Question

Question: Prepare the cash disbursement for direct materials budget for the first quarter

Budget information below

Sweetums Cookies, Inc.: A Master Budget CaseIntroductionYou knew they were good, but you never thought Grandma’s old cookie recipe would bring you this far! It all started about three years ago when you began using your Grandma’s cookie recipe to bake cookies as a little side business. You bake them right in your home and sell them to friends and local stores. Response has been great! People love the cookies, and you’re making a little extra money.There is a small problem with all of this success. The volume of business has grown so much that you can no longer keep up with demand. Your desire to grow this hobby into a full-fledged business has led you to explore expanding. You have been investigating new facilities, equipment, and the requirements of hiring a few employees. However, you’re missing one important element; money to fund this expansion!On the advice of a friend, you meet with a local banker. She says that the bank cannot lend you any money without a business plan that describes your financial results, marketing strategy, and projections for the future. You show the banker your income statement and balance sheet as of the most recent year-end, but what she really needs to see is your budget for the next year.When you return home after the meeting, you pull out your college accounting textbook and settle in to produce a plan for next year. You pull out Grandma’s recipe to see what ingredients it takes to make a dozen cookies. Next, you go to your invoice files to determine the cost of each of the ingredients. You brainstorm to develop a list of the new costs that you must incur when you expand your operations. After analyzing all of this data you are able to break your costs into several categories. You realize that some costs are for raw materials while others are related to manufacturing overhead or operating expenses. You also realize that some costs appear to be fixed while other costs are variable. You now have the information you need to create a budget that will allow you to show the banker your plans for the coming year. This budget will also help you to understand your sales and the collection on those sales. You will be able to determine how much money you need to purchase the ingredients for your cookies and to pay your overhead and operating expenses. You realize that if you can estimate how many dozens of cookies you can sell, then you can calculate how many ingredients to buy and how much overhead and operating expenses will be. You will need to get yours sales estimate as accurate as possible.

This project is based loosely on a master budget case developed by Thomas C. Wooten and Jane Dillard-Eggers of Belmont University.AssignmentUse the information in Exhibits 1 – 3 to prepare a master budget for the first quarter of the year (January – March). Exhibit 1 presents information regarding sales price, production costs, and operating costs. Exhibit 2 contains information regarding your sales projections, expected collection patterns, purchasing and payment patterns for the first four months of the year. Exhibit 3 presents information regarding your plans for capital contributions, equipment purchases, loans, minimum cash balance. It also contains your Grandma’s cookie recipe.RequiredComplete the Connect assignment Master Budget Project by preparing the following components of Sweetums Inc.’s master budget:1.) Sales budget2.) Cash collections budget3.) Direct materials purchases budgets (5)4.) Cash disbursements for materials budget5.) Manufacturing overhead budget6.) Operating expenses budget7.) Cash budget

This project is based loosely on a master budget case developed by Thomas C. Wooten and Jane Dillard-Eggers of Belmont University.EXHIBIT 1Sales Price, Production Costs, and Operating ExpensesSales PriceA dozen cookies sell for $12.05.Direct Materials CostsMaterialPer Unit CostFlour$ .15Sugar$ .15Eggs$ .10Shortening$ .50Chocolate Chips$ 1.25Any other ingredients are indirect materials and are considered part of manufacturing overheadDirect Labor CostsInformation regarding direct labor costs is not maintained because you are your only employee. In this case, labor costs are considered part of manufacturing overhead.Manufacturing Overhead CostsVariable costs per dozenFixed costs per monthUtilities$ .50N/aOther indirect materials and labor$ .75N/aMaintenanceN/a$ 250DepreciationN/a$ 500Totals$ 1.25$ 750Operating ExpensesVariable costs per dozenFixed costs per monthShipping Costs$ 1.50N/aSalariesN/a$ 2,000DepreciationN/a$ 200OtherN/a$ 1,450Totals$ 1.50$ 3,650

