BAC5010 Coursework Frapp Delicious Ltd was established in 2018, it produces premium ice lollies using only natural ingredients. The company's business is highly seasonal, with most of the sales occurring in summertime. Prior to 2020 its business had been smooth until a major cash crunch in 2020 and 2021 when the COVID-19 disease spread across the world, that almost forced the company into bankruptcy. After that event, having realized the role of budgeting in organization, Greenspan - the owner and CEO of the company - decided to carry out the practice of budgets preparation within his company. And as the newly hired CFO, you are assigned this important task of preparing budgets for the next fiscal year beginning January 1". 2022. With the assistance of your staff and people from other departments, you have gathered following necessary information for the preparation of budgets. Sales data The budgeting team led by you comes up with following estimations of sales for the next year (Year 2022): Quarter 4120230 Quarter Quarter 2 Quarter Sales in cases 12.000 36,000 48,000 24,000 18.000 Selling price per case is predicted at $20 throughout the next year and during the first quarter of 2023. At Frapp Delicious Ltd, all sales are on credit; furthermore, experience has shown that 70% of sales are collected in the quarter in which the sale is made and the remaining 30% are collected in the following quarter. Production data BAC5010 Coursework Frapp Delicious Lid was established in 2018, it produces premium ice lollies using only natural ingredients. The company's business is highly seasonal, with most of the sales occurring in summertime. Prior to 2020 its business had been smooth until a major cash crunch in 2020 and 2021 when the COVID-19 disease spread across the world, that almost forced the company into bankruptcy. After that event, having realized the role of budgeting in organization, Greenspan - the owner and CEO of the company - decided to carry out the practice of budgets preparation within his company. And as the newly hired CFO, you are assigned this important task of preparing budgets for the next fiscal year beginning January 16, 2022. With the assistance of your staff and people from other departments, you have gathered following necessary information for the preparation of budgets. Sales data The budgeting team led by you come up with following estimations of sales for the next year (Year 2022): Power 02310 Quarter Duarter one Sales in cate 12.000 36.000 15.000 24.600 Selling price per case is predicted at $20 throughout the next year and during the first quarter of 2023. At Frapp Delicious Ltd, all sales are on credit; furthermore, experience has shown that 70% of sales are collected in the quarter in which the sale is made and the remaining 30% are collected in the following quarter Production data The experience shows that company needs to have a level of ending finished goods inventory equal to 20% of the next quarter's sales to ensure the continuity of sales. The desired ending inventory of finished goods on December 31, 2022 is 3,600 cases (20% of 18.000 ADA 4.800 Like the manufacturing overhead budget, the selling and administrative expense budget of the company is divided into variable and fixed cost components with the variable selling and administrative expense is estimated at $1.80 per case. The fixed selling and administrative expense budget is compiled from business units' budgets as follows: Quarter 1 Quarter 2 Quarter 3 Quarter 4 Advertising 24,000 24,000 24,000 24,000 Executive salaries 66,000 66,000 66.000 66,000 Insurance 12,000 12,000 12.000 12.000 Property taxes 4.800 4.800 4.800 Depreciation 12,000 12,000 12.000 12.000 All selling and administrative expenses are about to be paid for cash in the quarter of incurrence except for the depreciation expenses. You have also obtained the following additional assumptions that are needed for the preparation of cash budget: - The beginning cash balance is expected to be $51,000 on January 1, 2022 Greenspan plans to spend $156,000 during 2022 on equipment purchases: $60,000 in the first quarter; $48,000 in the second quarter, $24,000 in the third quarter, and $24,000 in the fourth quarter. The board of directors has approved cash dividends of S9,600 per quarter - The company has a policy to have a cash balance of at least $30,000 at the beginning of each quarter for contingencies. - A current agreement with a local bank allows the company to borrow in increments of $10,000 at the beginning of each quarter, up to a total loan balance of $250,000. The interest rate on these loans is 1% per month, and interest is not compounded. The borrowings (if any) must be made on the first day of the quarter and the repayment of the loan (if any) plus accumulated interest can be made at the end of the year only. Required: 1. On spreadsheet, prepare all the relevant budgets for the next fiscal year 2022, including: a. Sales budget (5 marks) b. Production budget (5 marks) c. Direct materials budget (10 marks) a. Direct labor budget (5 marks) c. Manufacturing overhead budget (5 marks) 6. Ending finished goods inventory budget (10 marks) g. Selling and administrative expense budget