Acct 552 Course Project

(Master Budget Preparation)

You have been hired by the McClosky Corporation and they manufacture industrial dye. The company is preparing its 20X9 master budget and has presented you with the following information:

1. The projected December 31, 20X8, balance sheet for the company is as follows:

                     Assets

Cash                                                      $ 6,080

Accounts Receivable                           29,500

Raw Materials Inventory                      1,000

Finished Goods Inventory                    3,200

Prepaid Insurance                                  1,800

Building                               $ 350,000

Accum Depreciation            (25,000) 325,000

Total Assets                                      $ 366,580

            Liabilities and Equity

Notes Payable                                   $ 25,000

Accounts Payable                                  2,650

Dividends Payable                               12,000

Total Liabilities                                $ 39,650

Common Stock             $ 200,000

Paid-In Capital                    40,000

Retained Earnings              86,930   326,930

Total Liabilities and

Stockholders’ Equity                     $ 366,580

Other Information that is being provided to you:

2. The Accounts Receivable balance at 12/31/20X8 represents the balances of November and December credit sales. Sales were $90,000 and $85,000 respectively.
3. Estimated sales in gallons of dye for January through May 20X9 are as follows:

    January                                                9,000

    February                                           11,000

   March                                                 16,000

   April                                                    14,000

   May                                                     13,000

   June                                                     12,000

Each gallon of dye sells for $ 15

4. The collection pattern for accounts receivable is as follows: 70 percent in the month of sale, 20 percent in the first month after the sale, and 10 percent in the second month after the sale. McClosky does not provide cash discounts and they are not expecting any bad debts.
5. Each gallon of dye has the following standard quantities and costs for direct material and direct labor:

1.4 gallons of direct material (some evaporation takes place during processing) X $.90 per gallon                                                               $ 1.26

0.5 direct labor X $ 8 per hour                                                                4.00

6. Variable overhead is applied to the product on a machine-hour basis. Processing one gallon of dye takes five hours of machine time. The variable overhead is $0.08 per machine hour. Variable overhead consists of utility costs. Total annual fixed overhead is $150,000; it is applied at $ 1 per gallon based on expected annual capacity of 150,000 gallons. Fixed overhead per year is made up of the following costs:

     Salaries                                         $ 110,000

     Utilities                                               15,000

   Insurance                                             1,800

     Depreciation-factory                        23,200

Fixed overhead is incurred evenly throughout the year.

7. There is no beginning Work-in-Process Inventory. All work is completed in the period in which it is started. Raw Material Inventory at the beginning of the year consists of 1,100 gallons of direct material at a standard cost of $.90 per gallon. There are 500 gallons of dye in Finished Goods Inventory at the beginning of the year carried at a standard cost of $6.28 per gallon; direct material, $.98, direct labor, $4.00; variable overhead $ .30; fixed overhead , $1,00
8. Accounts Payable relates to raw material and is paid 60 percent in the month of purchase and 40 percent in the month after purchase. No discounts are received for prompt payment.
9. The dividend will be paid in January 20X9.
10. A new piece of equipment will be purchased in March 20X9 and the cost is $12,000. Payment of 80 percent will be made in March and 20 percent in April. The equipment has a useful life of three years and will be placed in service on March 1.
11. The note payable has a 12 percent interest rate; interest is paid at the end of each month. The principle of the note is repaid as cash is available to do so.
12. The McClosky management team wishes to maintain a minimum cash balance of $5,500. Investments and borrowing are made in $100 amounts. (Even $100 amounts). Interest on any borrowings are expected to be 12 percent per year, and investments will earn 4 percent per year.
13. The ending finished goods inventory should include 5 percent of next month’s sales. This will not be true at the beginning of 20X9 due to a miscalculation in sales for the month of December. The ending inventory of raw materials should be 5 percent of next month’s needs.
14. Selling and administration costs per month are as follows: salaries $25,000; rent, $7,000 and utilities, $800. These costs are paid in cash as they are incurred.
15. The company’s tax rate is 20 percent.

Please note: You will be preparing a master budget for the first quarter of 20X9 and the supporting schedules listed below:

Requirements:

Milestone 1:

Please prepare the following budgets:

1. Sales Budget
2. Production Budget
3. Purchases Budget

Please submit Milestone 1 at the end of Week 6.

