EcoSun Solutions Inc. Budgeting Project

EcoSun Solutions Inc. is a well$-$established business that has been producing a single product,

high$-$quality solar panels, for the past decade. The solar panel industry has experienced

substantial growth due to increased demand for renewable energy sources. In response to market

opportunities, EcoSun Solutions Inc. is considering expanding its operations to meet growing

customer needs. You are provided with the following data to prepare the company's master

budget for $2024.$ All monetary values are stated in US$$.$

Sales

The company conducts market research and assesses its sales pipeline to estimate revenue

growth. Based on this research, the company expects sales in January $2024$ to be $4,900$ solar

panels.

Sales in the subsequent months are expected to increase by $100$ units each month for the next

$13$ months.

The selling price initially is set at $$400$ but a $10\%$ increase in price is to be made in June

Standard cost $-$ Direct Materials

Standard cost $-$ Direct Labour

Working Capital Management

$($a$)$ Accounts Receivable Policy

Allow for:

$20\%$ of sales to be cash sales and the balance credit sales

$75\%$ of credit sales to be received in the month of sale

$25\%$ of credit sales to be received one $(1)$ month after the sale$($b$)$ Accounts Payable Policy

Allow for:

$25\%$ of purchases to be cash purchases

$50\%$ of purchases to be paid for in the month of purchase

$25\%$ of purchases to be paid for one $(1)$ month after purchase

$($c$)$ Closing Inventory Policy

Raw Materials$-$ Should be $10\%$ of the following month's production needs

Finished Goods $-$ Should be $20\%$ of the following month's sales

The expected raw materials inventory on December $31,2024,$ is $2,448$

The expected finished goods inventory on December $31,2024,$ is $1,220$ units

Standard cost $-$ Manufacture Overhead

The production manager is unsure as to how to go about estimating manufacturing overheads

but has compiled the following data relating to prior periods.

Use regression analysis to derive a cost function for manufacturing overhead cost.

Manufacturing overheads are paid in the month incurred. Included in the monthly

manufacturing overhead costs is $$15,000$ depreciation for property, plant and equipment.

Administration cost $($all fixed$)$

Accounting$/$Finance

Human Resources

Information Technology

Legal & Corporate Affairs

$$60,000$ per month

$$30,000$ per month

$$45,000$ per month

$$10,000$ per monthRoughly $75\%$ of these expenses are paid for in the month incurred and $25\%$ in the following

month. There is no outstanding payment for administrative costs expected for December $31,$

Selling and Distribution Budget $($semi$-$variable$)$

Sales Promotion

Sales Representation

Sales Administration

Market Research

Distribution

Depreciation $-$ property, plant, and equipment

$5\%$ of total sales

$7\frac{1}{2}\%$ of total sales $+$$$5,000$ per month

$$20,000$ per month

$10\%$ of sales promotion

$$10$ per unit sold $+$$$12,000$ per month

$$10,000$ per month

All selling and distribution costs are paid in the month incurred.

Financing Activities

The company plans to borrow $$200,000$ in January $2024$ and repay this amount along with

the incurred interest in July $2024.$ All borrowings take place at the beginning of a month, and

all repayments are made at the end of a month. The annual interest rate is $10\%.$

The Statement of Financial Position as at ${31}^{st}$ December $2023$ is as follows:

ASSETS

Non$-$current Assets

Plant and equipment at cost

Less Accumulated depreciation

$[1,500,000,],[280,000,1,220,000]$

Current Assets

Shareholder's Equity

Share capital

Retained earnings

$1,208,400$

$600,000,1,808,400$

Current Liabilities

Accounts Payables

TOTAL EQUITIES AND LIABILITIES

$***$This amount is made up as follows: Finished Goods

Raw Materials

$980$ units @ $$250/$unit $=$$$245,000$

$1,968lbs$@$$\frac{50}{l}b.=$$$98,{400}_{?}($d$)$ Direct$-$material usage and purchases budget.

$(341\frac{1}{2}$ marks$)$

$($e$)$ Schedule of cash disbursement to suppliers for direct material.

$(22\frac{1}{2}$