D Hawk entered the market in early 2018. D Hawk manufactures camera drones, selling primarily to retailers.

D Hawk 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 make the Master Budget for the year ending December 31, 2020. In addition, you believe it is important to carry out sensitivity analysis and conduct additional analyses that will help management.

Requirements

1.Use the provided Excel template to create monthly master budget for D Hawk for the year ending December 31, 2020, including the following schedules:

Sales Budget & Schedule of Expected Cash Collections

Production Budget & Manufacturing Overhead Budget

Direct Materials Budget & Schedule of Expected Cash Disbursements

Direct Labour Budget

Ending Finished Goods Inventory Budget

Selling and Administrative Expense Budget

Cash Budget

2.Create budgeted Income Statement, budgeted Balance Sheet, and a budgeted Statement of Retained Earnings for the year ending December 31, 2020

3.Using data from parts 1 & 2, what recommendations, if any, would you make to this company with respect to managing its cash budget?

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.

Important 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 o =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.

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 D Hawk's manufacturing process, D Hawk'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 D Hawk 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 Hawk 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:

A B 1 2 3 4 5 6 7 8 9 .0 1 2 3 4 _5 _6 7 8 9 20 1 22 23 4 25 26 27 28 9 1 $2 | $ D E F G H CamDrone Sales Budget For the year ended December 31, 2020 CamDrone Schedule of Expected Cash Collections For the year ended December 31, 2020 J K