1 2 J Master Budget Project Group 011 Vaughan Company makes AMAZING SUPER DUPER Widgets. Management is now preparing detailed budgets for the third quarter, July through September, and has assembled the following information to assist in budget preparation: 4 5 6 ' 8 1. Sales Budget y 10 11 K 13 The marketing department has estimated sales as follows for the remainder of the year. Actual sales in June we 5,000 14 15 July August September 8,000 15,000 October November 12,000 December Ib 17 The selling price of a SUPER DUPER widget is $35 and all sales are on account. 15 19 Based on past experience, sales are collected in the following pattern: 20 21 22 23 40% in the month of sale 55% in month following the sale 5% are never collected (uncollectible) 24 25 26 27 28 29 30 31 Vaughan Company Sales Budget 3rd Quarter Sales in Units Selling Price per Unit Total Sales in $ $,000 6,000 10,000 July August September Total 3rd Quarter 8,000 15,000 35 280,000 35 12,000 35 35,000 35 525,000 420,000 1,225,000 12:10 PM 0 4G () 46490 10 K/S Less: Bad Debt Expense Budgeted Cash S&A Expenses From here we go to the cash budget. We need to know cash receipts, cash disbursements, Cash flows/deficit, and the financing section. Vaughan's cash guidelines are as follows: They have a line of credit that can be accessed in $1,000 increments at an annual interest rate of 18%. Money will be borrowed on the last day of a given month and paid back on the last day of the month when it can be. Minimum cash balance required by Vaughan is $50,000. The beginning cash balance on July 1 is $50,000. Interest is paid when money is paid back. Vaughan Company Cash Budget 3rd Quarter Beginning Cash Balance 161 162 163 164 8. 165 166 167 168 169 170 171 172 173 114 175 176 177 Cash Receipts 178 Total Cash Available 179 Less: Disbursements 180 Direct Materials 181 Direct Labor 182 FOH 183 S&A Expenses 184 Total Disbursements 185 Cash Balance (Deficit) 186 Borrowings 187 RePayments 188 Interest 189 Ending Cash Balance Add: July August September = ||| L Share 12:09 PM 0 4G 430 K/S 101 88 89 90 91 92 93 The next Budget is the Direct Labor Budget. Let's assume that each unit takes 0.6 DLH to make and each DLH costs $15. Let's further assume that labor is paid in the month incurred. Vaughan Company DL Budget Total 94 3rd Quarter July August September 3rd Quarter 30 96 Budgeted Production in Units 97 DLH per Unit 98 Total DLH needed 99 Cost per DLH 100 Total Direct Labor Cost 101 102 5. 103 104 105 106 107 Next we will prepare our FOH budget. FOH is applied based on DLH. Estimated variable FOH is expected to be $420,000 and estimated DLH are expected to be 300,000. Fixed FOH is estimated to be $9,100 per month with $2,000 of that amount being depreciation of factory equipment and building. Like DL, assume that FOH is paid in the month incurred. = ||| L Share 12:09 PM 0 4G 468 101 56 57 58 59 60 61 62 63 64 65 bb 67 68 3. Raw Materials Purchasing Budget Each unit of SUPER DUPER widget requires 0.8 pounds of WHAM compound. To prevent shortages, the company would like the inventory of WHAM compound on hand at the end of each month to equal 30% of the following month's production needs. The inventory on July 1 is 2,004 pounds. WHAM compound costs $5.00 per pound and Vaughan pays for 50% of its purchases in the month of purchase; the remainder is paid in the following month. $50,400 of WHAM compound was purchased in June and 50% was paid for in June. Vaughan Company RM Purchasing Budget Total July August September 3rd Quarter 69 70 71 3rd Quarter Required Production 72 73 74 RM per Unit Production Needs Add: Desired Ending Inventory 75 Total Needs 76 Less: Beginning Inventory 77 RM to be Purchased 78 Cost of RM per pound 79 Cost of RM to be Purchased 80 81 Cash Disbursements for RM 82 83 June's RM Purchases 84 July's RM Purchases 85 86 87 August's RM Purchases September's RM Purchases Total Disbursements = ||| L Share 12:09 PM 0 440 101 4G ((-)) .K/S 26 27 Sales Budget 3rd Quarter Total July August September 3rd Quarter 28 29 Sales in Units 30 Selling Price per Unit 8,000 35 15,000 35 12,000 35,000 31 Total Sales in $ 280,000 525,000 35 420,000 35 1,225,000 32 33 Cash Collections 34 35 June's Cash Collections 96,250 96,250 36 July's Cash Collections 112,000 154,000 266,000 37 August's Cash Collections 210,000 288,750 498,750 38 September's Cash Collections 168,000 168,000 39 Total Cash Collections $ 208,250 $ 364,000 $456,750||$ 1,029,000 40 41 2. 