Budget Case - Ethereal Chutes
Rebman
For this case, you are to prepare an operating budget for the next year for Ethereal Chutes, a company that has been in operation for 8 years. You will prepare the operating budget and the projected income statement (each on its own worksheet tab in this workbook). Also, you are to provide comments about the projections for management.
Your grade will be based on the operating budget, the projected income statement, and your comments to management. Be sure that the amounts on your income statement are correct!
Below are some of the assumptions for the company. On the next tab in this workbook you will find a start for the budget calculations. You will have to complete the budget plan for next year. For this case, you will only be preparing the operating budgets; the cash flow budget is not required as part of this case.
This project is required to be done on excel or other spreadsheet software (eg OpenOffice). The file must be submitted in a Windows format (.xls or .xlsx) to receive your grade.
Your comments or suggestions for management should be written in the space below the projections on the income statement.
Points will be given for accuracy and for the use of formulas in excel. If all calculations are accurate, but there is no or limited use of formulas for the computations, the maximum credit is 85 points. If all calculations are accurate and there is good use of formulas, then 110 points can be earned.
Some of the cells have formulas started for you. You can use them for a guide. Be careful with December formulas.
The company manufactures custom parachutes for skydivers. They are expensive, but the company makes the best quality chutes and does custom designs.
The company is preparing their budget for the next calendar year. Your job is to prepare their operating budget and income statement for presentation to the management group.
The company has some variation in sales levels from month to month, and this makes planning difficult for them.
Some information is as follows -->
1	Revenues are based on the number of units of product sold and from "repacking" and repair services.
2	The volume of work is seasonal. The quantities per month and the sales prices are shown on the attached worksheet.
3	Direct Labor costs are $18.00 per hour.
4	It takes 20 hours of direct labor for each chute that is sold. Each repack takes 2 hours.
5	The materials for each chute consist of chute material and a pack set. Each finished chute uses one unit of chute material and one pack set.
6	The cost of each unit of chute material is $600, and the cost of each pack set is $425.
7	Each repack uses $20 of supplies. These are not materials and are not inventoried.
8	Other fixed manufacturing expenses such as equipment, utilities, etc are $2,600 per month.
9	Depreciation on equipment is $1,000 per month. This has been included in the Other fixed operating expenses above.
10	Selling and administrative expenses are $8,000/month plus 10% of chute sales and are paid each month. The 10% of chute sales is paid in the month after the sales are made. So, the Jan 10% payment is based on the Dec chute sales amount.
11	The company wants to keep 25% of the following month's projected sales of parachutes in inventory at the end of each month. There is no inventory for repacking because this is a service rather than a sale of a product.
12	Beginning inventory at Jan 1 is 6 chutes. (FG)
13	The company wants to keep 20% of the chute material and the pack sets in inventory at the end of each month. Materials for repacking are not inventoried.
14	Beginning inventory at Jan 1 is 12 chutes and 12 pack sets (Materials inventory).
15	There are no work in process inventories.
16	The cost per chute for inventory purposes is:
			DM chutes	600
			DM pack sets	425
			DL	420
			OH	210
			total	1655