comprehensive master budget with cash flow issues air boats inc produces small infla 1571465

Comprehensive Master Budget with Cash Flow Issues. Air Boats, Inc., produces small inflatable boats. The company’s fiscal year ends on December 31. Information to be used for the operating budget this coming year follows. Sales and Production-Related Budget Information

o Average sales price for each boat is estimated to be $150. Unit sales for this coming year, ending December 31, are expected to be as follows:

o Finished goods inventory is maintained at a level equal to 15 percent of the next quarter’s sales. Finished goods inventory at the end of the fourth quarter budget period is estimated to be 13,000 units. o Each unit of product requires 4 pounds of direct materials, at a cost of $5 per pound. The management prefers to maintain ending raw materials inventory equal to 8 percent of next quarter’s materials needed in production. Raw materials inventory at the end of the fourth quarter budget period is estimated to be 30,000 pounds.

o Each unit of product requires 0.5 direct labor hours at a cost of $15 per hour.

o Variable manufacturing overhead costs are

o Fixed manufacturing overhead costs per quarter are

Selling and Administrative Budget Information

o Management estimates all selling and administrative costs are fixed.

o Quarterly selling and administrative cost estimates for the coming year are

Capital Expenditures and Cash Budget Information

o The company plans to pay cash for selling and administrative equipment totaling $5,000,000 and production equipment totaling $20,000,000 (management plans to fully automate production with new machinery). Both will be purchased at the end of the fourth quarter and will not affect depreciation expense for the coming year.

o All sales are made on credit. The company expects to collect 90 percent of sales in the quarter of sale and 10 percent the quarter following the sale. Accounts receivable at the end of last year totaled $1,400,000, all of which will be collected during the first quarter of this coming year.

o All direct materials purchases are on credit. The company expects to pay 80 percent of purchases in the quarter of purchase and 20 percent the following quarter. Accounts payable at the end of last year totaled $400,000, all of which will be paid during the first quarter of this coming year.

o The cash balance at the beginning of this coming year is expected to be $75,000. Budgeted Balance Sheet Information

o Assume 10 percent of fourth quarter budgeted sales will be collected in full the following year (this represents accounts receivable at the end of the fourth quarter).

o Expected account balances at the end of the fourth quarter are

o Actual retained earnings at the end of last year totaled $2,641,400, and no cash dividends will be paid during the current budget period ending December 31.

Required:

p. Prepare the quarterly sales and production-related budgets using the figure formats referenced here: a. Sales budget ()

b. Production budget ()

c. Direct materials purchases budget ()

d. Direct labor budget ()

e. Manufacturing overhead budget ()

q. Prepare a quarterly selling and administrative budget using the format shown in .

r. Prepare a quarterly budgeted income statement using the format shown in .

s. Prepare a quarterly capital expenditures budget using the format shown in .

t. Prepare a quarterly cash budget using the format shown in .

u. Prepare a budgeted balance sheet at December 31 using the format shown in . (Hint: cash will have a negative balance.)

v. Review the cash budget for Air Boats, Inc. What issue is facing the treasurer, and how might this issue be resolved?