46 43 44 Production Budget The company maintains a finished goods inventory equal to 5% of the following month's sales. The inventory of finished goods on July 1 is as it should be. 40 46 Vaughan Company 47 Production Budget 48 3rd Quarter July August September Total 3rd Quarter 49 50 Budgeted Sales in Units 8,000 51 Add: Desired Ending Inventory 750 52 Total Needs 8,750 15,000 600 15,600 12,000 35,000 400 12,400 1,750 36,750 53 Less: Beginning Inventory 400 750 600 1,750 54 Required Production 8,350 14.850 11,800 35,000 = ||| Share 12:09 PM You 14 minutes ago (+)) .11 46.11 855 10 137 138 139 140 7. 141 142 143 144 134 150 136 Unit Cost Ending Inventory in Units Cost Per Unit Ending FG Inventory Now it is time for the Selling and Administrative Budget. It too will be divided into a variable portion and a fixed portion. Assume that variable S&A costs are $1.50 per unit plus bad debt expense. Further assume that monthly Fixed Costs are as follows: Advertising $20,000, Executive Salaries $32,000, Other $25,000, and Office depreciation is $3,000. S&A are paid in the month incurred. 145 146 147 148 149 Vaughan Company S&A Budget 3rd Quarter July August September Total 3rd Quarter 150 Budgeted Sales 151 Variable S&A Expenses 152 153 154 155 156 157 158 159 160 161 162 Budgeted Variable S&A Exp. Budgeted Fixed S&A Expenses: Advertising Executive Salaries Other Depreciation Total Fixed S&A Expenses Total Budgeted S&A Expenses Less: Depreciation Less: Bad Debt Expense Budgeted Cash S&A Expenses = |||| n 12:09 PM You 15 minutes ago (+)) .11 46.11 855 10 108 109 110 112 113 114 Vaughan Company FOH Budget 3rd Quarter Budgeted DLH Variable FOH rate Total Budgeted Variable FOH July August September Total 3rd Quarter 115 Total Budgeted Fixed FOH 116 Total Budgeted FOH 117 Less: Depreciation 118 Cash Needed for FOH 119 120 Total FOH per Budget 121 122 123 124 6. 125 126 127 Budgeted DLH this period Predetermined FOH per DLH Now we need to prepare the Ending FG Inventory Budget. Vaughan Company Ending FG Inventory Budget 128 3rd Quarter Quantity Cost Total 123 130 Cost Per Unit: 131 Direct Materials 132 133 134 Direct Labor FOH Unit Cost = ||| 12:09 PM You 16 minutes ago 1.06 10 1 2 S 4 5 6 Master Budget Project Group 011 Vaughan Company makes AMAZING SUPER DUPER Widgets. Management is now preparing detailed budgets for the third quarter, July through September, and has assembled the following information to assist in budget preparation: 7 8 1. Sales Budget 10 11 The marketing department has estimated sales as follows for the remainder of the year. Actual sales in June we 5,000 K 13 14 15 July August September 8,000 October $,000 15,000 November 6,000 12,000 December 10,000 15 17 The selling price of a SUPER DUPER widget is $35 and all sales are on account. 15 19 Based on past experience, sales are collected in the following pattern: 20 21 40% in the month of sale 22 23 55% in month following the sale 5% are never collected (uncollectible) 24 25 Vaughan Company 26 Sales Budget 27 3rd Quarter 28 29 Sales in Units 30 Selling Price per Unit 31 Total Sales in $ 525,000 July August September Total 3rd Quarter 8,000 35 15,000 12,000 35,000 35 35 35 280,000 420,000 1,225,000 = ||| 12:09 PM 0 1 4G (-) 245 10 Master Budget Project 2 3 Vaughan Company makes AMAZING SUPER DUPER Widgets. You and your team are about to 4 prepare the detailed budgets for the third quarter, July through September. Using the budget template 5 and information given in this workbook, prepare the master budget for third quarter including: a) a sales budget for each month and the quarter 7 8 b) a production budget for each month and the quarter 9 c) a RM budget for each month and the quarter d) a DL budget for each month and the quarter e) a FOH budget for each month and the quarter f) an ending FG Inventory budget for 9/30/2024 g) a selling & administrative budget for each month and the quarter 11 12 13 14 15 i) a budgeted income statement for each month and the quarter 16 h) a cash budget for each month (but not quarter) j) a budgeted balance sheet for 9/30/2024 18 Do not worry about taxes. Assume that there are no cash dividends to be paid in 2024 and there will be 19 no purchases of P,P and E. = ||| L Share