4. You are the CEO of PNR Co., Ltd. and your team has prepared a budget for 2019 by quarter as shown in the following sheets.
4.1.Discuss how you think about the proposed budget and the performance of the company. What can you suggest to improve both the business operations and the budgeting?
4.2. Suppose budgeted sales for quarter 1 and quarter 2 are to be revised down from 8,000 and 8,500 units respectively. Explain how these changes will affect the budgets. Recommend some strategies to tackle the drop in sales and improve the performance in 2019. You may present a revised master budget to support your argument.
03/2018 04/2018 8,500 along Budgeted sales in units Selling price per unkt Total budgeted sales 01/2019 02/2019 Q3/2019 04/2019 Year 2019 8,000 10,000 12,000 38,500 $ 80$ BD $ 80$ BO$ 80 $ 640,000 $ 680,000 $ 800,000 $ 960,000 $ 3,000,000 3,500 Production Budget Budgeted Sales Added: Desired ending inventory Total Needs Les Beginning inventory Required production 8,000 2,600 11,600 2,240 8,360 8,500 5,100 13,600 3,600 10,000 10,000 3,900 13,500 5.100 SACO 12.000 4,680 16,680 2,500 12,780 43,10 3,240 39,940 Orect Meer Budget Production Materials per unit (pounds! Production needs Added: Desired ending inventory Total Needs Les Beginning inventory Material to be purchased wounds! Cost per unit Material to be purchased 30 5 41,800 19,000 69,800 20,000 40,800 3 $ 122,400 $ 10,000 5 50,000 23,000 73,000 19,000 54,000 3 $ 162,000 $ RADO 5 44,000 21,000 65,000 23,000 42,000 12,780 5 63,500 22,400 B6, 100 21,000 65,100 3$ 195,900 $ 39,940 5 199,700 22,400 222,100 20,000 202,100 3 606,300 $ 126,000 $ 10,000 Grect labor long Units of production Direct laber per unit Labor hours required Hourly wage rate Total direct labor costs 8,30 2 16,720 10 $ 167,200 $ 8,800 2 17.100 10 $ 176,000 $ 20,000 10 $ 200,000 $ 12,780 2 25,560 10 $ 255,500 $ 39,940 2 79,860 10 79,00 $ $ $ $ $ $ $ 16,720 10,032 $ 5,015 $ 26,7525 8,360 $ 50,260 $ 20,000 12,000 $ 6,000 $ 32,000 $ 10,000 $ 60,000 $ 17,500 10,560 $ 5,2805 22,160 S 8,600 $ 52,800 $ 25,560 15,336 $ 7,6685 40,896 % 12,780 $ 76,650 $ 79,80 47,926 22,464 127,808 39,940 239,640 Manufacturing Overhead Budget 202,400 26,000 Budgeted DLH Indirect laber (50.66/DUH Indirect materials (50.3/DLMI Employee welfare ($1.6/OLH) Facilities (50.5/DLO Variable mig. Oh costs Fixed Expenses Salary and was Government fees Insurance expense Maintenance costs Utilities Depreciation expertise Other expenses Fixed mily. OH OH Total mig. Of costs Advertising Sales commission Salary: Sales team Tweepers Entertainment experies Insurance Government fee Facilities Depreciation Other expres Total selling expenses $ $ $ $ $ $ s $ $ 50,600 $ 6,500 $ 7,200 $ 11,500 $ 10,600 $ 24,000 $ 3,000 $ 113.400$ 163,560 $ 50,600 $ 6,500 $ 7,200 $ 11,500 $ 6,600 $ 24,000 $ 3,000 $ 109,400 $ 169,400 $ 50,500 $ 6,500 5 7,200 $ 11,500 $ 9,600 $ 24,000 $ 3,000 $ 112,400 $ 165,200 $ 50,600 $ 6,500 $ 7,200 $ 11.500 5 6,600 $ 24,000 $ 3,000 $ 109,400 $ 186,0ROS 46,000 33,400 96.000 12,000 444.100 684,240 Sding Expense Budget $ $ $ $ S $ $ $ $ $ $ 12,960 $ 51,840 38,000 $ 3,600 5 2,400 $ 600 $ 400 $ 300 $ 3,000 $ 700$ 113,000 $ 18,432 $ 73,728 $ 38,000 $ 3,600 $ 2.400$ 6005 400 $ 300 $ 3,000 $ 700$ 141,160 $ 19,800 $ 79,200 $ 38,000 $ 2,6005 2,400 $ 500 $ 400 $ 300 $ 3,000 $ 700$ 148,000 $ 15,665 62,784 $ 38,000 $ 3,600 S 2,400 $ 600 $ 400 $ 300 $ 3,000 $ 700 $ 