Bart and Lisa operate a manufacturing operation in southern New Brunswick. They make a single product. In order to help ensure a successful year they have engaged you to prepare a complete master budget for the upcoming quarter. Lisa is a qualified engineer but not overly sophisticated in financial matters. Bart handles the design and marketing of their company’s products.
You have gathered the following information as of March 31, 2019:
Accounts Receivable 490,000
Net Capital Assets 1,180,000
Total Assets 1,914,000
Accounts Payable 24,000
Common Stock 100,000
Shareholder’s Equity (SE) 1,790,000
Total Liabilities and SE 1,914,000
Inventory is made up of the following balances:
Raw Materials $ 24,000 4,800 units
WIP $ 60,000
Finished Goods $120,000 4,000 units
Recent and Projected Sales
February $300,000 6,000
March 400,000 8,000
April 400,000 8,000
May 400,000 8,000
June 300,000 6,000
July 400,000 8,000
August 500,000 10,000
September 500,000 10,000
Credit accounts are collected 70% in the month following the sale and 30% in the next
month following. There are no bad debts. Collections are current; the March A/R balance
is made up of uncollected amounts from February and March sales. You may assume no
changes to the WIP balances.
Each unit produced requires $10.00 of raw materials (representing 2.0 units of material
with a purchase cost of $5.00 per unit) and $14.00 of direct labour (2 hours of direct
labour are required for each unit). There is a minimum of 5,000 labour hours per month
regardless of how much time is worked. All labour is paid at $7 per hour (i.e. no overtime
is paid.) Overhead is applied on the basis of direct labour hours. Variable overhead is
estimated to be $1.5 per direct labour hour. The desired finished goods inventory is 50%
of the next month’s sales. The desired raw materials inventory is 30% of the next month’s
production requirements. All purchases are paid in the month following the purchase and
all A/P is current.
Fixed manufacturing overhead is estimated at $24,000 per month. The total depreciation
per month for manufacturing assets is $4,000.
Salaries, wages and commissions average 10% of sales, all other expenses excluding
depreciation is 5% of sales. Fixed selling and administrative expenses for rent, property
taxes and other items are $40,000 per month. Depreciation is $3,000 per month.
There is a planned acquisition of a new machine in April for $120,000 which will be paid
for in April.
A dividend of $100,000 will be paid in May.
Any borrowing the company makes are effective at the beginning of the month and all
repayments are made at the end of the month. Ignore interest for the purposes of this
assignment. The company does not want to begin a month with less than $20,000 in
beginning cash. Income taxes can be ignored.
Prepare monthly budgeted income statements and cash flow statements for the quarter
(April, May & June) along with all the supporting budgets and a Balance Sheet as of June
30, 2019). Each budget component should be prepared on a separate sheet. This must be
prepared using Excel (DO NOT USE ANOTHER SPREADSHEET PROGRAM) and
submitted electronically via email. PLEASE INCLUDE THE NAMES OF ALL GROUP
MEMBERS ON THE FIRST SHEET OF YOUR EXCEL FILE. AS PER COURSE
OUTLINE, THIS ASSIGNMENT MUST BE DONE IN TEAMS OF 2-3.
HINT: If everything is correct you should get the following numbers:
Cost per unit of Finished Goods: $30.27
Total Assets: $2,016,091
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