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Formative Assessment: Business Master Budget Creation

Objective: This performance task evaluates your ability to create a comprehensive master budget tailored to a business environment in the United Arab Emirates. The task involves preparing various budgets, including sales, cash collection, purchases, production, expenses, and cash budget. Additionally, you will need to demonstrate an understanding of credit terms relevant to the UAE market.

Scenario: You are the financial manager of "SmartTech Innovations," a growing technology company based in Dubai, UAE. Specializing in cutting$-$edge electronic gadgets, your task is to create a master budget for the upcoming fiscal year $(12$ months$)$ based on the provided information, considering the specific business landscape and practices in the UAE.

Information:

$1.$ Sales Forecast:

$$ January: AED $350,000$

$$ February: AED $420,000$

$$ March: AED $500,000$

$$ April: AED $480,000$

$$ May: AED $400,000$

$$ June: AED $450,000$

$$ July: AED $520,000$

$$ August: AED $580,000$

$$ September: AED $650,000$

$$ October: AED $620,000$

$$ November: AED $560,000$

$$ December: AED $700,000$

$2.$ Credit Terms:

$80\%$ of sales are credit sales with a $30-$day collection period.

$$ The remaining $20\%$ are cash sales.

$3.$ Cash Collection:

$70\%$ of credit sales are collected in the month following the sale.

$$ The remaining $30\%$ are collected in the second month following the sale.

$4.$ Purchases:

$$ The cost of goods sold is $60\%$ of sales.

$$ The company maintains a policy of ending each month with $20\%$ of the next

month's cost of goods sold in inventory.

$5.$ Production:

$$ The company aims to have an ending finished goods inventory equal to $10\%$ of the next month's sales.

$6.$ Expenses:

$$ Monthly operating expenses $($excluding cost of goods sold$)$ are estimated to be

AED $50,000.$

$7.$ Cash Budget:

$$ The company wants to maintain a minimum cash balance of AED $100,000.$

Purchases Budget:

$\backslash$table$[[$Month$,\backslash$table$[[$Cost of Goods Sold of$],[$Sales$)]],\backslash$table$[[$Desired Ending$],[$Inventory$]],\backslash$table$[[$Total Purchases$],[($AED$)]]],[$January$,210,000,50,400,218,400],[$February$,252,000,60,000,261,600],[$March$,300,000,57,600,297,600],[$April$,288,000,48,000,278,400],[$May$,240,000,54,000,246,000],[$June$,270,000,62,400,278,400],[$July$,312,000,69,600,319,200],[$Align Right$],[$August$,348,000,78,000,356,400],[$September$,390,000,74,400,386,400],[$October$,372,000,67,200,364,800],[$November$,336,000,84,000,352,800],[$December$,420,000,,]]$