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ACCT-5012 - CASE STUDY Group members

Fine Office Company Fine Office Company makes office furniture for offices. They are in the process of preparing a Master Budget including the Operating budget, Cash Statement, Income Statement and Balance Sheet for 2021. The yearly budget is broken into quarters. The year end is 31st December 2021. Your group has been requested to compile a master budget for the fiscal year 2021. Package is to include the following budgets; 1. Sales budget for each quarter and for the year 2. Production budget for each quarter and for the year 3. Purchasing Budget for each quarter and for the year 4. Direct labour budget for each quarter and for the year 5. Manufacturing overhead budget for each quarter and for the year 6. Selling and Administration budget 7. Work sheets for Collections and Disbursements 8. Budgeted Income Statement 9. CVP Income Statement 10. Budgeted Cash Statement 11. Budgeted Balance Sheet Additional details: Fine Office Company produces two products P100 and P200 Sales price per P100 is A Sales price per P200 is B There are 800 units from P100 in finished goods inventory at the end of 2020 with a value of $ of 2020 value 300,000 . At the end of each quarter, Fine Office Company requires ending inventory to be equal to The required ending inventory for Dec. 31, 2021 are 600 units for P100 and Each P100 unit uses D sq. ft. of steel during the manufacturing process. The cost of steel for 2021 is estim Each P200 unit uses E sq. ft. of steel during the manufacturing process. Fine Office Company currently has 30,000 sq. ft. of steel in the beginning inventory. At the end of each quarter, Fine Office Company wants to have F sq. ft. inventory. Each product requires G machine hours and H direct labour hrs to produce. Direct Labour costs $ I per direct labour hour. Fine Office Company allocates manufacturing overhead costs based on the estimated machine hours. Estimated manufacturing overhead cost for 2021 are $ J and are all variable. For each quarter, it is estimated that 40 % of sales will be cash and % will be credit sales. Of the credit sales, 80% pay in the quarter of the sale and 20% pay in the following quarter. Credit sales from Q4 2020 were $1,300,000 Direct labour costs and manufacturing overhead costs are paid for in cash in the quarter they occurred. Assume operating expenses occur evenly throughout the year and are all paid in cash. For each quarter, 70 % of material purchases are paid for in cash in the quarter of the purchase and 30 % are paid in the following quarter. Purchases of materials from Q4 2020 were $1,500,000

Fine Office Company Additional details continued: Fine Office Company will pay $60,000 in dividends in Q4 Currently, the cash balance in the bank is $15,000. Fine Office Company wants to maintain a minimum cash balance of $10,000 in the bank for each quarter. Budgeted sales volumes are: P100 Q1 K Q2 L Q3 M Q4 P200 Q1 O Q2 P Q3 Q Q4 Selling and Administration expenses for the budgeted year are as follows; Variable Cost: Delivery costs are based on $ 0.3 per sales unit. Commissions are based on 0.1 % of sales value. Fixed Costs: $ Accounting & professional services 3600 Administrative & Sales Salaries 140000 Advertising 20000 Computer costs 9000 Depreciation 70000 Office Supplies 5000 Printing 3000 Insurance 4000 Property taxes 2000 Rent 40000 Utilities 3400 Total Fixed Costs 300000 Fine Office Company will purchase a new machine on 1/1/2021 worth $ 700000 and will make two equal payments. The first payment will be in Q2 and the second in Q4. Assume the machine was purchased at the beginning of the year. Taxation is 30 % on taxable income and paid at the end of Q 4 each year. Balance sheet information as at 31st December 2020 is as follows; PPE $100,000 Accumulated Depreciation $100,000 Common Stock $580,000 Retained Earnings $145,000 For Cost of goods sold (COGS); Add total costs of production + Beginning Finished goods - Ending Finished goods Inventory. Interest of $ 9000 on loans is paid in total at the end of the year and is a fixed cost.