The Eastern Technology CompanyBackground and Assumptions for Preparation of 2014 Master BudgetSales Revenue:The Eastern Technology Company manufactures Weather Radios for sale to retailers such as Wal-Mart, Target, etc.The 2014 quarterly unit sales estimates and projected sales prices per unit are as follows:Quarter1 Quarter2 Quarter3 Quarter4Sales Units 9,300 9,500 9,700 9,900Price per Unit $125.00 $127.00 $128.00 $130.00Also, note that that projected sales for Quarter 1 of 2015 is 10,000 units.Product Cost Assumptions:The company’s product requires two raw materials, resistors and switches. Cost parameters are as follows: Number of Components/UnitSwitches @ $4/switch 3 Resistors @ $6/resistor 2 Number of minutes required to complete finished unit:Direct labor minutes per unit 30Machine minutes per unit 12 Hour rates used:Direct labor rate = $10/hourManufacturing overhead rates (i.e., the PDOHRs to use to apply overhead):Labor-related = $25/hourMachine-related = $40/hourEastern applies manufacturing overhead using two cost drivers: direct-labor hours and machine hours.Ending Inventories:The desired ending inventories for each of the two direct materials is 10% of the next quarter’s respective amount of direct materials needed for production. The desired finished goods ending inventory is 5% of the next quarter’s budgeted sales units. Beginning inventory for direct materials and finished goods are assumed to be zero as of 1/1/2014.Non-Product Cost Assumptions (i.e., Selling, General, and Administrative Expenses):Sales are made by brokers who charge a sales commission. The sales commission rate is $0.50 per unit sold.Shipping costs are $3 per unit sold.The administrative office building historical cost was $1,600,000 and is being depreciated over 20 years. The administrative computer facility historical cost was $900,000 and is being depreciated over 10 years. Both assets are depreciated on a straight-line basis with no salvage value.Eastern also has office equipment and computers that are leased with a quarterly operating lease payment of $32,000.All other selling, general, and administrative expenses are fixed and are $225,000 for each quarter.Estimated income taxes are based on absorption costing operating income. A tax rate of 40% is expected.Cash Disbursements:Direct materials are all purchased on account with no available discounts; 30% are paid for in the quarter of purchase and 70% are paid for in the following quarter. Also note that the direct materials purchased during the 4th quarter of 2013 (the prior year) are estimated at $220,000, of which 30% will be paid during the 1st quarter of 2014.All direct labor and manufacturing overhead costs are paid in the quarter incurred, with the remaining balance paid in the subsequent quarter. Also, Wages Payable is expected to be $13,000 as of December 31, 2013 to be paid in the first quarter of 2014.Estimated income taxes are paid in the quarter following the calculation of these taxes and are budgeted in this manner. The company will not have any taxes due during the 1st quarter given that it will record a slight net loss in 2013.All other non-product costs are paid in the quarter incurred.Cash Collections:Eastern makes all sales on account with no discounts available. Payments are received 70% in the quarter of sale, 27% in the following quarter, and the remaining 3% is never collected. Uncollectible accounts expense of 3% of sales is recognized in the quarter of sale. Also note that the sales of account during the 4th quarter of 2013 (the prior year) are estimated at $1,100,000, of which 27% will be paid during the 1st quarter of 2014