ACCT-5012 - CASE STUDY Group members

Fine Office Company Marking Rubric Don't use marking cells

Tab Max. Points Group Points

Fine Office Company makes office furniture for offices. They are in the process of preparing Sales 7 0

a Master Budget including the Operating budget, Cash Statement, Income Statement Production 10 0

and Balance Sheet for 2021. The yearly budget is broken into quarters. The year end is Dir. Materials 13 0

31st December 2021. Your group has been requested to compile a master budget for the Dir. Labour 5 0

fiscal year 2021. Manufacturing OH 18 0

Package is to include the following budgets; Cost of Ending Finished Inv. 12 0

1. Sales budget for each quarter and for the year COGS 14 0

2. Production budget for each quarter and for the year Selling & Admin 17 0

3. Purchasing Budget for each quarter and for the year I/S 18 0

4. Direct labour budget for each quarter and for the year CVP I/S 16 0

5. Manufacturing overhead budget for each quarter and for the year Cash 32 0

6. Selling and Administration budget Cash Worksheets 14 0

7. Work sheets for Collections and Disbursements B/S 24 0

8. Budgeted Income Statement Total 200 0

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 A

Sales price per P200 is B

There are 800 units from P100 in finished goods inventory at the end of 2020 with a value of $ 360,000 and 500 units from P200 at the end

of 2020 value 300,000 . At the end of each quarter, Fine Office Company requires ending inventory to be equal to C of the following quarter's budgeted sales in units.

The required ending inventory for Dec. 31, 2021 are 600 units for P100 and 400 units for P200

Each P100 unit uses D sq. ft. of steel during the manufacturing process. The cost of steel for 2021 is estimated to be $ 8 per sq. ft.

Each P200 unit uses E sq. ft. of steel during the manufacturing process.

Fine Office Company currently has 30,000 sq. ft. of steel in the beginning inventory. At

the end of each quarter, Fine Office Company wants to have F sq. ft. of ending

inventory.

Each product requires G machine hours and H direct labour hrs to produce.

Direct Labour costs $ I per direct labour hour.

Fine OfficeCompany allocates manufacturing overhead costs based on the estimated machine

hours. Estimated manufacturing overhead cost for 2021 are$ J 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 2020 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 2020 were $1,500,000

Fine Office Company

Additional details continued:

Fine Office Company will pay $60,000 in dividends in Q4

Currently, the cash balance in the bank is $15,000. Fine Office Company wants to maintain a

minimum cash balance of $10,000 in the bank for each quarter.

Budgeted sales volumes are:

P100 Q1 K Q2 L Q3 M Q4 N

P200 Q1 O Q2 P Q3 Q Q4 R

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 3600

Administrative & Sales Salaries 140000

Advertising 20000

Computer costs 9000

Depreciation 70000

Office Supplies 5000

Printing 3000

Insurance 4000

Property taxes 2000

Rent 40000

Utilities 3400

Total Fixed Costs 300000

Fine Office Company will purchase a new machine on 1/1/2021 worth $ 700000 and will make two equal

payments. The first payment will be in Q2 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 Q 4 each year.

Balance sheet information as at 31st December 2020 is as follows;

PPE $100,000 Accumulated Depreciation $100,000

Common Stock $580,000 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.

Based on above information I need to find out the CVP income statement and cash Budget which template is given below -

CVP Income Statement

CVP Income Statement for year ended 31st December 2021

$ $

Sales

Less: Variable Costs

Direct materials

Direct Labour

Manufacturing Variable Overhead costs

Selling & Administration variable costs

Adjustment for Finished Inventory

Beginning Finished Goods Inventory

Less: Ending Finished Goods Inventory

Total Contribution Margins

Less: Fixed costs

Selling & Administration fixed costs

Interest costs

Income Tax

Net Income after taxation

Check result with Income Statement:

Cash Budget

CASH BUDGET

for the year ending 31st December 2021

1 2 3 4 Year

Beginning cash balance

Add: Receipts

Collections from Customers

Total receipts:

Total available cash:

Less: Disbursements

Direct Materials

Direct Labour

Manufacturing Overhead

Selling and Administrative expenses

Purchase of a truck

Income Tax expense

Dividends

Total disbursements:

Excess (deficiency) of available cash over cash disbursements

Financing

Add: Borrowings

Less: Repayments (including interest)

Ending cash balance

Notes:

Minimum cash balance: $10,000

Interest on loans to be paid in Quarter 4

Taxation amount taken from the Income Statement