Create a master budget for twelve months from oct

Assignment Help Managerial Accounting

Reference no: EM132640636

The company desires a minimum ending cash balance each month on $35,000.

The beard grooming products are sold to retailers for $20 each and the sales have been stagnant due to the Covid-19. However, the marketing department has been positive toward the end of the year due to season change and upcoming holiday. The marketing department has just sent you their forecasted quarter sales and marketing budget.

Quarter

Sales in       Unit Marketing Expenses
2020 Q4    30000 $35,000
2021 Q1 35000 20000
2021 Q2 40000           20000
2021 Q3 65000 45000
2021 Q4      68000           45000
2022 Q1      70000          45000

The increased sales volume before and during June and January is due to Father's Day and holidays with AATB being a favorite. Ending finished goods inventories are supposed to be equal to 20% of the next month's sales in units. AATB currently does its own assembly production in house. Each unit consists of 3 shaves and the cost of each is $1.50. Each unit needs 0.10 labour hour from assemble to finish package. The hourly pay rate to the assembling workers is $15 per hour. The production manager also required desired direct material ending inventory to 30% of the next quarter production.

Purchases are paid for in the following manner: 50% in the quarter of the purchase and the remaining 50% paid in the quarter following the purchase. All sales to the distributors are made on credit terms with no discount (for now), and payable within 15 days. The AATB has determined that only 50% of sales are collected by the end of the quarter in which the sale occurred. An additional 30% is collected in the quarter following the sale, and the remaining 20% is collected in the second quarter following the sale. Bad debts have been negligible, supporting the credit terms as favorable.

Below is a display of the AATB division monthly manufacture overhead and selling and administrative expenses:

Manufacture Overhead
Variable:
Indirect labour $0.5 per labour hour
Indirect Materials $0.2 per labour hour

Fixed:
Wages and Salaries$2,000 per month
Utilities $1,500 per month
Insurance $2,000 per month
Depreciation $2,000 per month

Selling and Administrative
Variable:
Sales Commissions $1 per unit
Fixed (Monthly) :
Wages and Salaries$22,000
Utilities $6,000
Insurance $1,200
Depreciation $1,500
Miscellaneous $3,000

Labour, Manufacture Overhead, and Selling and Administrative expenses are all paid during the month, in cash, with the exception of depreciation (of course). AATB will make a purchase of a parcel of land during the quarter of 2021 for $22,500 cash. AATB contributes to the corporate dividend at a rate of $12,000 each quarter, payable in the first month of the following quarter. AATB's balance sheet at the end of the first quarter is shown below:

Assets

Cash $14,000
Accounts receivable ($48,000 sales in Q2 and $152,000 in Q3 this year ) $200,000
Liabilities
Accounts payable $85,700

An agreement with Bank of the West allows AATB to borrow in increments of $1,000 at the beginning of each month, up to a total loan amount of $550,000. The interest rate on these loans is 12% annually (pretty high considering market rates) but the interest is not compounded, meaning this is simple interest only.

Required:

Problem a: Make a master budget for twelve months from Oct, 2020 to Oct, 2021. Include the following budget schedules and financial statements:

1) Master Budget
2) Cash Budget. Show the cash budget by month and in total.
3) Budgeted Income statement

Reference no: EM132640636

Questions Cloud

Research of current social networking and e-fundraising : The purpose of this activity is to experience "hands-on" research of current social networking and e-fundraising.

Make production cost report for the badgersize company : Make production cost report for the Badgersize Company Forming Department for the month of August. Work in Process Inventory, August 1: 20,000 units

Explain the difference between a dnp and a phd in nursing : Discuss the difference between a DNP and a PhD in nursing. Discuss which of these you would choose to pursue if you decide to continue your education.

Discuss nursing education and positive patient outcomes : Discuss the correlation between nursing education and positive patient outcomes. Include current research that links patient safety outcomes to advanced.

Create a master budget for twelve months from oct : Create a master budget for twelve months from Oct, 2020 to Oct, 2021. Include the following budget schedules and financial statements

How do explain accounting requirement for propose investment : How do explain the accounting requirements for the proposed investment. In particular you should explain how the profit of Queen Ltd would be recognised

Find how would define fixed and variable product costs : Find How would define fixed and variable product costs? How are costs used in determining the contribution margin of different products manufactured and sold?

Develop understanding of cultural role of the dramatic arts : Plays are meant to be performed, rather than read. The purpose of dramatic arts often extends far beyond the words written on a page; staging, lighting.

How do compute the first production department cost : How do Compute the first production department's cost of ending work in process inventory for materials, conversion, and in total for May.

User Account

All Pages