3. Budgets(24marks) a) (21 marks)
Prepare an analysis of cash requirements for the following:
Exhibit 8 Cash budget To compensate for this, a cash requirements budget for the coming year would be useful. The information is below. Production and cash requirements The following tables provide the details required to prepare the production and purchases budget for 20X8. Additional information is as follows: BBCC's accounts payable payment policy is to pay 80% of purchases in the quarter purchased and the remainder in the quarter following purchase. When planning for ending chocolate bar inventories, the company's policy is to have 7% of the next quarter's sales available on hand at the end of the quarter for The- Bar and Alamonde. Because Salt-Lick is made to order, no ending inventories of bars are kept. Also, it plans to have 9% of next quarter's estimated ingredients requirements on hand at the end of the quarter for all products. . Table 1: Sales forecasts for 20X8 and the first half of 20X9 Quarter The-Bar Salt-lick 20X8 Q1 20X8 Q2 20X8 Q3 20X8 Q4 20X8 totals 20X9 Q1 20X9 Q2 180,400 187,000 206,800 178,200 752,400 188,600 193,200 Alamonde 118,800 123,200 134,200 116,600 492,800 124,200 127,650 66,000 69,300 77,000 68,200 280,500 69,000 70,150 Total 365,200 379,500 418,000 363,000 1,525,700 381,800 391,000 Table 2: Ending inventories and last-quarter ingredients purchases Salt-Lick The-Bar 12,628 Alamonde 8,316 0 Vanilla Almonds Sugar 482 kg 29 litres 23 kg Fourth-quarter 20X7 purchases Vanilla Sugar $3,800 Almonds $2,500 $23,000 Table 3: Budgeted costs of ingredients (per 1,000 bars) Alamonde Salt-Lick Ingredients Price Chocolate liquor $5.50 per kg Cocoa butter $6.00 per kg Cocoa powder $1.15 per kg Cane sugar $0.70 per kg Emulsifier $0.80 per kg Vanilla $70.00 per litre Almonds $10.00 per kg Himalayan salt $5.50 per kg Other 0.08 per bar Total cost of ingredients The-Bar $ 192.50 79.80 8.05 9.31 0.48 56.35 0.00 0.00 80.00 $ 426.49 $ 192.50 79.80 4.83 9.31 1.12 49.00 21.00 0.00 80.00 $ 437.56 $ 161.70 54.60 8.05 14.46 0.56 98.00 0.00 9.63 80.00 $ 426.99 Table 4: Budgeted costs for systems upgrade Alan has been working with an outside computer consultant in relation to an upgrade to BBCC's information systems. The purpose of this systems project is to do the following: Integrate information systems between the cocoa bean and chocolate bar divisions. Upgrade BBCC's software to a mid-range ERP2 (enterprise resource planning) system. The consultant has prepared the following budget for the project: Project Budget PROJECT: Networking and software upgrade Cost by development phase Hours/unit by development phase Chargeout Implemen- Total rate/hour Analysis Design tation hours/unit or unit cost Analysis Design Implementation Total cost Total by cost category Cost categories Labour Project manager Application customization and implementation End user training Process analysis and development 256 40 50 110 224 100 180 250 136 35 176 120 616 S 175 S 406 S 480 S 653 $ 167,168 $ 146,272 $ 369 $ 14,760 $ 36,900 $ 398 $ 19,900 $ 71,640 $ 301 $ 33,110 $ 75,250 $ $ 234,938 $ 330,062 S 88,808 $ 12,915 S 70,048 $ 36,120 $ 207,891 $ 402,248 64,575 161,588 144,480 772,891 S 772,891 3 3 $ 156,500 $ $ S 469,500 $ 469,500 Hardware Servers Network connections (equipment and telecommunications) Network connection fees Hardware maintenance contract 1 1 1 $ 85,400 1 $ 2,500 1 $ 10,000 $ $ $ s - $ $ 85,400 $ - $ 2,500 $ - $ $ - $ $ 87,900 S - S S $ 10,000 S 479,500 $ 85,400 2,500 10,000 567,400 S 1 567,400 Software Application software licence fees Application maintenance contract 1 1 $ 25,000 1 $ 13,000 1 $ $ $ - $ 25.000 $ $ $ - $ 25,000 $ S 13,000 S 13,000 S S 25,000 13,000 38,000 $ 38,000 Testing Testing 20 144 600 764 S 100 $2,000 $ 14,400 $ 60,000 S 76.400 $ 76.400 Reserves (10% of total estimate) Total project cost estimate $ 23,694 $ 45,736 $ $ 260,632 $ 503,098 $ 74,739 $ 835, 130 $ 144,169 S 1,598,860 144,169 1,598,860 The consultant will bill BBCC quarterly using the following completion rates. The amount is considered due at the end of each quarter for the year. Note that hardware and software costs are billed in total at the beginning of the phase they are implemented. All other costs are based on percentage completion of the phase. January February March April May June July August September October November December Analysis 25% 35% 50% 60% 75% 85% 85% 85% 90% 95% 100% YTD % completion Design Implementation 0 0 10% 0 20% 0 25% 0 30% 0 40% 10% 45% 20% 50% 25% 60% 40% 70% 50% 80% 60% 100% 75% The cash budget should account for these costs as billed by the consultant
