ACCOUNTING 101B MANAGERIAL ACCOUNTING

GROUP PROJECT

To be completed in groups of 3-4 students (depending on class size)

TBA, Inc., manufactures and sells concrete block for residential and commercial building.

In preparation for a master budget for the 2023, management gathers the following

information.

TBA, Inc.

Balance Sheet

12/31/2022

ASSETS

Current Assets

Cash $120,000

Accounts receivable 300,000

Materials inventory 50,000

Work-in-process inventory -

Finished goods inventory 55,000

Total current assets $525,000

Property, Plant, & Equipment

(PP&E)

Land $2,500,000

Building 9,000,000

Accumulated Depreciation (4,500,000)

Total PP&E $7,000,000

TOTAL ASSETS $7,525,000

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $100,000

Line of Credit 0

Total current liabilities $100,000

Stockholders' Equity

Common stock, no par $600,000

Retained Earnings 6,825,000

Total stockholders' equity $7,425,000

TOTAL LIABITIES & STOCKHOLDERS' EQUITY $7,525,000Quarterly sales for 2022 are shown in the table below.

Quarter Sales in Units Selling Price Per Block

1 2,000,000 $.70

2 6,000,000 $.70

3 6,000,000 $.80

4 2,000,000 $.80

Management reports that 100,000 blocks and 5,000,000 pounds of raw materials are in

inventory at the beginning of 2023.

To helps protect against lost sales caused by unfulfilled demands from customers or

delays in shipments from suppliers, TBA decides that the number of units (blocks) in its

desired ending finished goods inventory should equal to 50% of next quarters budgeted

sales.

Each block requires 26 pounds of raw materials (a mixture of cement, sand, gravel, shale,

pumice, and water). Each pound of raw materials costs $0.01. Starting in 2023, TBAs

policy is to have ending materials equal to 50% of next quarters materials needed.

Each block requires 0.015 direct labor hours; direct labor cost is $14 per hour.

Variable overhead rate is $8 per direct labor hour. Fixed overhead is budgeted at

$320,000 per quarter ($100,000 for supervision, $200,000 for depreciation, and $20,000

for rent).

TBA's variable marketing expense is a $0.05 commission per unit (block) sold. Fixed

marketing expenses for each quarter include the following:

Salaries = $52,000

Depreciation = $5,000

Travel = $3,000

In addition, TBA plans to spend between 1-2% of previous quarters revenue on

advertising & promotions.

TBA has no variable general & administrative expenses. Fixed general & administrative

expenses for each quarter include the following:

Salaries = $55,000

Insurance = $4,000 Depreciation = $12,000

Travel = $2,000

Income tax is 21% of income before taxes; estimated taxes are paid quarterly at the end

of each quarter.

30% of the sales are cash sales. Of the sales on account, 80 percent are collected in the

quarter of sale; the remaining 20 percent are collected in the next quarter.

All materials are purchased on account; 70 percent of purchases are paid for in the

quarter of purchase. The remaining 30 percent are paid in the next quarter. The accounts

payable balance as of 12/31/2022 is mainly related to the material purchases in the fourth

quarter of 2022.

TBA plans to purchase additional equipment for $125,000 in the first quarter. The

acquisition will be financed with cash, supplementing it with the business line of credit if

necessary.

TBA recently established a $500,000 business line of credit with the interest rate of 12%

per year. TBA requires a $100,000 minimum cash balance at the end of each quarter.

Money can be borrowed from the business line of credit if the cash balance falls below

the minimum cash requirement. If the cash balance exceeds $100,000 at quarter-end,

TBA uses the excess to repay the business line of credit. All borrowing takes place at the

beginning of the quarter, and all repayment takes place at the end of the quarter.

If the quarter-end preliminary cash balance still exceeds the minimum cash requirement

after repaying the business line of credit, TBAs policy is to pay cash dividends equal to

50% of the excess amount.

The cash balance reported on 12/31/2022 balance sheet was $120,000.

REQUIREMENTS

1. Prepare the following budgets using Excel (80 points)

Prepare the quarterly Sales Budget for the coming year (2023) considering sales

predictions, market conditions, advertising plan, and business capacity assuming that

TBA is currently utilizing only 80% of its capacity. Show total sales by quarter and in

total for the year. (5 points)

Prepare the Production budget for the coming year. Show total units produced by

quarter and in total for the year. Your group can decide a different amount of desired

ending finished goods inventory for each quarter to better protect against lost sales

caused by unfulfilled demands from customers or delays in shipments from suppliers.

(5 points) Prepare the Direct Materials Purchases budget for the raw materials for the coming

year. Show total amounts by quarter and in total for the year. Your group can change

the policy regarding the desired ending materials inventory if necessary. (5 points)

Prepare the Direct Labor budget for the coming year. Show total amounts by quarter

and in total for the year. (5 points)

Prepare the Overhead budget for the coming year. Show total amounts by quarter and

in total for the year. (5 points)

Prepare Budgeted Product Cost and the Cost of Goods Sold budget for the coming

year. (10 points)

Prepare the Selling Expense budget for the coming year. Show total amounts by

quarter and in total for the year. (5 points)

Prepare the General & Administrative expense budget for the coming year. Show total

amounts by quarter and in total for the year. (5 points)

Prepare the Capital Expenditures budget for the coming year. (5 points)

Prepare the cash receipts budget, cash payments budget, and the Cash budget for

each quarter of the coming year. (15 points)

Prepare the budgeted income statement for the coming year. (15 points)