Details: It's March 31st, and Big Kahuna ("BK") is asking you to complete their monthly budget for the next three months. They buy Patio Sets from a wholesaler for an average cost of $150 each and plan to sell the following units at the average selling price shown. Month February Actual March Actual April Estimate May Estimate June Estimate July Estimate Sales (# of Units) 1500 2700 3000 4000 4800 5000 Average Selling Price $299 $289 $285. $275 $275 $275 The prices fluctuate as old units are sold off in the Winter and as the new units are rolled out in the busy Spring season. Some customers pay right away and others are invoiced on account. Historically, 55% of the sales are collected in the month of sale, with 30% more in the next month and the balance in the second month. It takes time to build all the Patio Sets so they need to be in stock early. BK likes to end the month with enough inventory to satisfy 80% of the next month's sales estimate. In practice, they are not always exact on this. On March 31, they had 2400 units in inventory at an average cost of $150. D CB203 Master Budget Comprehensive Assignment 15% of Grade Because BK carries so much inventory, it helps that they can delay payment to the wholesaler. Typically, BK pays 40% of the invoice cost in the month of purchase and the balance in the following month. The actual purchases made in March was $315,000. Most of the variable labour is used in moving and assembling inventory so the number of units purchased is the most accurate driver of variable labour costs. Variable labour averages @ $20 per unit purchased in the month of purchase. Fixed labour is estimated to be $39,000 for the quarter to cover management and office staff salaries. Total Labour expense in March was $73,000. Payroll processing and reporting cutoffs mean that 60% of the labour is paid in the month it is earned and the rest is paid the next month. General and Administration expenses are driven by unit sales so that is the driver used to forecast them. Variable G&A averages $75 per unit and fixed G&A is $15,000 each month. The fixed G&A value includes $3,000 of depreciation expense. The balance sheet from March 31" is given and it shows opening bank balance for the quarter. In addition to the cashflows already mentioned, the company plans to pay a $20,000 dividend in May and purchase $100,000 of new storage equipment in June. The equipment will not be used in June, so it will not affect the monthly depreciation. The company has a $100,000 line of credit available to them and as of March 31", it is unused. BK has a terrific relationship with the bank, so the line is provided at a 0% interest rate as long as they only use it periodically. You can assume no interest. The company has no overdraft protection on the bank account, so they need to borrow from the line to keep the minimum balance of $0. Below is the Balance Sheet as of March 31": Cash 31-Mar $110,000 Accounts Receivable 418,410 Merchandise Inventory $360,000 Fixed Assets $1,000,000 Less: Depreciation -$360,000 Total Assets $1,528,410 Accounts payable $189,000 Wages Payable $29,200 Line of credit $0 Total Liabilities $218,200 Common Shares $1,104,000 Retained Earnings $206,210 Total Liabilities and Equity $1,528,410 5 6 7 B 9 Sales Budget 10 11 12 Sales (Units) 13 Selling Price 14 Sales (5) 15 16 Big Kahuna Inc. Master Budget For the Quarter ended June 20XX Actual February Actual Forecast March April Forecast Forecast May June Quarter Total + 17 Collection Budget Assumption Actual Actual 18 Inputs February March Forecast April Forecast May Forecast June Quarter Total 19 20 Sales 21 22 Collected in month of sale 23 Collected in month after sale 24 Collected in second month after sale 25 Total Collections 26 27 Accounts Receivable at month-end 28 29 Merchandise Purchases Budget 30 31 32 Sales (units) 33 Desired ending inventory (units) 34 Total needs 35 Less: Beginning Inventory 36 Purchases required (units) 37 38 Unit Cost 39 Purchases ($) 40 41 Assumption Inputs Forecast April Forecast May Forecast June Quarter Total 42 + 43 Merchandise Payments Budget Assumption Actual 44 Inputs March Forecast April Forecast Forecast May June Quarter Total 45 46 Purchases ($) 47 48 Amount paid in month of purchase. 49 Amount paid in following month 50 Total Payments 51 52 Accounts payable Balance at month-end 53 Labour Budget 6 7 8 Purchases required (units)) 9 Variable Labour per unit. 0 Variable Labour Expense 1 2 Fixed Labour 3 Total Labour Expense 4 55 56 Labour paid during month earned 57 Labour paid in following month 58 Total cash impact of labour 59 70 Wages Payable at month-end 71 Assumption Inputs Actual Forecast Forecast March April May + Forecast June Quarter Total General and Administration Budget Sales (Units) 8 G&A per unit 9 Variable G&A Expense 0 1 Fixed G&A 2 Total G&A Expense E 4 Less: Depreciation s G&A Cash Impact Assumption Inputs Forecast April Forecast May Forecast June Quarter Total 91 Cash Budget 92 93 94 Opening Balance 95 Add: Collections 96 Cash available 97 98 Disbursements 99 Merchandise 100 Labour 101 General and Administration 102 Fixed Asset Purchase 103 Dividends 104 Total Disbursements 105 106 Cash balance before financing 107 Borrowing 108 Repayment 109 Interest Expense 110 Ending Balance 111 112 Line of Credit Balance at Month-end 113 Forecast April. Forecast May Forecast June Quarter Total 14 Ending Inventory/COGS Budget 15 161 17 Cost per unit 18 19 Sales (Units) 20 Cost of Goods Sold 21 22 Beginning Inventory (units) 23 Purchases (units) 24 Sales (Units) 25 Ending Inventory (Units) 26 27 Value of Ending Inventory 28 29 Budgeted Income Statement 130 131 132 Sales 133 Cost of Goods Sold 134 Gross Profit. 135 136 Labour 137 General and Administration (incl. Depreciation) 138 Total Expenses 139 140 Net Income before tax 141 142 Forecast April Forecast May Forecast June Quarter Total Forecast April Forecast May Forecast June Quarter Total 142 143 Budgeted Balance Sheet 144) 145 146 147 Cash 148 Accounts Receivable 149 Merchandise Inventory 150 Fixed Assets 151 Less: Depreciation 152 Total Assets 153 154 Accounts payable 155 Wages Payable 156 Line of credit 157 Total Liabilities 158 159 Common Shares 160 Retained Earnings 161 Total Liabilities and Equity 162 163 164 Balance Check 165 Actual Forecast Forecast March April May $110,000 $418,410 $360,000 $1,000,000 $360,000 $1,528,410 $189,000 $29,200 So $218,200 $1,104,000 $206,210 $1,528,410 + Forecast June 50 50 50