I had to copy and paste into this box. I am sorry it messed the top words up

To

be

succ

essful, all busine

sses mu

st perform

periodic

asse

ssmen

ts to

de

termin

e the efficiency

of operations. Whether

you

are an owner, a manag

er,

or a

fro

nt-

lin

e employee,

at

some

tim

e you

will be affected

by a budget.

Preparing

a budget

and

an

alyzing

the resul

ts o

f operations in relation

to the

bu

dget

will help

you

un

derstand

ho

w to

use financial

inf

ormation

to evaluat

e the

effectiven

ess of an organization

'

s operation

s. The proces

s will also

help

you

dete

rmin

e the reasons

operations do

no

t always

go

as planned and

make

de

cisions

on

chang

es that migh

t need

to be mad

e to make

the organization

, or jus

t you

r own department, more efficient.

In

Part I

of the final project, you

will us

e course-provided information

to prepar

e an

operating

bu

dget and compar

e actual

operation

al resul

ts to the budgets,

discussing

po

tential reasons fo

r any variances

and

are

as to

explore

furth

er. This

varian

ce

analysis will

allo

w you

to mak

e suggestions in Part II o

f the final project

abou

t potential chang

es to mak

e you

r organization mo

re

efficient.

You will hav

e thre

e deliverables for

Part I of th

e assessment:

a stud

ent workshee

t, a budget varianc

e workshee

t, and

a bu

dget varianc

e report. First,

you will

prepa

re

a beginning operating

bu

dget

for your

company, using

the stud

ent worksheet

provided. Your budget

will incl

ud

e different products

with

dif

ferent

costing methods, labor,

and

sales

projections ba

sed on

a desired pro

fit margin. You

will then comp

are

your budget

to act

ual r

esults to determin

e and

anal

yze

variances. You

will calculat

e and

record

the variances on

the

bu

dget

varian

ce

worksheet

pro

vided.

Fin

ally, you

will provid

e a bri

ef written analysis

of the

variances

and

discu

ss additional information

ne

eded to

det

ermin

e their cause.

This assessment addres

ses the following

cours

e outcomes:

Communicate budget planning to internal stakeholders for strategic planning

Apply costing methods to production for supporting budget planning and decision making

Prompt

You are a manager for Peyton Approved, a pet supplies manufacturer. This responsibility requires you to create budgets, make pricing decisions, and analyze the

results of operations to determine if changes need to be made to make the company more efficient.

You will be preparing a budget for the quarter July through September 2014. You are provided the following information. The budgeted balance sheet

on

June

30, 2014, is:

Peyton Approved

Budgeted Balance Sheet

30

-

Jun

-

15

ASSETS

Cash

$42,000

Accounts receivable

259,900

Raw materials inventory

35,650

Finished goods inventory

241,080

Total current assets

578,630

Equipment

$720,000

Less accumulated depreciation

240,000

480,000

Total assets

$1,058,630

LIABILITIES AND EQUITY

Accounts payable

$63,400

Short

-

term notes payable

24,000

Taxes payable

10,000

Total current liabilities

97,400

Long

-

term note payable

300,000

Total l

iabilities

397,400

Common stock

$600,000

Retained earnings

61,230

Total stockholders' equity

661,230

Total liabilities and equity

$1,058,630

1.

Sales were 20,000 units in June 2015

. Forecasted sales in units are as follows: July, 18,000; August, 22,000; September, 20,000; October, 24,000. The

product

'

s selling price is $18.00 per unit and its total product cost is $14.35 per unit.

2.

The June 30 finished goods inventory is 16,800 units.

3.

Going forward, company policy calls for a given month

'

s ending finished goods inventory to equal 70% of the next month

'

s expected unit sales.

4.

The June 30 raw materials inventory is 4,600 units. The budgeted September 30 raw materials inventory is 1,980 units. Raw materials cost $7.75 per

unit. Each finished unit requires 0.50 units of raw materials. Company policy calls for a given month

'

s ending raw materials inventory to equal 20% of the

next month

'

s materials requirements.

5.

Each finished unit requires 0.50 hours of direct labor at a rate of $16 per hour.

6.

Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $1.35 per unit produced. Depreciation of $20,000 per

month is treated as fixed factory overhead.

7.

Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% monthly interest on the long-term note payable.

8.

Sales representatives

'

commissions are 12% of sales and are paid in the month of the sales. The sales manager

'

s monthly salary is $3,750 per month.

Specifically, the following

critical elements

must be addressed:

1.

Operating Budget

Create an operating budget using the Final Project Part I Student Worksheet.

a)

Prepare a

sales budget

. Ensure accuracy of data.

b)

Prepare a

production budget

. Ensure the accuracy of your data.

c)

Prepare a

manufacturing budget

. Ensure the accuracy of your data.

d)

Prepare a

selling expense budget

. Ensure the accuracy of your data.

e)

Prepare a

general and administrative expense budget

using appropriate costing methods.

2.

Budget Variance Analysis

The actual quantity of material used was 31,000 with an actual cost of $7.75 per unit. The actual labor hours were 33,000 with an actual rate per hour of

$15.

a)

Develop a

variance analysis

including a budget variance performance report and appropriate variances for materials and labor.

Use the budget

variance student worksheet provided.

b)

In your budget variance report,

discuss

each variance. What does the variance tell you?

c)

In addition, your budget variance report should cover the following: What needs to be

investigated

to determine the reason for the variance?