Budget Information Based on your discussions with the various departments throughout the company, you have collected the following relevant information for preparing the budget: Sales 1. The marketing department is forecasting the following annual sales: For the year ended December 31, 2019: 7,000 units at $925 each* For the year ended December 31, 2020: 8,500 units at $925 each . For the year ended December 31, 2021: 11,000 units at $925 each *Expected sales for the year ended December 31, 2019 were based on actual sales to date and budgeted sales for the duration of the year. 2. Peak months for sales generally correspond with summer weather and gift-giving holidays. History shows that January is the slowest month, with only 1% of annual sales, followed closely behind by Feb-April with 2% of annual sales for each month. Sales spike during summer months with May, June, July, and August contributing 12%, 15%, 12%, and 10% of annual sales respectively. With the back-to-school focus in September, there is a significant dip in camera drone sales to 3% of annual sales. As Christmas shopping picks up momentum, winter sales increase to 8% in October, 13% in November, and then peak at 20% in December. This pattern of sales is not expected to change in the next two years. Manufacturing Costs and Inventory 3. Each camera drones spends a total of 6.75 hours in production. 4. Due to the highly technical nature of CamDrone's manufacturing process, CamDrone's direct labour rate has averaged $36.00 per hour for 2019. This rate already includes the employer's portion of employee benefits. A new collective agreement is being negotiated, with a 3% pay increase anticipated effective January 1, 2020. 5. Each CamDrone requires 1.55kg of direct materials. During 2019, the average cost of direct materials was $61/kg. The supplier of the direct materials tends to be somewhat erratic, so CamDrone finds it necessary to maintain a direct materials inventory balance equal to 40% of the following month's production needs as a precaution against stock-outs. 6. Due to the similarity of the equipment in each of the production stages and the company's concentration on a single product, manufacturing overhead is allocated based on volume (i.e. the units produced). The variable manufacturing overhead rate for 2019 is $175/unit, consisting of: Plant & Equipment Maintenance $73 Utilities 45 Indirect Materials 37 Other 20 $1757. The fixed manufacturing overhead costs for 2019 are as follows: Supervisor's salary $181,800 Amortization of Plant & Equipment 132,000 Insurance 84,000 Training & Development 54,750 Property and Business Taxes 48,000 Other 30.000 $530.550 Amortization is calculated using the straight-line method, with no amortization calculated in the year capital assets are acquired. 8. Aside from amortization, all other manufacturing costs are expected to increase by 3% in 2020 due to inflation. 9. From previous experience, management has determined that an ending finished goods inventory equal to 25% of the next month's sales is required to efficiently meet customer demands. Collections Pattern 10. Sales are on a cash and credit basis, with 49% collected during the month of the sale, 33% the following month, and 15% the month thereafter. There are no early payment discounts for customers. Bad debt expense (amounts considered uncollectible) account for 3% of sales. 11. Based on the collection pattern described above, accounts payable as at end of business day on December 31, 2019 is projected to be $1,098,899 arising from the following estimates: Sales (November 2019) $1,170,000 Sales (December 2019) 1,800,000 Payments Pattern 12. CamDrone pays for 20% of a month's purchases of direct materials in the month of purchase, 50% in the following month and the remaining 30% two months after the month of purchase. There are no early payment discounts offered by suppliers. 13. Based on the payment pattern described above, accounts payable as at end of business day on December 31, 2019 is projected to be $78,641 arising from the following estimates: Direct Material Purchases (November 2019) $95,888 Direct Material Purchases (December 2019) 62,334 14. All payroll costs are paid in the period in which they are incurred. 15. The property and business taxes, paid at the beginning of July each year, apply to the following 12-month period. Any increases for inflation on property and business taxes do not take effect until the beginning of July each year.16. Annual insurance premiums, paid at the beginning of April each year, apply to the following 12-month period. Any increases for inflation on insurance premiums do not take effect until the beginning of April each year. 17. Fixed manufacturing overhead costs are incurred evenly over the year and "cash- related" amounts are paid as incurred. 