Master Budget

BCO322 MASTER BUDGET Task brief & rubrics

Task:

Individual task

· Students should prepare a Master Budget on Excel and provide an analysis of the financial situation of the company, that will demonstrate a clear understanding of management accounting and the learning objectives discussed in this course.

· Key contextual elements should include management accounting, when it comes to operational budgets, cash budgets, pro forma financial statements as well as excel processing.

· Formal Written Report saved and uploaded to Moodle in PDF format.

· You need to develop your company’s master budget for 4 quarter of the year2021, considering all relevant aspects learned during this semester about management accounting.

The chief financial officer of Backpacks is Us, Inc., an important and successful company that manufactures excellent quality backpacks, has relied on you to prepare the Master Budget for this year.

We will take as our starting point the balance sheet from last fiscal year, at 31 of December 2020.

Backpacks is Us, Inc.

Balance Sheet

31/12/2020

ASSETS

Current assets:

Cash 80.000

Accounts Receivables 1.250.000

Inventories (FIFO):

Direct Materials (6.000 units) 27.000

Finished Goods (5.000 units) 300.000

Total current assets $1.657000

Plant and equipment 350.000

Accumulated depreciation (straight line) (175.000)

Total assets $1.912.000

LIABILITIES

Current liabilities:

Accounts payable 900.000

Notes payable (12 months @8%) 150.000

Income taxes payable 46.000

Interest payable 1.500

Total current liabilities $1.097.500

STOCKHOLDERS’ EQUITY

Capital stock, 15.000 shares outstanding 15.000

Retained earnings 799.500

Total $1.912.000

In order to complete the preparation of the different types of budgets that comprise the Master Budget, the company has provided you with the following essential information:

1. The company plans to sell 70.000 backpacks distributed as follows:

First quarter: 18.000 backpacks

Second quarter: 20.000 backpacks

Third quarter: 20.000 backpacks

Fourth quarter: 12.000 backpacks

The sales price of each backpack is $ 100, and all sales are credit sales to be collected in 90 days from month of purchase.

2. From the balance sheet we see that the finished goods inventory at the end of the previous year is 5.000 backpacks. The company plans to have an ending inventory equal to 15% of next quarter’s sales. Sales in the first quarter of 2022 are expected to be 19.000 backpacks. There is no beginning or ending balance in work in process.

3. The manufacturing costs estimates per backpack are as follows:

Variable cost per backpack:

· Direct material: 2,5 meters of canvas at $4.50 per meter.

· Direct labour: it takes 0.5 hours to complete a backpack at $12/hour.

· Manufacturing overhead per finished backpack: $9/unit

Fixed manufacturing overhead per quarter: $25.000 (including $8.750 depreciation expense). The machines are depreciated using the straight-line method over a period of 10 years.

4. The direct material purchases budget is based on production quantity and desired material inventory levels. Beginning and ending balance is set at 6,000 units. All purchases of direct materials are made on account and are to be paid in 90 days from month of purchase.

5. Selling and administrative expenses are indicated as follows:

Variable operating expenses: $5 per unit sold

Fixed operating expenses per quarter: $130.000.

6. The note payable corresponds to a 12-month $150.000 loan at an annual interest rate of 6% obtained from the bank on November 1, 2020. This note payable plus all the interest accrued must be paid on October 31, 2021. On January 2021, two months interest has already been accrued.

7. Income taxes are paid at the end of each quarter. The tax rate is 30%.

From the information provided prepare:

Prepare a sales budget (10 points)

Prepare budgets for:

· Production (10 points)

· manufacturing costs: (20 points)

· operating expenses. (10 points)

· Budget for cost of goods manufactured and sold (10 points)

Prepare a budgeted income statement (15 points)

Prepare a cash budget. (10 points)

Prepare a budgeted balance sheet. (15 points)

Rubrics

	Exceptional 90-100	Good 80-89	Fair 70-79	Fail <70
Critical analysis (25%)	Student effectively assesses the impact of project on the company. Student engages with theory/data in a critical manner.	Student fairly assesses the impact of project on the company. Students attempt to engage with theory/data in a critical manner.	Student fairly assesses the impact of project on the company, although some key aspects might be missing. Student may be unsuccessful in attempts to engage critically with theory/data.	Student fail to assesses the impact of project on the company, although some key aspects might be missing. Student makes no attempt to engage with theory/data in a critical manner.
Critical evaluation (25%)	Student effectively engages in critical evaluation of all aspects presented in the brief.	Student makes a good attempt at engaging in critical evaluation of most aspects presented in the brief.	Student makes a fair attempt at engaging in critical evaluation of some aspects presented in the brief (argument might be weak).	Student makes an insufficient attempt to critically evaluate aspects presented in the brief.
Critical discussion & formulation of solutions (25%)	Student effectively leads discussion towards strong theory/data-driven solutions.	Student makes a good attempt at leading discussion towards theory/data-driven solutions.	Student makes a fair attempt at leading discussion towards theory/data-driven solutions.	Student fails to lead discussion towards relevant solutions.
Communication (25%)	Student includes all relevant sections, meeting professional standards of presentation. Correct referencing format.	Student includes all relevant sections, but falls short of professional standards of presentation. Largely correct referencing format.	Student includes most relevant sections, but falls short of professional standards of presentation. Some incorrect referencing.	Student fails to submit several relevant sections and/or falls significantly short of professional presentation standards. Largely incorrect referencing format.

Weight: This task represents 100% of your total grade for this subject.

It assesses the following learning outcomes:

 Outcome 1: Examine on how to prepare a master budget .

 Outcome 2: Demonstrate understanding on how to prepare cash budgets and pro

forma income statement and proforma balance sheet

 Outcome 3: Analyze the way in which costs can be managed

 Outcome 4: Demonstrate working knowledge of real -world budget issues using excel