COCOA DELUXE is channeling all its efforts into the production of its flagship product, the Heavenly Harmony Bar $($HHB$),$ with a wholesale selling price of $$15$ per bar.

Actual and budgeted unit sales are:

November$2023($actual$)30,000$

December $2023($actual$)17,000$

January $202425,000$

February $202432,000$

March $202422,000$

April $202415,000$

May $202419,000$

Additional Sales and Cash Collection Information:

$$ All sales are sold to selected retail outlets on credit, with no discount.

$$ The company has found that only $30\%$ of a month$$s sales are collected by month$-$end.

$$ An additional $50\%$ is collected in the month following the sale.

$$ The remaining $20\%$ is collected in the second month following the sale.

$$ Bad debts have been negligible, so they can be ignored for the purposes of the budget.

PRODUCTION

Manufacturing cocoa beans into a chocolate bar involves the following steps:

$1.$ Sourcing and importing the cocoa beans

Cocoa beans can vary widely based on factors such as the type and quality of beans, their origin, and market conditions. COCOA DELUXE has been paying $$0\mathrm{.}10$ per gram of cocoa beans and anticipates the cost remaining stable for the next year.

$2.$ Purchasing the Direct Materials

$$ Each bar requires $70$g of chocolate $($cocoa beans$).$

$$ It is company policy to keep enough cocoa beans in raw materials to meet $60\%$ of the next month$$s production needs. As of December $31$st $2023,$ COCOA DELUXE had $1,197,000$g of cocoa beans in raw materials inventory.

$$ Purchases of raw materials are paid for as follows:

o $50\%$ in the month of purchase

o The remaining $50\%$ in the following month

$3.$ Chocolatiers $($Direct Labour$)$ roast, winnow and grind down the cocoa beans, and mold and package each bar

$$ Each bar requires $0\mathrm{.}25$ labour hours $(15$ minutes$).$ Chocolatiers who manufacture the bars are paid $$21\mathrm{.}00$ per hour.

$$ There is never work overtime. The company has enough casual$/$on$-$call workers that they can call in if additional work is required.

$4.$ Manufacturing Overhead

$$ Manufacturing overhead includes all the costs of production other than direct materials and direct labour. The variable component of manufacturing overhead is $$0\mathrm{.}50$ per bar in production, and the fixed component is $$17,000$ per month. The $$17,000$ of fixed manufacturing overhead includes depreciation of $$1,500$ per month on the fermenting, winnowing and grinding machines used to manufacture the bars as well as the items noted below.

$$ Direct labour hours is used as an allocation base for assigning manufacturing overhead to units produced.

$5.$ Finished Goods

$$ Inventories of finished goods on hand at the end of each month are to be equal to $50\%$ of the following months budgeted sales.

$$ As of December $31,2023,$ the company had $12,500$ bars in finished goods inventory.

$$ The company has no work$-$in$-$process $($WIP$)$ inventory.

$6.$ Other Selling and Administrative Expenses & Cash Outflows

COCOA DELUXE$$s other $($non$-$manufacturing$)$ monthly operating expenses are given below:

Variable:

HHB Packaging $$0\mathrm{.}50$ per bar sold $**$

Fixed:

Executive salaries $$10,000$

Utilities $($office$)$ $$2,500$

Insurance $($office$)$ $$800$

Depreciation $($S&A$)$ $$1,200$

Miscellaneous $$1,000$

$**$The HHB Bar packaging includes an artfully created design and message intended to bring joy and a moment of pure delight to each day. COCOA DELUXE must pay a royalty fee of $$0\mathrm{.}50/$bar sold to the artist.

$$ All operating expenses are paid during the month in cash, with the exception of the depreciation, as it is not a cash expense.

$$ Due to the planned introduction of a new chili chocolate bar, the company will be purchasing a new set of grinding machines to infuse chili peppers into the cocoa beans. It is expected the purchase of the machine will be in January $2024$ and cost $$50,000.$ The new bar is scheduled to begin production and launch during the Fall to be ready for the Christmas season.

$$ The company has a policy to declare a dividend of $$10,000$ on the last day of each quarter, which will be paid in the first month of the next quarter.

Opening Balance Sheet, January $1,2024$

Assets

Cash $22,500$

Accounts receivable $268,500$

Inventory $-$ Raw Materials $119,700$

Inventory $-$ Finished Goods $167,990$

PP&E $254,000$

Accumulated depreciation $(71,000)183,000$

TOTAL ASSETS $$761,690$

Liabilities and Equity

Bank loan $-$

Accounts payable, purchases $89,250$

Dividends payable $10,000$

Capital stock, no par $150,000$

Retained earnings $512,440$

TOTAL LIABILITIES AND EQUITY $$761,690$ Prepare Master Budget