Milestone 2:

Please prepare the following budgets:

4. Labor Budget
5. Variable Overhead Budget
6. Fixed Overhead Budget
7. Budgeted Cost of Goods Manufactured
8. Budgeted Income Statement

Please submit Milestone 2 at the end of Week 7.

Milestone 3:

1. Budgeted Balance Sheet

10. Cash Budget
11. Budget Presentation and please address the following questions:

1. The sales manager would like to increase the sales price by 10 next quarter, what will be the projected revenues be for the 2^nd quarter.
2. The production manager would like to purchase new equipment for next quarter due to the fact that their competitor has purchased equipment which cost $50,000. Will the company be able to make the purchase or will you need more information?
3. The CEO feels that the cash budget is not necessary, please explain to the CEO why cash budgeting is important to the organization.
4. Please explain the to the management team how a competitor’s actions can affect business planning.

Please submit Milestone 3 at the end of Week 8.

A partial income statement for a company's most recent fiscal year follows:

Additional data:
Selling expenses are 20 percent of sales, administrative expenses are 10 percent of cost of goods sold; the income tax rate is 40 percent.

Required:

Supply dollar amounts for blanks a through h. Computations may not be in the order presented.

1. ____________

2. ____________

3. ____________

4. ____________

5. ____________

6. ____________

7. ____________

8. ____________

Consider the following time series:

1. Show the four-quarter and centered moving average values for this time series (to 3 decimals if necessary).
   

   Year	Quarter	Time Series Value	Four-Quarter Moving Average	Centered Moving Average
   1	1	4
   	2	2
   	3	3
   	4	5
   2	1	6
   	2	4
   	3	5
   	4	7
   3	1	8
   	2	7
   	3	6
   	4	8

   
   

• 1. Compute seasonal indexes and adjusted seasonal indexes for the four quarters (to 3 decimals).

  Quarter	Seasonal Index	Adjusted Seasonal Index
  1
  2
  3
  4
  Total

1. Glenny’s Glassworks prepares an annual CASH Budget by quarter and uses the following information to estimate the Cash Budget:

On Jan 1, 2020 the Cash Balance is expected to be $47,000.00 and they want a minimum ending balance in cash in any quarter to be $25,000.

2020 Sales are expected as follows:

1^st Q                 $275,000

2^nd Q                $330,000

3^rd Q                 $280,000

4^th Q                 $240,000As

75% of Sales are expected to be collected in the quarter they are made and the remaining 25% in the following Quarter. The 4^th Q 2019 Sales were $165,000.

REQUIRED:

1. Prepare the Cash Receipts Budget by Quarter for 2020.
2. If Glenny spends $1,200,000 in Cash Disbursements during 2020, what would their ending Cash Balance be at Dec 31, 2020? Would they need to borrow any money to maintain their minimum cash requirement?

Garden Depot is a retailer that is preparing its budget for the upcoming fiscal year. Management has prepared the following summary of its budgeted cash flows:

The company’s beginning cash balance for the upcoming fiscal year will be $25,000. The company requires a minimum cash balance of $10,000 and may borrow any amount needed from a local bank at a quarterly interest rate of 3%. The company may borrow any amount at the beginning of any quarter and may repay its loans, or any part of its loans, at the end of any quarter. Interest payments are due on any principal at the time it is repaid. For simplicity, assume that interest is not compounded.

Required:

Prepare the company’s cash budget for the upcoming fiscal year. (Cash deficiency, repayments and interest should be indicated by a minus sign.)

Garden Depot is a retailer that is preparing its budget for the upcoming fiscal year. Management has prepared the following summary of its budgeted cash flows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total cash receipts $300,000 $420,000 $350,000 $370,000 Total cash disbursements $358,000 $328,000 $318,000 $338,000 The company’s beginning cash balance for the upcoming fiscal year will be $35,000. The company requires a minimum cash balance of $10,000 and may borrow any amount needed from a local bank at a quarterly interest rate of 3%. The company may borrow any amount at the beginning of any quarter and may repay its loans, or any part of its loans, at the end of any quarter. Interest payments are due on any principal at the time it is repaid. For simplicity, assume that interest is not compounded. Required: Complete the company's cash budget for the upcoming fiscal year. (Cash deficiency, repayments, and interest, should be indicated by a minus sign.)