127,40 % 56,688 267,552 152,000 14,400 9,600 2,400 1,500 1,200 12,000 2,800 530,440 Mive Expense wing Salary: Management team Salary: Support stalls Insurance Government for Facilities Office supplies Depreciation Other spurses Total admis expenses $ $ $ $ S $ $ $ $ 40,848S 17,000 $ 2,150 $ 1,200 $ 600 $ 1,400 $ 10,000 $ 800 $ 73,998 40,848$ 17,000 $ 2.150 $ 1,200 $ 600 $ 1,400 $ 10,000 $ 800 $ 73,99 $ 40,8485 17,000 $ 2,150 $ 1,200 $ 500$ 1,400 $ 10,000 $ 800 $ 71,938 40,848$ 17,000 $ 2,150 $ 1,200 $ 600 $ 1,400 $ 10,000 $ 800 $ 73,99 $ 163,392 68,000 8,600 4,800 2,400 5,600 40.000 3,200 295,992 Mariek to be purchased $ 130,000 $ 122,400 5 162,000 $ 126,000 $ 195,900 5 736,300 $ 80% in the same month 20% in the following month Total cash disurements 104,000 $ $ 104,000 $ 97,920 $ 26,000 $ 123,920 $ 129,600 $ 24 ABD $ 154,00 $ 100,000 $ 32,400 S 139,200 $ 156,720 25,200 181,920 $ $ 697,120 4,580,000 Expected Cinh Collections Total budgeted sales 60% is the same month 40% in the following month Total cash collections $ 700,000 $ $ 420,000 $ $ $ 420,000 $ 800,000 $ 480,000 $ 280,000 $ 750,000 $ 640,000 $ 384,000 $ 320,000 $ 704,000 $ 680,000 $ 408,000 $ 256,000 $ 564,000 $ 800,000 $ 430,000 $ 272,000 $ 752,000 $ 960,000 $ 575,000 320,000 896,000 $ 4,195,000 capul Bpendit we Computer Vehicles Total $ $ S $ $ $ $ $ $ $ $ s 20,000 $ 70,000 $ 150,000 $ 70,000 150,000 $ $ $ $ 704,000 $ 704,000 $ 61,5225 664,000 $ 725,522 5 -13,116 $ 752,000 $ 738,684 $ 896,000 $ 938,486 5 3,016,000 3,016,000 Beginning cash balance Add: Cash collections Total cash wable Les Cash disbursements Materials Dirut ber Manufacturing overhead Selling penses Admin. Expenses Equipment purchase Dividend Total disbursements Excess deficiency Financing Borrowing Repayment Interest Total financing Ending cash balance Budget $ $ $ $ $ S $ $ $ 123,920 $ 167,200 $ 163,560 $ 113,800 $ 73,998 $ $ $ 642,478$ 51,522 5 154,000 $ 200,000 $ 169,400 $ 141,150 $ 73,99 $ $ $ 738,638 -13,116 $ 133,200 S 176,000 S 165,200 $ 148,000 $ 73,938 $ $ s 696,398 $ 42,486 $ 181,920 $ 255,600 $ 186,000 $ 127,480 $ 73,99 $ 150,000 $ $ 975,073 $ -36,592 $ 599,120 79,00 684.240 530,440 295,992 150,000 3,052,992 -36,592 $ $ $ $ $ $ $ $ $ $ $ $ -13,116 $ $ 61,522 $ $ 42,486 S -36,592 $ -36,592 PNR Co., Ltd. Cost of Goods Sold Budget For the Year Ended December 2019 $ 58,320 Beginning finished goods inventory Add: Direct materials Beginning raw materials inventory Add: Raw materials purchased Less: Ending raw materials inventory Raw materials used in production Add: Direct labor Add: Mfg. overhead ($3/DLH) Cost of goods manufactured Ending finished goods inventory Cost of goods sold $ 40,000 $ 404,200 $ 44,800 $ 399,400 $ 798,800 $ 239,640 $ 1,437,840 $ 84,240 $ 1,411,920 PNR Co., Ltd. Budgeted Income Statement For the Year Ended December 31, 2019 $ $ $ $ $ 38,500 3,080,000 1,411,920 1,668,080 530,440 1,137,640 Budgeted sales in units Total budgeted sales Cost of goods sold Gross margin Selling expenses Excess profit Less: Fixed expenses Manufacturing overhead Selling expenses Admin. Expenses Total fixed expenses Operating profit Less: Interest expense Pretax profit Less: Taxes (assumed) Net profit $ $ $ $ $ $ $ $ $ 444,600 530,400 295,992 1,270,992 -133,352 2,227 -135,579 -47,453 -88,126 PNR Co., Ltd. Budgeted Balance Sheet For the Year Ended December 2019 Assets: Cash Accounts receivable Inventory Total current assets