ABC Company

ABC Company makes steel tool cabinets for offices. They are in the process of preparing a Master Budget including the Operating budget, Cash Statement, Income Statement and Balance Sheet for 2020. The yearly budget is broken into quarters. The year end is 31st December 2020. Your group has been requested to compile a master budget for the fiscal year 2020. Package is to include the following budgets; 1. Sales budget for each quarter

2. Production budget for each quarter

3. Purchasing Budget for each quarter

4. Direct labour budget for each quarter

5. Manufacturing overhead budget for each quarter

6. Selling and Administration budget

7. Work sheets for Collections and Disbursements

8. Budgeted Income Statement

9. CVP Income Statement

10. Budgeted Cash Statement

11. Budgeted Balance Sheet

Additional details:

Sales price per filing cabinet is $1,650

There are 800 tool cabinets in finished goods inventory at the end of 2019 with a value of $ 360,000 . At the end of each quarter, ABC Company requires to have 1980 units in finished goods inventory.

Each cabinet uses 165 sq. ft. of steel during the manufacturing process. The cost of steel for 2020 is estimated to be $ 8 per sq. ft.

ABC Company currently has 30,000 sq. ft. of steel in the beginning inventory. At the end of each quarter, ABC Company wants to have 132,000 sq. ft. of ending inventory. Each cabinet requires 13.2 machine hours and 6.6 direct labour hrs to produce.

Direct Labour costs $ 46.2 per direct labour hour.

ABCCompany allocates manufacturing overhead costs based on the estimated machine hours. Estimated manufacturing overhead cost for 2020 are$ 2,079,000 and are all variable.

For each quarter, it is estimated that 40 % of sales will be cash and 60 % will be credit sales. Of the credit sales, 80% pay in the quarter of the sale and 20% pay in the following quarter. Credit sales from Q4 2019 were $1,300,000

Direct labour costs and manufacturing overhead costs are paid for in cash in the quarter they occurred.

Assume operating expenses occur evenly throughout the year and are all paid in cash.

For each quarter, 70 % of material purchases are paid for in cash in the quarter of the purchase and 30 % are paid in the following quarter. Purchases of materials from Q4 2019 were $1,500,000 ABC Company Additional details continued:

ABC Company will pay $60,000 in dividends in Q4

Currently, the cash balance in the bank is $15,000. ABC Company wants to maintain a minimum cash balance of $10,000 in the bank for each quarter.

Budgeted sales volumes are: Q1 14,190 Q2 15,180 Q3 14,850 Q4 15,840

Selling and Administration expenses for the budgeted year are as follows;

Variable Cost: Delivery costs are based on$ 0.3 per sales unit. Commissions are based on 0.1 % of sales value. Fixed Costs: $ Accounting & professional services 1800 Administrative & Sales Salaries 77000 Advertising 9000 Computer costs 4200 Depreciation 35000 Office Supplies 2300 Printing 1400 Insurance 1200 Property taxes 500 Rent 20000 Utilities 3000 Total Fixed Costs 155400

ABC Company will purchase a new machine on 1/1/2020 worth $700,00 and will make two equal payments. The first payment will be in Q1 and the second in Q3. Assume the machine was purchased at the beginning of the year.

Taxation is 30 % on taxable income and paid at the end of Q 4 each year.

Balance sheet information as at 31st December 2019 is as follows; PPE $100,000 Accumulated Depreciation $100,000 Common Stock $280,000 Retained Earnings $145,000

For Cost of goods sold (COGS); Add total costs of production + Beginning Finished goods - Ending Finished goods Inventory.

Interest of $ 9000 on loans is paid in total at the end of the year and is a fixed cost.