18. Selling and administrative expenses are paid in the month in which they occur. Other 19. Anticipating a significant increase in customer demand and market share over the next few years, CamDrone is planning a significant expansion involving acquiring additional manufacturing equipment for $3,000,000 cash. Half of this amount is to be paid to the equipment supplier in July 2020, with the remainder to be paid in October 2020. 20. Selling and administrative expenses are known to be a mixed cost; however, there is a lot of uncertainty about the portion that is fixed. Based on prior year experience: Lowest level of monthly sales: 80 units .. Total Operating Expenses: $87,270* Highest level of monthly sales: 1,600 units .. Total Operating Expenses: $360,780* * excluding bad debts and amounts described below These expenses are expected to increase by 3% in 2020 due to inflation. 21. To secure and grow its market share, CamDrone is planning to operate "pop-up" kiosks in various local retail centers during peak sales months (May-Aug, Nov-Dec) commencing Nov2019. CamDrone is budgeting $10,900 per month (including all related fees and taxes), payable at the beginning of each month, to set-up and operate these kiosks. The cost to set-up and operate "pop-up" kiosks will be in addition to the normal selling and administrative expenses described above and is not expected to increase during 2020. 22. Income tax expense is estimated to be 25% of net income. CamDrone makes monthly income tax installment payments of $250 and pays all outstanding income taxes (in excess of installment payments) in March of the following year. As such, any outstanding income tax balance for the year ended December 31, 2019 it will be paid in March 2020. 23. An arrangement has been made with the local bank that if CamDrone maintains a minimum balance of $50,000 in their bank account, they will be given a line of credit at a preferred rate of 3% per annum (0.25% per month). All borrowing is considered to happen on the first day of the month, repayments are on the last day of the month. All borrowings and repayments from the bank should be in multiples of $10,000 and interest must be paid at the end of each month. Interest is calculated on the balance at the beginning of the month, which includes any amounts borrowed that month. 24. CamDrone has a policy of paying dividends at the end of each quarter. The President tells you that the Board of Directors is planning on declaring dividends as follows: March 2020 $125,000 June 2020 175,000 September 2020 325,000 December 2020 325,000 Dividends are paid in the month they are declared.25. The company is forecasting the following balances as at the end of business day on December 31, 2019: Assets Cash $100.000 Accounts Receivable 1,098.899 Inventory: Direct Materials 3,591 Inventory: Finished Goods 11.640 Prepaid Property and Business Taxes 24.000 Prepaid Insurance 21,000 Capital Assets (Net) 571.800 Total Assets 1.830.930 Liabilities & Shareholders' Equity Accounts Payable $78.641 Income Taxes Payable 19,700 Capital Stock 500.000 Retained Earnings 1.232.589 Total Liabilities and Shareholders' Equity S1 830 930G M N P a R CamDrone CHECK FIGURES: Cash Budget For the year ended December 31, 2020 Total Disbursements for June = $1,138,142 Ending Cash Balance for August = $54,021 January Feburary March April May June July August September October November December Year Line of Credit Balance for November = $3,690,000 Cash Balance (beginning) Add: Collections from Customers Less Cash Disbursements: Direct Materials Direct Labour Manufacturing Overhead Selling and Administrative Expenses Tax Remittances Tax Balances Payable Prepaid Property and Business Taxes Prepaid Insurance Capital Asset Purchases Dividend Payments Total Disbursements Excess (Deficiency) of Cash Available Over Disbursements Financing: Borrowing (beginning of month) Interest Expense (paid monthly) Repayment (end of month) Total Financing Cash Balance (ending) Line of Credit Running Total (end of month)D M Cam Drone Production Budget CHECK FIGURES: For the year ended December 31, 2020 Required Production for October = 786 (all amounts in Units) #NAME? January Feburary March April May June July August September October November December Year Expected Sales 910 85 170 170 170 1,020 1,020 850 255 680 1,700 Add: Desired Ending Inventory of Finished Goods 350 43 43 43 255 319 255 213 64 170 276 425 28 2,131 Total Units Needed 1,260 128 213 213 425 1,530 1,233 914 425 956 1,530 1,728 10,631 Less: Beginning Inventory of Finished Goods (228) (21) (43) (43) (43) (255) (319) (255 (213) (64) (170) (276 (425) (2,127) Required Production 107 170 170 382 1,211 978 701 361 786 1,254 8,507 CamDrone CHECK FIGURES: Manufacturing Overhead Budget For the year ended December 31, 2020 Total Cash Discursements for Manufacturing Ovcarhead In July = $199,16 January Feburary March April May July August September October November Production in Units 107 170 170 382 1,084 1,211 978 701 361 786 1,254 1,303 Variable overhead rate per unit 180.25 180.25 180.25 180.25 180.25 180.25 180.25 180.25 180.25 180.25 180.25 180.25 180.25 Variable manufacturing overhead 19.287 30.643 30.643 195.391 218.283 126.355 141.677 