This project is based loosely on a master budget case developed by Thomas C. Wooten and Jane Dillard-Eggers of Belmont University.EXHIBIT 2Sales Projections, Collections, Purchases, and PaymentsMonthly Sales Projections (in dozens of cookies):January1,000February1,200March1,300April1,100You have stopped production of cookies at year end to facilitate the expansion of the business. Therefore, you expect to have no uncollected accounts receivable, unpaid accounts payable, or raw materials inventories at January 1, the beginning of your budget period. Collections of SalesSixty percent (60%) of all sales are collected in the month the sale occurs. Forty percent (40%) of all sales are collected in the month following the sale.ProductionThe company produces cookies daily. No work-in-process or finished goods inventories are maintained.Raw Materials Inventory, Purchases, and PaymentsThe company plans to maintain an ending inventory of raw materials at the end of each month equal to 10% of the raw materials production needs for the next month.Twenty-five percent (25%) of materials purchases are paid for in the month of the purchase. Seventy-five percent (75%) of materials purchases are paid for in the month following the purchase.

This project is based loosely on a master budget case developed by Thomas C. Wooten and Jane Dillard-Eggers of Belmont University.EXHIBIT 3Financing Activities and Cookie IngredientsFinancing ActivitiesJanuary beginning cash balance$10,000Loan acquired in January$25,000Equipment purchase in January$20,000Minimum desired cash balance at the end of each month$10,000If cash over $10,000 is available at the end of the month, you will make repayments of outstanding loans in multiples of $1,000. If additional borrowing is necessary to maintain the $10,000 end-of-month balance, you have a line of credit with the bank and will borrow additional funds in multiples of $1,000. Interest (12% annual rate) is paid monthly on total outstanding borrowing at the end of the prior month.

Answer 1

Sales Budget
Particulars	Jan	Feb	March	Total
Sales in dozens	1000	1200	1300	3500
Selling price	12.05	12.05	12.05	12.05
Total	12050	14460	15665	42175
	Cash Collection budget
Particulars	Jan	Feb	March	Total
Jan	7230	4820		12050
Feb		8676	5784	14460
March			9399	9399
Total	7230	13496	15183	35909

Direct material purchase budget for Flour
Particulars	Jan	Feb	March
Dozens of cookies to be produced	1000	1200	1300
Cups of flour per dozen	2.5	2.5	2.5
Total required production	2500	3000	3250
Add: desired ending inventory	300	325	275
Less: begn. Inventory		300	325
Total flour to be purchased	2800	3025	3200
Cost per dozen	0.15	0.15	0.15
Total cost of flour	420	453.75	480

Direct material purchase budget for Sugar
Particulars	Jan	Feb	March
Dozens of cookies to be produced	1000	1200	1300
Cups of sugar per dozen	1.5	1.5	1.5
Total required production	1500	1800	1950
Add: desired ending inventory	180	195	165
Less: begn. Inventory		180	195
Total sugar to be purchased	1680	1815	1920
Cost per dozen	0.15	0.15	0.15
Total cost of sugar	252	272.25	288

Direct material purchase budget for Eggs
Particulars	Jan	Feb	March
Dozens of cookies to be produced	1000	1200	1300
Eggs per dozen	2	2	2
Total required production	2000	2400	2600
Add: desired ending inventory	240	260	220
Less: begn. Inventory		240	260
Total eggs to be purchased	2240	2420	2560
Cost per dozen	0.1	0.1	0.1
Total cost of eggs	224	242	256

Direct material purchase budget for Shortening
Particulars	Jan	Feb	March
Dozens of cookies to be produced	1000	1200	1300
Cups of shortening	1	1	1
Total required production	1000	1200	1300
Add: desired ending inventory	120	130	110
Less: begn. Inventory		120	130
Total shortening to be purchased	1120	1210	1280
Cost per dozen	0.5	0.5	0.5
Total cost of shortening	560	605	640

Direct material purchase budget for chocolate chips
Particulars	Jan	Feb	March
Dozens of cookies to be produced	1000	1200	1300
Cups of chips	2	2	2
Total required production	2000	2400	2600
Add: desired ending inventory	240	260	220
Less: begn. Inventory		240	260
Total chips to be purchased	2240	2470	2560
Cost per dozen	1.25	1.25	1.25
Total cost of chip cups	2800	3087.5	3200

Cash disbursement budget for materials
Particulars	Jan	Feb	March	Total
Flour	105	428.44	460.31	993.75
Sugar	63	257.06	276.19	596.25
Eggs	56	228.5	245.5	530
Shortening	140	571.25	613.75	1325
Chocolate chips	700	2856.25	3068.75	6625
Total cash payments	1064	4341.5	4664.5	10070