BGV the maker of industrial liquidating agent is preparing the budget for 2023. The sales department has indicated the annual sales of 40,000 units and the selling price to be set at RM90 per unit. The selling price of the product for 2022 was RM85.

The sales department have estimated that the bulk of the sales will be in the 2nd and 3rd quarter of the year. For the 1st quarter, sales will be 10% of the annual sales, the 2nd and 3rd Quarter, sales will be 30% and 40% respectively while for remaining will be in the 4th Quarter. It is expected customers always pay 100% of their purchases within the same quarter. However, in the 3rd quarter 90% will be collected in the quarter and the remaining amount in the next quarter. For the 4th Quarter, 85% will be collected in the quarter and the remaining amount in the next quarter.

The company intends to have an inventory of finished products of 1,500 units at the end of the budget year. Each quarter will also require an ending finished inventory in order not to be in a situation of a stock out.

Each product requires 3kg of raw materials and 4 hours of labour time to complete. The raw material is RM10 per kg and workers are paid RM7 per hour.

The production department intends to have 5,000 kg of raw materials at the end of the budget year. Each quarter will also require an ending inventory as a precaution against any shortages in the supply of raw materials.

The production requires variable overheads that is set based on direct labour hours. The predetermined rate is RM1.50 per direct labour hour.

Annual Fixed Overhead expenses are as follows: -

a. Factory Rent RM 120,000 b. Depreciation for machines RM 30,000 c. Factory Maintenance and Cleaning RM 60,000

Other non-manufacturing expenses annually are as follows:-

a. Advertising RM 150,000 b. Salaries RM 360,000 c. Office Expenses RM 30,000 d. Depreciation for office equipment is RM 40,000 e. Rent of the administration building is RM 60,000

Additional information

a. The company will be paying the 2022 tax payable in the 2nd Quarter of 2023. b. An equipment will be purchased in the 1st Quarter at a cost of RM 250,000. c. Principal payment to reduce the Non-Current Liabilities will be made at every quarter. The amount is RM12,500 every quarter. The interest payment of RM12,000 will also be paid every quarter. d. Interest rate for any short-term loans will be 8% and the loan must be settled within the same year that it is made. Any extension of payment will need further negotiation with the bank. e. Dividends will be paid on the 4th Quarter. It was suggested that dividend amount is RM70,000. f. The number of ordinary shares is 1 million units. In 2022, the average share price is RM1.20. The average industry PE ratio is 6 times. g. The cost of capital for the company is 12%

INCOME STATEMENT	2022
Sales	2,500,000
Cost of Goods Sold	1,650,000
Gross Margin	850,000
Selling aEBITDAnd Administration Expense	540,000
EBITDA	310,000
Depreciation	25,000
EBIT	285,000
Interest Expense	48,000
Earning Before Tax	237,000
Corporate Tax	59,250
Net Income	177,750

Previous Retain Earnings	207,250
Add: Net Income	177,750
Less: Dividends	50,000
New Retain Earnings	335,000.0

BALANCE SHEET	2022
Current Assets
Cash	49,250
Trade Receivables	70,000
Raw Materials	80,000
Inventories	200,000
Total Current Assets	399,250
Land	1,000,000
Plant and Machines	1,645,000
Less: Accumulated Depreciation	900,000
Plant and Machines Net	745,000
TOTAL ASSETS	2,144,250

Current Liabilities
Trades Payable	150,000
Taxes Payable	59,250
Total Current Liabilities	209,250
Non-Current Liabilities	600,000
Stockholders Equity
Common Stock	1,000,000
Retained Earnings	335,000
Total Equity	1,335,000
TOTAL LIABILITIES AND EQUITY	2,144,250

Required: a. Prepare a complete Master Budget for 2023 in spreadsheet.

b. Clarify the assumptions and decisions that you have made in preparing the budget. (The evidence by spreadsheet)

c. Prepare a performance analysis on the budget which include financial ratio analysis, economic value-added analysis, and market value analysis, between 2022 and the budget. (Prepare spreadsheet for the evidence)