226.034 234.866 4533,390 Fixed manufacturing overhead: Supervisor Salaries 15,605 15,605 15,605 15,605 15,605 15,605 15,605 15,60 15,605 15,605 15,605 15,605 187,257 Amortization of Plant & Equipment 11,000 11,000 11,000 11,000 11,000 1,000 1 1,000 11,000 1,000 1,000 1 1,000 132,000 Insurance 7,210 7,210 7,210 7,210 7,210 7,210 7,210 7,210 7,210 86,520 Training and Development 4699 4699 4699 4699 4699 4699 4699 4699 4699 4699 4699 56,390 Property and Business Taxes 4,120 4,120 4,120 4,120 4,120 4,120 4,120 4,120 4,120 4,120 4,120 4,120 49,440 2,575 2,575 2,575 2.575 2.575 2,575 2,575 2,575 30,900 Total fixed manufacturing OH 45,209 45.209 45,209 45,209 45,209 45,209 45,209 45,209 45,209 45,209 45,209 542.507 Total manufacturing OH 54,496 75,852 75,852 14,065 240,600 263,492 221,494 171,564 10,279 186,886 271,243 280,075 .075,897 Less: Amortization of Plant & Equipment * 11,000) 11,000) 11,000) 11,000) (11,000) 11,000) (11,000) (11,000) 11,000 11,000) (11,000) (11,000 (132,000) Less: Prepaid Insurance ** Less: Prepaid Property and Business Taxes *+ (7,210) (7,210 (7,210) (7,210) (7,210) 7,210) (7,210) (7,210 7,210) (7,210) (7,210) (86,520) 4,120 (4,120 (4,120 4,120 4,120 (4,120) (4,120 (4,120 (4,120) 4,120 (49,440) Cash disbursements for manufacturing OH 42,166 53,522 91,735 218,270 241,162 199,164 87,949 164,556 248,913 257,745 1,807,938 * Amortization is a non-cash expense * Prepaid expenses addressed as separate line items in Cash BudgetC D Cam Drone M Q Sales Budget CHECK FIGURES: For the year ended December 31, 2020 Total Budgetd Sales for May = $943,500 Units Sold January February March April May June July August September October November December Total Cash Colletions for November = $743,792 Price Per Unit 85 Sales ($) 925 170 170 925 170 $78,625 925 57,250 925 1020 925 1275 925 1020 925 850 925 255 925 580 925 1105 1700 157,250.00 157,250 943,500 1,179,375 943,500 925 785,250 235,875 629,000 1,022,125 925 1.572.500 CamDrone Schedule of Expected Cash Collections For the year ended December 31, 2020 Amount Collected January February 175500 March April May June July August September October Amount Collected November December Amount 594000 38526.25 77052.5 77052.5 25946.25 51892.5 77052.5 462315 1892.5 51892.5 577893.75 62315 11793.75 23587.5 23587.5 311355 23587.5 389193.75 385262.5 141525 311355 15578.75 259462.5 308210 500841.25 77838.75 770525 Total Cash Collection 207570 337301.25 808,026.25 372,998.75 140,738.75 152.532.50 537,795 912,836.25 176906.25 993,033.75 873,523.75 141525 516,566.25 117937.5 503,986.25 35381.25 743,792.50 94350 1,202,176.25C G H CamDrone CHECK FIGURE: Direct Labour Budget For the year ended December 31, 2020 Total Direct Labor Cost for the Year = $2,129,319 January Feburary March April May June July August September October November December Year Units Required to be Produced 107 170 170 382 108 1211 978 701 361 786 1254 1303 8507 250.30 Direct Labour cost per Unit 250.30 250.30 250.30 250.30 250.30 250.30 250.30 250.30 250.30 250.30 250.30 250.30 26782.31 42551.34 42551.34 95615.36 271327.35 303115.71! 244795.34 175461.69 90359.02 196737.36 326143.49 2129319 Direct Labour Cost 313878.6936 + X V fx C D E G M N CamDrone Q R Direct Materials Budget CHECK FIGURE: For the year ended December 31, 2020 Total Cost of Purchase of Direct Materials for February = $16,556 Units to be Produced Direct Materials Needed (kg/unit) Production Needs (kg) Add: Desired Ending Inventory of Direct Materials (kg) Total Needs (9) Less: Beginning Inventory of Direct Materials kog) Direct Materials to be Purchased (9) Cost of Direct Materials ($/kg) Total Cost of Purchases of Direct Materials CamDrone Schedule of Expected Cash Disbursement for Purchases of Direct Materials CHECK FIGURE For the year ended December 31, 2020 Total Cash Disbursements for Purchases of Direct Materials in January Feburary March February = $29,182 Accounts Payable April May June July August September October November December Year Payment of Materials Total Cash DisbursementsQuestion Your Answer Using data from parts 1 & 2, what recommendations, if any, would you make to this company with respect to managing its cash budget? What additional recommendations, if any, might you make to this company in order to improve its current situation? Do not necessarily constrain your answer to include only those areas dealing with budgets.CamDrone Ending Finished Goods Inventory Budget CHECK FIGURE: Total Budgeted Cost of Goods Sold = $5,027,304 For the year ended December 31, 2020 Quantity Cost/unit Total Production Cost (/unit) Direct Materials ka Direct Labour hr Manufacturing Overhead (Variable and Fixed) unit Unit Product Cost Budgeted Finished Goods Inventory Ending Finished Goods Inventory (units) Unit Product Costs (see above) Ending Finished Goods Inventory ($) Budgeted Cost of Goods Sold Beginning Finished Goods Inventory Plus: Cost of Goods Manufactured Less: Ending Finished Goods Inventory Budgeted Cost of Goods SoldImportant Notes About Preparing Your Master Budget 