BUDGET CASE Your friend Vinny would like to open a milkshake shack on the Sanibel Island. He needs your help to need help to prepare an operating budget for his business and to show him whether he can earn a profit at the end of the day. Below is the data you are provided: Cost of materials needed to make milkshakes: Other costs: 1. Shack rental: $500 a month 2. Cleaning and other miscellaneous supplies: $100 a month 3. Equipment: Industrial Milk Shake Maker: $72 per machine x 10 machines=$720 4. Equipment: Industrial Refrigerator/freezer: $480 5. Countertops: $1,200 6. Tables and benches for customers to sit outside: $108 per bench-set x 10=$1,080 7. Annual insurance: $600 a year 8. Sign: use your marketing knowledge to think of a good name= $100 9. Advertising expenses: $5,000 a month 10. Accounting and bookkeeping costs: $500 a month 11. Owner's salary: $96,000 a year 12. Dues and membership fees: $2,000 a year. 13. Licenses and permit fees: $600 a year. 14. Maintenance services: $400 a month. 15. Office supplies: $300 a month. 16. Two part-time employees: each receiving a monthly salary of $800 (including benefits). 17. Total Start-up Costs = $20,247. A self-amortizing, 2 year loan will be obtained from a bank with monthly payments. The loan amortization schedule is included in the appendix of this case study. 18. 10% of gross sales must be given to the Island. Assume: 1. Sale prices of milkshakes: $10 for large, $7 for small. 2. On an average, 150,000 people visit the Island. Monthly visitors are evenly distributed. 3. 20% visitors will buy a milkshake either big or small during a month from him. 4. Vinny projects that 60% of large and 40% of small size will be sold. 5. No beginning inventory. At month end, Vinny would like to have 10% materials left for the next month. 6. Milkshake Maker depreciation: 36months 7. Refrigerator/freezer depreciation: 120 months 8. Counter tops depreciation: 120months 9. Tables and benches depreciation: 36 months Prepare for the first quarter Sales budget Production budget Direct materials budget for each raw material necessary to make milk shakes Manufacturing overhead budget General, Administration and Selling budget Using the information from the budgets you prepared above, need help to prepare an projected Income Statement for the first quarter. APPENDIX: LOAN AMORTIZATION SCHEDULE: Beginning Balance Payment Interest Expense Principle reduction Ending balance 20,247.00 897.36 101.24 796.12 19,450.88 19,450.88 897.36 97.25 800.11 18,650.77 18,650.77 897.36 93.25 804.11 17,846.66 17,846.66 897.36 89.23 808.13 17,038.53 17,038.53 897.36 85.19 812.17 16,226.36 16,226.36 897.36 81.13 816.23 15,410.13 15,410.13 897.36 77.05 820.31 14,589.82 14,589.82 897.36 72.95 824.41 13,765.41 13,765.41 897.36 68.83 828.53 12,936.88 12,936.88 897.36 64.68 832.68 12,104.20 12,104.20 897.36 60.52 836.84 11,267.36 11,267.36 897.36 56.34 841.02 10,426.34 10,426.34 897.36 52.13 845.23 9,581.11 9,581.11 897.36 47.91 849.45 8,731.66 8,731.66 897.36 43.66 853.70 7,877.96 7,877.96 897.36 39.39 857.97 7,019.99 7,019.99 897.36 35.10 862.26 6,157.73 6,157.73 897.36 30.79 866.57 5,291.16 5,291.16 897.36 26.46 870.90 4,420.26 4,420.26 897.36 22.10 875.26 3,545.00 3,545.00 897.36 17.73 879.63 2,665.37 2,665.37 897.36 13.33 884.03 1,781.34 1,781.34 897.36 8.91 888.45 892.89 892.89 897.36 4.46 892.89 0.00