You have joined a northern mail order company selling winter coats. You have the coat sales by quarter for the last three years.

Year 1 Qtr 1, 24 Winter Coats Qtr 2, 12 Qtr 3, 20 Qtr 4, 36 Year 2 Qtr 1, 28 Winter Coats Qtr 2, 10 Qtr 3, 22 Qtr 4, 40 Year 3 Qtr 1, 32 Winter coats Qtr 2, 14 Qtr 3, 27 Qtr 4, 44

Use linear regression to forecast the total coats to be sold in year 4 in thousands. For the equation Y = aX + b give "a".   ____ (two decimals) Give "b" ____ (two decimals)

Give the forecast for the fourth year? ____ (two decimals)Next use the quarters to generate seasonal factors. Give the season factor for quarter one? ____ (two decimals)

Give the season factor for quarter two? _____ (two decimals)Give the season factor for quarter three? _____ (two decimals) Give the season factor for quarter four? ______ (two decimals) Give the forecasted sales for quarter one? ______ (All answers remaining to two decimals) Quarter two? ______Quarter three? ______Quarter four? _____

esults for the fourth quarter of 2019 are provided below. CVI's management is concerned as to why the operating income was lower than budgeted. 2019 fourth-quarter operating statement Actual Budget Revenues: High-speed Internet service $1,822,800 $1,890,000 Regular-speed Internet service 2.856.000 2.646.000 4,678,800 4,536,000 Expenses Billing and collection (55 per customer per quarter) 226,800 210.000 Variable costs of high-speed service ($15 per customer per quarter) 176,400 189.000 Variable costs of regular-speed service ($5 per customer per quarter) 168,000 147.000 Fixed costs 2.650.000 2.300.000 3221 2002 846 000 Operating income $1.457 600 $1.690.000 The budget was based on CVi holding a 35% market share assuming a total budgeted market size of 120.000 customers. The actual market size for the fourth quarter of 2019 turned out to be 125.000 customers, due to new apartment buildings in the area. The budget also assumed that 30% of CVI's customers would select the high-speed package and the remaining 70% of CVI's customers would select the regular-speed package CVI's high-speed package was budgeted with a selling price of $150 per customer per quarter. The regular-speed package had a budgeted selling price of $90 per customer per quarter. The actual prices in the fourth quarter were $155 and $85 per customer for the high-speed and regular-speed packages respectively.

Calculate each of the following variances:

a) Sales price variance

b) sales volume variance

c) Sales quantity variance

d) Sales mix variance

e) Market size variance

f) Market share variance

OKD Company is a trading company. The following financial data are derived from the accounting system in the beginning of April:

Accounts receivable23,000

Inventory24,200

Cash (Overdraft)(7,000)

Dividend payable1,000

Equipment at cost80,000

Accumulated depreciation19,200

Long-term note payable 14% 40,000

Share capital40,000

Retained earnings20,000

The company expects the following results during the second quarter of the year (next three months):      

The company generates all revenues from sales on account and is able to collect all outstanding balances. Its collection pattern is as follows:        

        80% is collected during the month of sales (a 4% discount is given for payment in this period); and

        the remaining 20% is collected in the following month.

The company pays for its purchase made in the month of purchase in order to take advantage of a 10% settlement discount, calculated on the gross purchase amount presented above. Inventory levels are expected to remain constant throughout the quarter. There is no fluctuation in price when the company purchases its inventory. Depreciation rate of the equipment is 12% on cost per year. Expenses are recorded on a monthly basis. Expenses are paid for in the month in which they are incurred. The declared dividend will be paid in April. There is no repayment of the long-term note during the quarter. Interest on the note for the quarter will be paid in June.

What is the net profit for the quarter?

What is the total current assets at the end of the quarter?

What is the total non-current assets at the end of the quarter?

What is the total liabilities at the end of the quarter?

What is the total shareholders’ equity at the end of the quarter?