Other assets Total assets $ -36,592.00 $ 384,000.00 $ 84,240.00 $ 431,648.00 $ 558,585.65 $ 990,233.65 Liabilities and Stockholders' Equity Accounts payable Total liabilities Common stock Retained earnings Total liabilities and stockholders' equity $ 39,180.00 $ 39,180.00 $ 1,000,000.00 $ -88,126.35 $ 990,233.65 03/2018 04/2018 8,500 along Budgeted sales in units Selling price per unkt Total budgeted sales 01/2019 02/2019 Q3/2019 04/2019 Year 2019 8,000 10,000 12,000 38,500 $ 80$ BD $ 80$ BO$ 80 $ 640,000 $ 680,000 $ 800,000 $ 960,000 $ 3,000,000 3,500 Production Budget Budgeted Sales Added: Desired ending inventory Total Needs Les Beginning inventory Required production 8,000 2,600 11,600 2,240 8,360 8,500 5,100 13,600 3,600 10,000 10,000 3,900 13,500 5.100 SACO 12.000 4,680 16,680 2,500 12,780 43,10 3,240 39,940 Orect Meer Budget Production Materials per unit (pounds! Production needs Added: Desired ending inventory Total Needs Les Beginning inventory Material to be purchased wounds! Cost per unit Material to be purchased 30 5 41,800 19,000 69,800 20,000 40,800 3 $ 122,400 $ 10,000 5 50,000 23,000 73,000 19,000 54,000 3 $ 162,000 $ RADO 5 44,000 21,000 65,000 23,000 42,000 12,780 5 63,500 22,400 B6, 100 21,000 65,100 3$ 195,900 $ 39,940 5 199,700 22,400 222,100 20,000 202,100 3 606,300 $ 126,000 $ 10,000 Grect labor long Units of production Direct laber per unit Labor hours required Hourly wage rate Total direct labor costs 8,30 2 16,720 10 $ 167,200 $ 8,800 2 17.100 10 $ 176,000 $ 20,000 10 $ 200,000 $ 12,780 2 25,560 10 $ 255,500 $ 39,940 2 79,860 10 79,00 $ $ $ $ $ $ $ 16,720 10,032 $ 5,015 $ 26,7525 8,360 $ 50,260 $ 20,000 12,000 $ 6,000 $ 32,000 $ 10,000 $ 60,000 $ 17,500 10,560 $ 5,2805 22,160 S 8,600 $ 52,800 $ 25,560 15,336 $ 7,6685 40,896 % 12,780 $ 76,650 $ 79,80 47,926 22,464 127,808 39,940 239,640 Manufacturing Overhead Budget 202,400 26,000 Budgeted DLH Indirect laber (50.66/DUH Indirect materials (50.3/DLMI Employee welfare ($1.6/OLH) Facilities (50.5/DLO Variable mig. Oh costs Fixed Expenses Salary and was Government fees Insurance expense Maintenance costs Utilities Depreciation expertise Other expenses Fixed mily. OH OH Total mig. Of costs Advertising Sales commission Salary: Sales team Tweepers Entertainment experies Insurance Government fee Facilities Depreciation Other expres Total selling expenses $ $ $ $ $ $ s $ $ 50,600 $ 6,500 $ 7,200 $ 11,500 $ 10,600 $ 24,000 $ 3,000 $ 113.400$ 163,560 $ 50,600 $ 6,500 $ 7,200 $ 11,500 $ 6,600 $ 24,000 $ 3,000 $ 109,400 $ 169,400 $ 50,500 $ 6,500 5 7,200 $ 11,500 $ 9,600 $ 24,000 $ 3,000 $ 112,400 $ 165,200 $ 50,600 $ 6,500 $ 7,200 $ 11.500 5 6,600 $ 24,000 $ 3,000 $ 109,400 $ 186,0ROS 46,000 33,400 96.000 12,000 444.100 684,240 Sding Expense Budget $ $ $ $ S $ $ $ $ $ $ 12,960 $ 51,840 38,000 $ 3,600 5 2,400 $ 600 $ 400 $ 300 $ 3,000 $ 700$ 113,000 $ 18,432 $ 73,728 $ 38,000 $ 3,600 $ 2.400$ 6005 400 $ 300 $ 3,000 $ 700$ 141,160 $ 19,800 $ 79,200 $ 38,000 $ 2,6005 2,400 $ 500 $ 400 $ 300 $ 3,000 $ 700$ 148,000 $ 15,665 62,784 $ 38,000 $ 3,600 S 2,400 $ 600 $ 400 $ 300 $ 3,000 $ 700 $ 127,40 % 56,688 267,552 152,000 14,400 9,600 2,400 1,500 1,200 12,000 2,800 530,440 Mive Expense wing Salary: Management team Salary: Support stalls Insurance Government for Facilities Office supplies Depreciation Other spurses Total admis expenses $ $ $ $ S $ $ $ $ 40,848S 17,000 $ 2,150 $ 1,200 $ 600 $ 1,400 $ 