1. Rounding calculations: For calculation of COGS and ending Finished Goods Inventory, carry the MOH cost/unit to 4 decimal places For calculations involving Direct Materials, round all kg to 2 decimal places For calculations involving Direct Labour, round all hours to the nearest hour Round all units of product to full units (e-g. Sales, Finished Goods Inventory, Production, etc.) Aside from MOH cost/unit, round all other dollar amounts less than $100 to the nearest cent Aside from MOH cost/unit, round all other dollar amounts greater than $1,000 to the nearest dollar To round a number in excel use the formula =ROUND(value, number of decimals spots). For e.g., if I wanted to round the number 23.4567 to two decimal places, I would enter the following into excel 0 =ROUND(23.4567.2) 2. Do not hardcode your numbers. This means you enter all the necessary budget data into the worksheet entitled DATA, and use reference to these cells and formulas to complete the other tables and schedules. When grading your project, I will randomly audit cells to see if they are properly referenced, or if data has been hardcoded. If you hardcode data, you will automatically lose 15pts on the assignment.Overview As part of the continued advancement of technology, a drone camera market has emerged in recent years. The drone camera market has been growing as more photography enthusiasts have begun adopted this high-tech approach to capturing still images and video using remotely controlled devices. Eager to capture a share of this growing market, CamDrone entered the market in early 2018. CamDrone manufactures camera drones, selling primarily to retailers. CamDrone is pleased with its financial performance over its first few years of operations, optimistic to achieve continued financial success. For planning and control purposes the company utilizes a monthly master budget, which is usually developed at least three months in advance of the budget year. The company has a fiscal year ending December 31. It is now Sept 15, 2019. You have been asked to prepare the Master Budget for the year ending December 31, 2020. In addition, you believe it is important to carry out a sensitivity analysis and conduct additional analyses that will help management. Assignment Requirements (total of 150pts) 1. Use the provided Excel template to prepare a monthly master budget for CamDrone for the year ending December 31, 2020, including the following schedules: Sales Budget & Schedule of Expected Cash Collections (20pts) Production Budget & Manufacturing Overhead Budget (20pts) Direct Materials Budget & Schedule of Expected Cash Disbursements (20pts) Direct Labour Budget (10pts) Ending Finished Goods Inventory Budget (10pts) Selling and Administrative Expense Budget (10pts) Cash Budget (10pts) 2. Prepare a budgeted Income Statement, budgeted Balance Sheet, and a budgeted Statement of Retained Earnings for the year ending December 31, 2020 (30pts) 3. Using data from parts 1 & 2, what recommendations, if any, would you make to this company with respect to managing its cash budget? (10pts) 4. What additional recommendations, if any, might you make to this company in order to improve its current situation? Do not necessarily constrain your answer to include only those areas dealing with budgets. (10pts)Cam Drone Budgeted Income Statement For the year ended December 31, 2020 Sales Less: Cost of Goods Sold Gross Margin Less: Selling & Administrative Expenses Net Operating Income Less: Interest Expense Net Income Before Taxes (NIBT) Less: Income Taxes (25%) Net Income CHECK FIGURE: CamDrone Net Income = $10,903 Budgeted Statement of Retained Earnings For the year ended December 31, 2020 Retained Earnings (Beginning of Year) Plus: Net Income Less: Dividends Declared Retained Earnings (End of Year) Cam Drone Budgeted Balance Sheet December 31, 2020 Assets Cash Accounts Receivable Inventory: Direct Material Inventory: Finished Goods Prepaid Property and Business Taxes Prepaid Insurance Capital Assets (net) Total Assets Liabilities and Shareholders' Equity Liabilities Accounts Payable Income Taxes Payable Bank Loan Payable Total Liabilities Shareholders' Equity Capital Stock Retained Earnings Total Shareholders' Equity Total Liabilities & Shareholders' Equity CHECK FIGURE: Total Liabilities & Shareholdres' Equity = $4,816,523B C D E F G H I J K L M N 0 P Q R S CamDrone Selling and Administrative Expense Budget CHECK FIGURE: For the year ended December 31, 2020 Total Cash Disbursements for September = $122,240 January Feburary March April May June July August September October November December Budgeted Sales Year Variable Selling and Administrative Expense Total Variable Selling and Administrative Expense Fixed Selling and Administrative Expenses: Supervisors Salary Insurance Training and Development Property and Business Taxes Other Amortization Total Fixed Selling and Administrative Expense Total Selling and Administrative Expenses Less: Amortization Cash Disbursements for Selling and Administrative Expenses