Budgeting

After two years of study at a University, you finally graduate and start a job as a Junior accountant at Godox Inc. Your manager is responsible for the nationwide distribution of creator design sets. Because of the new social media influence among the current generation, the company has grown rapidly, and the prompt growth forces the management team to improve their efficiency and manage their production effectively.

You have just been given responsibility for all planning and budgeting of the entire lighting set division. Today is your first day, you have just given the assignment to prepare a master budget for the manager, who needs to present the budget and discuss the financial objectives with the shareholders tomorrow. During your job interview, you clearly stated that you gained managerial accounting knowledge and hands-on experience during your MBA study.

Your first assignment is to prepare a master budget for the next fiscal year, starting January 1, 2021. Your co-work has left a pile of files on your desk including the past sale records, product information, manufacture schedule and supplier pricing list. Now, you realized that you should have to pay more attention during the lecture. Now, you don't know where to start. Fortunately, you remember that you still kept a copy spreadsheet of the master budget template on your laptop from the accounting course.

Note: The company desires a minimum ending cash balance each quarter of $2,000,000. The Godox products are sold to retailers for $125 each and the sales have been in demand due to the Covid-19. However, the marketing department has been conservative toward the end of the year due to market saturation. The marketing department has just sent you their forecasted quarter sales and marketing budget.

Quarter: 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2

Sales in Unit: 30,000 35,000 40,000 55000 50000 55,000

Marketing Expenses: 35,000 20,000 20,000 35,000 35,000 25,000

Ending finished goods inventories are supposed to be equal to 20% of the next quarter's sales in units. Godox currently does its own assembly production in house. Each unit consists of 2 LED panels and the cost of each is $15. Each unit needs 0.50 labour hour from assembling to finish the package. The hourly pay rate to the assembling workers is $15 per hour. The production manager also required desired direct material ending inventory to 30% of the next quarter production.

Purchases are paid for in the following manner: 50% in the quarter of the purchase and the remaining 50% paid in the quarter following the purchase. All sales to the distributors are made on credit terms with no discount (for now), and payable within 45 days. The

Godox has determined that only 50% of sales are collected by the end of the quarter in which the sale occurred. An additional 50% is collected in the quarter following the sale. Bad debts have been negligible, supporting the credit terms as favorable.

Below is a display of the Godox division quarterly manufacture overhead and selling and administrative expenses:

Manufacture Overhead:

Indirect Labour- $2.50 per labour hour

Indirect Materials- $0.75 per labour hour

Wages and Salaries- $ 6,000.00

Utilities- $ 6,000.00

Insurance- $ 5,000.00

Depreciation- $ 5,000.00

Selling and Administrative:

Variable:

Sales Commissions- $1.00

Freight- $0.50

Fixed:

Wages and Salaries- $62,000

Utilities- $18,000

Insurance- $3,200

Depreciation- $5,500

Miscellaneous- $8,000

Labour, Manufacture Overhead, and Selling and Administrative expenses are all paid during the quarter, in cash, with the exception of depreciation (of course).

Godox will make a purchase of a parcel of land during the second quarter of 2021 for $3,500,000 cash. Godox's balance sheet at the end of the fourth quarter last year is shown below:

Assets

Cash $35,000

Uncollected Accounts receivable in Q4 this year: $250,000 Liabilities

Accounts payable $85,000

An agreement with the Bank of the West allows Godox to borrow up to a total loan amount of $3,500,000. The interest rate on these loans is 12% annually (pretty high considering market rates) but the interest is not compounded, meaning this is simple interest only.

Required:

Prepare a master quarterly budget for 2021. Include the following budget schedules and financial statements:

1. Master Budget
2. Cash Budget. Show the cash budget by a quarter.
3. The budgeted Income statement by quarter and in total