Question

Master Budget Project
Okay Company is preparing to build its master budget. The budget will detail each quarter’s activity and the activity for the year in total. The master budget will be based on the following information:
a. This will be the first year of operation for Okay Company.
b. Budgeted unit sales by quarter for 2017 are projected as follows: First quarter 6,300, Second quarter 6,100, Third quarter 6,100 & Fourth quarter 6,450. First and second quarter 2018 budgeted sales units is 6,400 each quarter.
c. The selling price is $45 per unit. Sales are estimated to be collected 75% in cash and 25% credit. Of the credit sales, 85% are estimated to be collected in the quarter following the sale and 15% are collected in the second quarter following the sale.
d. Since this is the first year of operations there is no beginning inventory of finished goods at the beginning of the year. Okay’s ending finished good inventory policy is 35% of the following quarter’s unit sales needs.
e. Each unit uses 0.50 hours of direct labor and 2 units of direct materials. Laborers are paid $12 per hour and one unit of direct materials costs $4.50.
f. Since this is the first year of operations there is no beginning inventory of direct materials at the beginning of the year. Okay plans to have 30% of the direct materials needed for the next quarter’s production units on hand at the end of each quarter.
g. Okay buys direct materials on account. 80% of the purchases are paid for in the quarter of acquisition, and the remaining 20% are paid for in the following quarter.
h. Fixed overhead totals $25,000 each quarter. Of this total, $5,000 represents depreciation. All other fixed expenses are paid for in cash in the quarter incurred.
i. Variable overhead is budgeted at $3 per units produced. All variable overhead expenses are paid for in the quarter incurred.
j. Fixed selling and administrative expenses total $15,000 per quarter, including $2,500 depreciation.
k. Variable selling and administrative expenses are budgeted at $1.25 per unit sold. All selling and administrative expenses are paid for in the quarter incurred.
l. Okay will pay quarterly dividends of $10,000. During the fourth quarter, $135,000 of equipment will be purchased.

Required: Prepare a master budget for Okay Company for each quarter of 2017 and for the year in total. The following component budgets must be included:
1.(2 points) Calculate the Ending Cash Balance if 1st Quarter Sales is changed to 6,000 units
2.(2 points) For correct formulas in excel spreadsheet.

Answer 1

Hello

I have copy, pasted my excel output here. If you have any other requirement, let me know in hte comments.

Master Budget

Computation of Sales
Particulars	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Unit Sales	6300.00	6100.00	6100.00	6450.00	24950.00
Sale Price	45.00	45.00	45.00	45.00	45.00
Sales	283500.00	274500.00	274500.00	290250.00	1122750.00
Recovery of Sales
Cash Sales(75%)	212625.00	205875.00	205875.00	217687.50	842062.50
Credit Sales(25%)	70875.00	68625.00	68625.00	72562.50	280687.50
Collection of Credit Sales
1st Quarter	60243.75	10631.25			70875.00
2nd Qaurter		58331.25	10293.75		68625.00
3rd Quarter			58331.25	10293.75	68625.00
4th Quarter				61678.13	61678.13
Total Cash Collections (1)	272868.75	274837.50	274500.00	289659.38	1111865.63
Opening Finished Goods Inventory	0.00	2135.00	2135.00	2257.50
Consumption of Finished Goods	6300.00	6100.00	6100.00	6450.00	24950.00
Ending Inventory needs	2135.00	2135.00	2257.50	2240.00
Hence, net production of Finished Goods	8435.00	6100.00	6222.50	6432.50	27190.00
Opening Direct Material Inventory(units)	0.00	3660.00	3733.50	3859.50
Consumption of Direct Material(units)	16870.00	12200.00	12445.00	12865.00	54380.00
Ending Inventory Needs(units)	3660.00	3733.50	3859.50	3840.00
Direct Material Purchases(units)	20530.00	12273.50	12571.00	12845.50	58220.00
Payment for Direct Material(units)	16424.00	13924.80	12511.50	12790.60	55650.90
Direct Material Cost (2)	73908.00	62661.60	56301.75	57557.70	250429.05
Direct Labor Cost (3)	50610.00	36600.00	37335.00	38595.00	163140.00
Payment of Overheads
Fixed Overheads	20000.00	20000.00	20000.00	20000.00	80000.00
Variable Overheads	25305.00	18300.00	18667.50	19297.50	81570.00
Total Overheads (4)	45305.00	38300.00	38667.50	39297.50	161570.00
Selling and Admin Overheads
Fixed Overheads	12500.00	12500.00	12500.00	12500.00	50000.00
Variable Overheads	7875.00	7625.00	7625.00	8062.50	31187.50
Total Selling & Admin Expenses (5)	20375.00	20125.00	20125.00	20562.50	81187.50
Payment of Dividend (6)	10000.00	10000.00	10000.00	10000.00	40000.00
Purchase of Equipment (7)				135000.00	135000.00
Net Cash Flows (8)	72670.75	107150.90	112070.75	-11353.33	280539.08
[(1)-(2)-(3)-(4)-(5)-(6)-(7)]
Opening Cash Balance	0.00	72670.75	179821.65	291892.40	0.00
Closing Balance	72670.75	179821.65	291892.40	280539.08	280539.08

(1) Cash Balance at the end of Q1 if sales of Q1 changed to 6000 units = $64,912

Cash Balance at the end of the year if sales of Q1 changed to 6000 units = $272,814.08

I hope this solves your query.

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