Reference no: EM133013652

ACCT6002 Managerial Accounting - Southern Cross University

You are a managerial accountant that has been hired by the owner and founder of The Cork Shop1, Byron Bay, to prepare the annual budget for 2022 and to make recommendations for improving its operations.

As per their company website "cork is an amazing raw material, harvested from the Cork Oak tree (Quercus Suber) without damaging the tree. In fact, no trees are ever cut down as only the bark is carefully removed. Harvesting helps regenerate the trees, contributing to their thriving life span of more than 200 years."

Cork is sustainable, 100% vegan, durable, recyclable and eco-friendly. Cork is also free from plastics, rubber and latex. It is not affected by mould, as it is moisture resistant. Due to Cork's unique properties, this is why it has been chosen as the material to manufacture their purses and wallets.

The following information has been gathered:

• Products: For the purposes of this assignment assume that the business sells only the following three (3) products:

• Operations: The Cork Shop operate on a calendar-year basis Jan through to Dec. The business runs out of owned premises in Byron Bay, Australia. Their sales team have provided the expected monthly sales per product type.
• Property, Plant and Equipment: Depreciation totals $3,000 per year.
• Cash collections: They expect to collect 30% of its credit sales in the month of sale and the remaining 70% of credit sales will be collected in following month. The company's bad debts are negligible.
• Payments: They plan to pay for 80% of its material purchases within the month of purchase and the remaining 20% in the following month.
• Ignore both GST and Income Tax.
• All of the planning and budgeting assumptions for the year have been provided to you in a budget template ready for you to use to prepare the Master Budgets. Please find these budget assumptions ACCT6002 S2 2021 The Cork Shop Budget.xls file in the Major assignment folder on Black Board.

REQUIRED:

PART ONE:
Prepare a Master Budget (15 marks weighted 50% of assignment total)
Using the information provided, prepare a master budget for The Cork Shop for the twelve- month period from January 2022 to December 2022 to produce and sell the three product outlined.
Your budget spreadsheet must be submitted in Excel Format (not as an appendix in your WORD document). The first worksheet should contain the budget assumptions. All future worksheets need to be linked to this data. Show all calculations and use Excel functions where possible. While you should use examples in your text as a guide, the key to using spreadsheets is that they are structured so that others can use them and follow the flow of information without difficulty.
Include the following:

1. A sales budget and expected cash collections
2. A production budget
3. A direct materials budget and expected cash disbursements for purchases of materials
4. A direct labour budget
5. A manufacturing overhead budget
6. Monthly Operating Cost budget
7. An ending finished goods inventory budget
8. Cost of Sales Budget
9. Budgeted Income Statement for the year ended 31st Dec 2022
10. Monthly Cash Budget

All of the planning and budgeting assumptions for the year have been provided to you in a budget template ready for you to use to prepare the Master Budgets.

Analysis & Recommendations

Write a report (Maximum 1,500 words, 10% (+/-) will be accepted with no penalty) for the owner of The Cork Shop.

The report should include:

• An overview of the expected results for the 2022 year including total revenue, operating expenses and expected final cash position;
• Compare the financial performance of each product and make recommendations about how to improve the individual and overall profitability of the sustainable products range. Where appropriate use industry data (e.g. comparative product comparison, consumer confidence, labour rates) to support your recommendations for change.
• Identify three major risks for the business in 2022, quantify these risks in terms of the potential impact on the profit and loss statement and provide recommendations on how to mitigate them.
• Explain how the master budget you have prepared can assist The Cork Shop to plan for different ‘what-if' scenarios and help them to pivot according to changes in economic conditions.
• Use visual aids such as tables and graphs to enhance your report presentation.

Attachment:- Managerial Accounting.rar