COST ACCOUNTING GROUP PROJECT To be completed in groups of 4 students Fabulous Accessories Inc. manufactures wallets and handbags that are sold in two regions, the East and West regions. ESTIMATED SALES Fabulous Accessories estimates the following sales volumes and prices for 2023: East Region Sales Volume West Region Sales Volume Unit Selling Price Wallets 287,000 241,000 $12 Handbags 156,000 123,600 25 *Sales fluctuate seasonally. Quarterly sales are projected as 15%, 25%,20%, and 40% in the first, second, third and fourth quarter, respectively. Fabulous Accessories Inc. expects the following inventories of wallets and handbags:

Est. Inventory 01/01/2022 Estimated Inventory 12/31/2022 Wallets 15,000 15,840 Handbags 8,000 8,388 Assume the estimated beginning inventory is 20% of that quarter estimated sales. (Hint: the estimated desired ending inventory for each quarter is the estimated beginning inventory of the following quarter) ESTIMATED DIRECT MATERIAL QUANTITY AND PRICE Fabulous Accessories Inc. uses leather and lining in producing wallets and handbags. The quantity of direct materials expected to be used for each unit of product is as follows: Wallet Handbag Leather: 0.30 sq.yd. per unit Leather: 1.25 sq.yd. per unit Lining: 0.10 sq.yd. per unit Lining: 0.50 sq.yd. per unit The following inventory and unit price information is expected: Estimated Direct Materials Inventory 01/01/2022 Estimated Direct Materials Inventory 12/31/2022 Leather 18,000 sq. yds 20,000 sq. yds Lining 15,000 sq. yds 12,000 sq. yds

Assume the estimated (desired) direct materials inventory at the end of each quarter in 2022 is the same as the estimated direct materials inventory on 12/31/2022. Hint: the beginning direct materials inventory for each quarter is the desired ending direct material inventory in the previous quarter. The estimated price per square yard of leather and lining during 2022 follows: o Leather: $4.50 / sq. yd. o Lining: $1.20 / sq yd. ESTIMATED WORK IN PROCESS AND FINISHED GOODS INVENTORY Estimated Inventory 01/01/2022 Estimated Inventory 12/31/2022 Work in process $214,400 $220,000 Finished Goods $1,095,600 $1,565,000 Assume that the estimated (desired) Work In Process and Finished Goods Inventory at the end of each quarter in 2022 is the same as the estimated Work In Process and Finished Goods Inventory on 12/31/2022.

ESTIMATED DIRECT LABOR QUANTITY AND RATE Fabulous Accessories Inc.s production managers estimate the following direct labor hours are needed to produce a wallet and handbag: Wallet Handbag Cutting Department: 0.10 hr. per unit Cutting Department: 0.15 hr. per unit Sewing Department: 0.25 hr. per unit Sewing Department: 0.40 hr. per unit The estimated average direct labor hourly rates for the Cutting and Sewing departments for Fabulous Accessories Inc. during 2022 are as follow: o Cutting Department: $12 per hour o Sewing Department: $15 per hour

FACTORY OVERHEAD BUDGET Variable Overhead Cost Budget for the year ending December 31, 2022 are as follow: Indirect factory wages $732,800 Power & light 306,000 Indirect materials 182,800 Total Variable Overhead Costs $1,221,600 Fixed Overhead Cost Budget for the year ending December 31, 2022 are as follow: Supervisor Salaries $360,000 Maintenance 140,280

Insurance & Property Taxes 79,200 Depreciation on Plant & Equipment 288,000 Total Fixed Overhead Costs $867,480 SELLING & ADMINISTRATIVE EXPENSE BUDGET Fabulous Accessories Inc has no variable selling and administrative expenses. Fixed selling and administrative expenses for 2022 is as follows: Estimated Selling expenses for the year 2022: Salas salaries expense $715,000 Advertising expense* $360,000 Travel expense 115,000 Total selling expense $1,190,000 *Advertising expense is $80,000 in Quarters 1, 2, and 3. However, at the beginning of the holiday season, the sales manager increases advertising; in Quarter 4, advertising expense is $120,000. Estimated Administrative expenses for the year 2022: Officers salaries expense $360,000 Office staffs salaries expense 258,000 Office Rent expense 34,500 Office supplies expense 17,500 Miscellaneous administrative expenses 25,000 Total administrative expense $695,000 CAPITAL EXPENDITURE BUDGET The company plans to make to following capital expenditure in 2022: o Cutting Machine to be purchased in January 2022, estimated cost is $400,000. o Sewing Machine to be purchased in April 2022, estimated cost is $274,000. CASH BUDGET Estimated Cash Receipts: o Of the sales on account, 60 percent are collected in the quarter of sale; the remaining 40 percent are collected in the quarter following the sale. Total sales for the fourth quarter of 2020 totaled $1,200,000; Accounts Receivable balance as of 12/31/2022 was $480,000 (40% of 2022 fourth quarter sales). Estimated Cash Payments: o All materials are purchased on account; 75 percent of purchases are paid for in the quarter of purchase. The remaining 25 percent are paid in the following quarter. The purchases for the fourth quarter of 2022 were $950,000; Accounts Payable balance was $190,000 as of 12/31/2022 (20% of 2022 fourth quarter purchases)

Minimum Cash Balance: o Fabulous Accessories Inc. requires a $340,000 minimum cash balance for the end of each quarter. $225,00 is estimated as the cash balance on December 31, 2020. o Money can be borrowed and repaid in multiples of $10,000. Interest is 10 percent per year. Interest payments are made only for the amount of the principal being repaid. All borrowing takes place at the beginning of a quarter, and all repayment takes place at the end of a quarter. Income Taxes: o Federal Corporate Income Tax rate and State Corporate Income Tax rate are 21% and 9% respectively. Estimated income taxes are paid at the beginning of each quarter for the previous quarter. o $150,000 estimated tax payment for the fourth quarter of 2022 is scheduled for payment at the beginning of the first quarter of 2023.

REQUIREMENTS: Prepare the following budgets for the coming year (2023) using Excel 5. Prepare a cost of goods sold budget for the coming year. 6. Construct a budgeted income statement for the coming year. 7. Construct a cash receipts budget for each quarter of the coming year. 8. Construct a cash payment budget each quarter of the coming year. 9. Prepare a cash budget for each quarter of the coming year.

\#1 Fabulous Accessories Inc. Sales Budget \#2 Fabulous Accessories Inc. Production Budget \#3 Fabulous Accessories Inc. Direct Materials Purchases Budget For the Year Ended December 31, 2023 \#4 Fabulous Accessories Inc. Direct Labor Budget For the Year Ended December 31, 2023 \#4 Fabulous Accessories Inc. Direct Labor Budget For the Year Ended December 31, 2023 \#1 Fabulous Accessories Inc. Sales Budget \#2 Fabulous Accessories Inc. Production Budget \#3 Fabulous Accessories Inc. Direct Materials Purchases Budget For the Year Ended December 31, 2023 \#4 Fabulous Accessories Inc. Direct Labor Budget For the Year Ended December 31, 2023 \#4 Fabulous Accessories Inc. Direct Labor Budget For the Year Ended December 31, 2023