ACCT-5012 - CASE STUDY Fine Office Company Fine Office Company makes office furniture for offices. They are in the process of preparing a Master Budget including the Operating budget, Cash Statement, Income Statement and Balance Sheet for 2023. The yearly budget is broken into quarters. The year end is 31st December 2023. Your group has been requested to compile a master budget for the fiscal year 2023. Package is to include the following budgets; 1. Sales budget for each quarter and for the year 2. Production budget for each quarter and for the year 3. Purchasing Budget for each quarter and for the year 4. Direct labour budget for each quarter and for the year 5. Manufacturing overhead budget for each quarter and for the year 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: Fine Office Company produces two products P100 and P200 Sales price per P100 is Sales price per P200 is $170 $320 Each P200 unit uses There are: 2118 938 units from P100 in finished goods inventory at the end of 2022 with a value of $ units from P200 in finished goods inventory at the end of 2022 with a value of $ At the end of each quarter, Fine Office Company requires ending inventory to be equal to Each P100 unit uses $3,60,000 and $3,00,000 15% of the following quarter's budgeted sales in units. 2.5 sq. ft. of steel during the manufacturing process. The cost of steel for 2023 is estimated to be $ 3.5 sq. ft. of steel during the manufacturing process. $8 per sq. ft. At the end of each quarter, Fine Office Company requires ending inventory of materials to be equal to Each product requires 14% of the following quarter's budgeted Total Material needs for P100 and P200 1.5 machine hours and $72 per direct labour hour. 3.5 direct labour hours to produce. and the fixed manufacturing overhead is 50% will be credit sales. $25,000 per Quarter Direct Labour costs $ Fine Office Company allocates manufacturing overhead costs based on the estimated machine hours Estimated variable manufacturing overhead cost for 2023 is $35,000 For each quarter, it is estimated that 50% of sales will be cash and Of the credit sales, 25% pay in the quarter of the sales and 50% pay in the following quarter, and 25% pay in the next quarter Credit sales from Q4 2022 were $13,00,000 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, the purchase and Q4 2022 were 25% of material purchases are paid for in cash in the quarter of 75% are paid in the following quarter. Purchases of materials from $1,50,000 Fine Office Company Additional details continued: Fine Office Company will pay Currently, the cash balance in the bank is $60,000 in dividends in Q4 $15,560 Fine Office Company wants to maintain a minimum cash balance of $10,000 in the bank for each quarter. Budgeted sales volumes year 2024 Q1 and Q1: P100 Q1 5000 Q2 P200 Q1 8000 Q2 5100 9600 Budgeted sales volumes year 2023 are: P100 P200 Q1 Q1 6500 Q2 3000 Q3 3500 Q4 3500 4000 Q2 4000 Q3 5500 Q4 8000 Selling and Administration expenses for the budgeted Quarter are as follows: Variable Cost: Delivery costs are based on $ $3 per sales unit. Commissions are based on 1% of sales value. Fixed Costs: Accounting & professional services Administrative & Sales Salaries Advertising Computer costs Depreciation Office Supplies Printing Insurance Property taxes Rent Utilities Total Fixed Costs $ 1500 10000 12500 4000 15000 2500 2500 2000 3000 5000 30000 88000 Fine Office Company will purchase a new machine on 1/1/2023 worth $ 500000 and will make two equal payments. The first payment will be in Q3 and the second in Q4. Assume the machine was purchased at the beginning of the year. Taxation is 30% on taxable income and paid at the end of Q4 each year. Ignore calculate taxes for negative net income Some balance sheet accounts as at 31st December 2022 are as follow: PPE $1,00,000 Common Stock $5,80,000 Accounts Receivable $5,20,000 Accumulated Depreciation Retained Earnings Accounts Payable $90,000 $1,45,000 $5,04,000 For Cost of goods sold (COGS); Add total costs of production + Beginning Finished goods - Ending Finished goods Inventory. Interest of $ 12000 on loans is paid in total at the end of the year and is a fixed cost.