Judd’s Reproductions makes reproductions of antique tables and chairs and sells them through three sales outlets. The product line consists of two styles of chairs, two styles of tables, and three styles of cabinets. Although customers often ask Judd Molinari, the owner/manager ofJudd’s Reproductions, to make other products, he does not intend to expand the product line. The planning group at Judd’s Reproductions prepares a master budget for each fiscal year, which corresponds to the calendar year. It is December 2019, and the planners are completing the master budget for 2020.Unit prices are $200, $900, and $1,800 for the chairs, tables, and cabinets, respectively.Customers pay (1) by cash and receive a 5% discount, (2) by credit card (the credit cardcompany takes 3% of the revenue as its fee and remits the balance in the month following themonth of sale), or (3) on account (only exporters buy on account). The distribution of cash,credit card, and exporter sales is 25%, 35%, and 40%, respectively. Of the credit sales toexporters, Judd’s Reproductions collects 30% in the month following the sale, 50% in thesecond month following the sale, and 17% in the third month following the sale, with 3% goinguncollected. Judd’s Reproductions recognizes the expense of cash discounts, credit card fees,and bad debts in the month of the sale.Judd’s employs 40 people who work in the following areas: 15 in administration, sales, andshipping; 2 in manufacturing supervision (director and a scheduler); 9 in manufacturingfabrication and assembly (carpenters); and 14 in manufacturing, finishing, and other areas(helpers, cleaners, and maintenance crew).The carpenter hours required to make the parts for and assemble a chair, table, or cabinet are0.4, 2.5, and 6, respectively. Production personnel have organized the work so that eachcarpenter hour worked requires 1.5 helper hours. Therefore, production planners maintain aratio a on average of 1.5 helpers for every carpenter. The company pays carpenters and helpers$24 and $14 per hour, respectively (including all benefits).Judd’s Reproductions guarantees all employees pay for at least 172 hours per month regardlessof the hours of work available. When the employees are not doing their regular jobs, theyundertake maintenance, training, community service, and customer relations activities. Judd’spays each employee weekly for that week’s work. If an employee works 172 hours or lessduring the month, Judd’s still pays the employee for 172 hours at his or her normal hourly rate.The company pays 150% of the normal hourly rate for every hour over 172 that the employeeworks during the month. Planners add new carpenters if the projected total monthly overtimeis more than 5% of the total regular carpenter hours available. Judd’s has a policy of noemployee layoffs. Any required hiring is done on the first day of each month.For a factory, Judd’s Reproductions rents a converted warehouse that costs $600,000 per year.The company pays rent quarterly beginning January of each year. Judd’s pays other fixed manufacturing costs, which include manufacturing supervision salaries and amount to $480,000annually, paid in equal monthly amounts.The capital investment policy is to purchase, each January and July, $5,000 of machinery andequipment per carpenter employed during that month. Judd’s recognizes depreciation at therate of 10% of the year-end balance of the machinery and equipment account. Statisticalstudies of cost behavior have determined that supplies, variable support, and maintenancecosts vary with the number of carpenter hours worked and are $5, $20, and $15 per hour,respectively.The units of wood required for chairs, tables, and cabinets are 1, 8. and 15, respectively. Eachunit of wood costs $30. The inventory policy is to make products in the month they will be sold.Two suppliers deliver raw materials and supplies as required. The company pays for allmaterials, supplies, variable support, and maintenance items on receipt.Annual administration salaries, fixed selling costs, and planned advertising expenditures are$300,000, $360,000, and $600,000, respectively. Judd’s Reproductions makes theseexpenditures in equal monthly amounts. Packaging and shipping costs for chairs, tables, andcabinets are $15, $65, and $135, respectively. Variable selling costs are 6% of each product’s listprice. Judd’s Reproductions pays packaging, shipping, and variable selling costs as incurred.Using its line of credit, Judd’s Reproductions maintains a minimum cash balance of $50,000. Allline-of-credit transactions occur on the first day of each month. The bank charges interest onthe line-of-credit account balance at the rate of 10% per year. Judd’s pays interest on the firstday of each month on the line-of-credit balance outstanding at the end of the previous month.On the first of each month, the bank pays interest at the rate of 3% per year on funds exceeding$50,000 in the company’s cash account at the end of the previous month.Realized sales for October and November and expected sales for December 2019 appear in thefollowing table:Judd’s Reproductions Unit Sales 2019Item October November DecemberChairs 900 975 950Tables 175 188 201Cabinets 90 102 95Sales staff estimates the unit demand for 2020 as follows: chairs, 1,000, plus a random numberuniformly distributed between 0 and 50, plus 15% of the previous month’s sales of chairs;tables, 200, plus a random number uniformly distributed between 0 and 20, plus 15% of theprevious month’s sales of tables; and cabinets, 100, plus a random number uniformlydistributed between 0 and 10, plus 15% of the previous month’s sales of cabinets. Thisestimation process resulted in the demand forecasts and the sales plan found in the followingtable:
Judd’s Reproductions Projected Unit Sales 2020Month Chairs Tables CabinetsJanuary 1,020 200 109February 1,191 237 120March 1,179 243 119April 1,195 250 126May 1,200 252 122June 1,204 255 125July 1,194 242 123August 1,199 253 121September 1,222 243 127October 1,219 248 126November 1,207 244 126December 1,192 255 119Planners project the Judd’s Reproductions balance sheet at January 1, 2020, to be as follows:Judd’s Reproductions Balance Sheet January 1, 2020Cash $50,000 Bank loan $0Accounts receivable $575,008Machinery (net book value) $360,000 Shareholder’s equity $985,008Total $985,008 Total $985,008
A.) Prepare a sales forecast, staffing plan, production plan, estimated cash flow statement
