a) Prepare a complete Master Budget for 2023.

b) Clarify the assumptions and decisions that you have made in preparing the budget.

c) Prepare a performance analysis on the budget which include financial ratio analysis, economic value-added analysis and the market value analysis, between 2022 and the budget.

BGV the maker of industrial liquidating agents is preparing the budget for 2023. The sales department has indicated annual sales of 40,000 units and the selling price to be set at RM 90 per unit. The selling price of the product for 2022 was RM 85 per unit.

For the 1st Quarter sales will be 10% of annual sales 2nd Quarter sales will be 30% of annual sales 3rd Quarater sales will be 40% of annual sales respectively while for remaining will be 20% in the 4th Quarter It is expected customers always pay 100% of their purchases within the same quarter. However, in the 3rd quarter, 90% will be collected in the quarter and the remaining amount in the next quarter. For the 4th Quarter, 85% will be collected in the quarter and the remaining amount in the next quarter.

The company intends to have an inventory of finished products of 1,500 units at the end of the budget year. Each quarter will also require an ending finished inventory in order not to be in a situation of a stock out.

Each product requires 3 kg of raw materials and 4 hours of labour time to complete. The raw material is RM 10 per kg and workers are paid RM 7 per hour.

The production department intends to have 5,000 kg of raw materials at the end of the budget year. Each quarter will also require an ending inventory as a precaution against any shortages in the supply of raw materials.

The production requires variable overheads that is set based on direct labour hours. The predetermined rate is RM 1.50 per direct labour hour.

Annual Fixed Overhead expensesin RM are as follows: -

a. Factory Rent 120,000

b. Depreciation for machines 30,000

c. Factory Maintenance and Cleaning 60,000

Other non-manufacturing expenses annually are as follows:-

a. Advertising 150,000

b. Salaries 360,000

c. Office Expenses 30,000

d. Depreciation for office equipment is 40,000

e. Rent of the administration building is 60,000

Additional information

a. The company will be paying the 2022 tax payable in the 2nd Quarter of 2023.

b. An equipment will be purchased in the 1st Quarter at a cost of RM 250,000.00

c. Principal payment to reduce the Non-Current Liabilities will be made at every quarter. The amount is RM 12,500 every quarter. The interest payment of RM 12,000 will also be paid every

d. Interest rate for any short-term loans will be 8% and the loan must be settled within the same year that it is made. Any extension of payment will need further negotiation with the bank.

e. Dividends will be paid on the 4th Quarter. It was suggested that dividend amount is RM 70,000.00

f. The number of ordinary shares is 1,000,000 units In 2022, the average share price is RM 1.20 The average industry PE ratio is 6.00 times.

g. The cost of capital for the company is 12%

INCOME STATEMENT 2022

Sales 2,500,000 Cost of Goods Sold 1,650,000 Gross Margin 850,000 Selling and Administration Expense 540,000 EBITDA 310,000 Depreciation 25,000 EBIT 285,000 Interest Expense 48,000 Earning Before Tax 237,000 Corporate Tax 25% 59,250 Net Income 177,750

Previous Retain Earnings 207,250

add: Net Income 177,750 less: Dividends 50,000 New Retained Earnings 335,000

BALANCE SHEET 2022

Current Assets Cash 49,250 Trades Receivables 70,000 Raw Materials 80,000 Inventories 200,000 Total Current Assets 399,250 Land 1,000,000 Plant and Machines 1,645,000 Accumulated Depreciation 900,000 Plant and Machines Net 745,000 Total ASSETS 2,144,250

Current Liabilities

Trade Payables 150,000 Taxes Payable 59,250 Total Current Liablilities 209,250

Non Current Liabilities 600,000

Stockholders Equity

Common Stock 1,000,000 Retained Earnings 335,000 Total Equity 1,335,000

Total LIABLITIES AND EQUITY 2,144,250