10,000 $ 800 $ 73,998 40,848$ 17,000 $ 2.150 $ 1,200 $ 600 $ 1,400 $ 10,000 $ 800 $ 73,99 $ 40,8485 17,000 $ 2,150 $ 1,200 $ 500$ 1,400 $ 10,000 $ 800 $ 71,938 40,848$ 17,000 $ 2,150 $ 1,200 $ 600 $ 1,400 $ 10,000 $ 800 $ 73,99 $ 163,392 68,000 8,600 4,800 2,400 5,600 40.000 3,200 295,992 Mariek to be purchased $ 130,000 $ 122,400 5 162,000 $ 126,000 $ 195,900 5 736,300 $ 80% in the same month 20% in the following month Total cash disurements 104,000 $ $ 104,000 $ 97,920 $ 26,000 $ 123,920 $ 129,600 $ 24 ABD $ 154,00 $ 100,000 $ 32,400 S 139,200 $ 156,720 25,200 181,920 $ $ 697,120 4,580,000 Expected Cinh Collections Total budgeted sales 60% is the same month 40% in the following month Total cash collections $ 700,000 $ $ 420,000 $ $ $ 420,000 $ 800,000 $ 480,000 $ 280,000 $ 750,000 $ 640,000 $ 384,000 $ 320,000 $ 704,000 $ 680,000 $ 408,000 $ 256,000 $ 564,000 $ 800,000 $ 430,000 $ 272,000 $ 752,000 $ 960,000 $ 575,000 320,000 896,000 $ 4,195,000 capul Bpendit we Computer Vehicles Total $ $ S $ $ $ $ $ $ $ $ s 20,000 $ 70,000 $ 150,000 $ 70,000 150,000 $ $ $ $ 704,000 $ 704,000 $ 61,5225 664,000 $ 725,522 5 -13,116 $ 752,000 $ 738,684 $ 896,000 $ 938,486 5 3,016,000 3,016,000 Beginning cash balance Add: Cash collections Total cash wable Les Cash disbursements Materials Dirut ber Manufacturing overhead Selling penses Admin. Expenses Equipment purchase Dividend Total disbursements Excess deficiency Financing Borrowing Repayment Interest Total financing Ending cash balance Budget $ $ $ $ $ S $ $ $ 123,920 $ 167,200 $ 163,560 $ 113,800 $ 73,998 $ $ $ 642,478$ 51,522 5 154,000 $ 200,000 $ 169,400 $ 141,150 $ 73,99 $ $ $ 738,638 -13,116 $ 133,200 S 176,000 S 165,200 $ 148,000 $ 73,938 $ $ s 696,398 $ 42,486 $ 181,920 $ 255,600 $ 186,000 $ 127,480 $ 73,99 $ 150,000 $ $ 975,073 $ -36,592 $ 599,120 79,00 684.240 530,440 295,992 150,000 3,052,992 -36,592 $ $ $ $ $ $ $ $ $ $ $ $ -13,116 $ $ 61,522 $ $ 42,486 S -36,592 $ -36,592 PNR Co., Ltd. Cost of Goods Sold Budget For the Year Ended December 2019 $ 58,320 Beginning finished goods inventory Add: Direct materials Beginning raw materials inventory Add: Raw materials purchased Less: Ending raw materials inventory Raw materials used in production Add: Direct labor Add: Mfg. overhead ($3/DLH) Cost of goods manufactured Ending finished goods inventory Cost of goods sold $ 40,000 $ 404,200 $ 44,800 $ 399,400 $ 798,800 $ 239,640 $ 1,437,840 $ 84,240 $ 1,411,920 PNR Co., Ltd. Budgeted Income Statement For the Year Ended December 31, 2019 $ $ $ $ $ 38,500 3,080,000 1,411,920 1,668,080 530,440 1,137,640 Budgeted sales in units Total budgeted sales Cost of goods sold Gross margin Selling expenses Excess profit Less: Fixed expenses Manufacturing overhead Selling expenses Admin. Expenses Total fixed expenses Operating profit Less: Interest expense Pretax profit Less: Taxes (assumed) Net profit $ $ $ $ $ $ $ $ $ 444,600 530,400 295,992 1,270,992 -133,352 2,227 -135,579 -47,453 -88,126 PNR Co., Ltd. Budgeted Balance Sheet For the Year Ended December 2019 Assets: Cash Accounts receivable Inventory Total current assets Other assets Total assets $ -36,592.00 $ 384,000.00 $ 84,240.00 $ 431,648.00 $ 558,585.65 $ 990,233.65 Liabilities and Stockholders' Equity Accounts payable Total liabilities Common stock Retained earnings Total liabilities and stockholders' equity $ 39,180.00 $ 39,180.00 $ 1,000,000.00 $ -88,126.35 $ 990,233.65
