Budgets: EAUBEL (11 points)

Eaubel is a young company that bottles and distributes spring water. The company was recently created by Jeanne, a recent business school graduate who inherited a family land from which an abundance of drinking spring water gushes. Eaubel packages this water and distributes it in six-packs of 1.5-liter bottles, only in local food stores. Jeanne oversees sales and distribution (managing customer contacts, managing customer orders, organizing and supervising the delivery of the packs to the stores) and is also in charge of all accounting and administrative management. She employs 2 people:

- Karim, who is in charge of the production-supply function: purchase of empty bottles, caps, labels and plastic film for the packaging, launching and monitoring the production process; - Joachim, employed for the distribution function under the responsibility of Jeanne, who delivers the water packs to the customers within a radius of 100 km with a van belonging to the company.

You will be responsible for the entire budget forecast for the 1st quarter.

General data:

Employer's social security contributions represent 40% of gross salaries. Employee social security contributions represent 20% of gross salaries. All social security contributions are paid the month following the month they concern.

The VAT rate is 20%. For simplicity, we will consider that "other distribution and administration costs" (see below) and "other manufacturing costs" (see below) are exempt from VAT. All other external purchases during the quarter are subject to VAT.

All data in the text is provided exclusive of VAT. Payment receipts and disbursements are made in cash, unless otherwise specified in the statement. Distribution and administration function

A total of 48,000 six-packs of water are expected to be sold over the quarter, with the following seasonality factors: 0.8 in January, 1 in February and 1.2 in March. The selling price of a pack of 6 bottles of water is 1.1. Customers (from food stores) pay in 1 month.

Jeanne earns a gross salary of 2,400 per month. Joachim has a gross salary of 1,800 per month.

The fixed assets of the distribution function (mainly the van for deliveries) and the administrative function (mainly computer equipment) generate a depreciation expense of 800 per month.

The other costs of the distribution and administration function can be considered as fixed and represent 1,000 per month.

The loan on the opening balance sheet generates constant monthly payments of 700 per month with 52 of interest in January, 50 in February and 48 in March.

Production-purchasing function

The production is largely automated. The production equipment includes different machines performing different functions (bottling of spring water, gluing of labels on the bottles, packaging of the bottles in packs of 6). To facilitate the management of the production capacities, it was decided to

privilege a regular production as much as possible. The desired stock at the end of March is 2,000 packs, valued at a standard unit production cost of 0.80. The number of packs of bottles at the beginning of January is 800.

Of all the current production equipment, only one machine (the one that wraps the bottles in plastic film in six-packs) is likely to run out of capacity. This machine can pack a maximum of 16,000 packs per month. In case of running out of the capacity for this machine, taking into account the company's future growth, the company would invest in a second machine. This machine would cost 6,000 and would be depreciated on a straight-line basis in 5 years. The supplier would receive the payment 50% in cash and 50% after 3 months.

The spring water itself is free since it comes from the land Jeanne owns. On the other hand, it is necessary to buy the empty water bottles, the caps, the labels and the glue to stick them on the bottles as well as the plastic film allowing to make up a pack of six. For one pack of 6 bottles, the consumption of all these elements, valued at purchase price, represents 0.12 in total. The suppliers of these elements are all paid in cash in one month.

From the end of January, Karim wishes to have, from the end of January until the end of March, a stock of these different elements representing half of the needs for the following month. The planned production for April is 17,000 packs. The purchase costs are negligible, and the value of these elements in stock is equivalent to their purchase price. The inventory value of these items as of January 1st is 600. Karim earns a gross salary of 2,200 per month.

The depreciation expense for the production-supply function for the current fixed assets represent 2,500 per month.

The other manufacturing costs can be considered as fixed and represent 800 per month.

The projected balance sheet for January 1st is as follows:

Assets Gross fixed assets Depreciation Net fixed assets

Raw material inventory Finished products inventory (packs) Accounts Receivable (customers)

Bank Total assets

Liabilities 250 000 Capital

15 000 235 000 Loan

600 Social security payable

640 State, VAT payable Accounts payable

210 000

40 000 3500 2500

18 000 (suppliers) 2300 4 060

258 300 258 300

Balance sheet (January 1st) information: Accounts receivable will be collected in January. Debts to suppliers, social organizations and the state must be settled in January.

QUESTIONS

1) Present all monthly budgets by function, indicating any intermediate steps, for the first quarter of year N+1.

2) Complete the financial summary of the budgets for the first quarter of year N+1, presenting:

• - a budgeted income statement for the quarter as a whole

• - a monthly VAT budget

• - a monthly cash flow budget

• - a budgeted balance sheet as of 31/3/N+1.