In this activity, you will be creating budgets for a single product for each of the months in an upcoming quarter. You will select a product that can be purchased in large quantities (at Costco or another warehouse retail chain) and repackaged into smaller quantities to offer for sale at a sidewalk caf, a sporting event, a flea market, or other similar venue. Investigate the price and quantity at which this product is available at the warehouse. Chose a selling price for the smaller (repackaged) package. Make reasonable assumptions about how many of the smaller units you can sell in each of the next four months (you will need the fourth months sales in units for the operating budgets).

Respond to the following questions/requirements:

What large quantity product did you chose?(Chose any product) How much does this product cost? (include pictures and pricing information printed from the internet or an advertisement). Describe the smaller quantity products that you will be selling and in what venue. How will you repackage your single products? At what price will you sell your repackaged product?

Make projections of your sales in units for January, February, March, and April. Prepare a sales budget for Jan, February and March and total. (pg. 304)

Prepare a production budget for January, February and March and total; assuming that you need to keep 10% of the next months sales on hand at the end of each month (this requirement is why you needed to estimate unit sales for four months). (pg. 305)

Prepare a direct materials budget for January, February and March and total; assuming that you need to keep 5% of the next months production needs on hand each month. Make sure you document what your assumptions are about raw materials. (For example, each unit that you are repackaging will require 0.5 ounces of shrink wrap, or each unit will require one cardboard box.) (pg. 307)

Estimate how many hours you will spend in each of the upcoming three months doing the repackaging. Select a reasonable wage rate for your employees. What will your total labor costs be in January, February and March and in total? Prepare a direct labor budget for January, February and March. (pg. 308)

Prepare a manufacturing overhead budget for January, February and March and total. Estimate your variable expense per unit, and your fixed MOH. It is OK if you dont have depreciation (pg. 310)

Make a list of the costs of a single product that you will be reselling. These costs include the smaller unit cost, the packaging cost incurred to repackage your product and the direct labor cost per unit. Prepare a unit product cost spreadsheet. This will figure will be used to calculate the cost of goods sold in your budgeted income statement. (pg. 311)

Think about any other variable and fixed selling expenses such as commissions, advertising, vendor licenses, or booth rental fees. Prepare the selling & administrative expense budget for January, February and March and total. (pg. 312)

Prepare a cash budget for January, February and March and in total. Assume that your beginning cash balance is $10,000 and your ending cash balance cannot fall below $5,000. Short term borrowings can be obtained for any amount at 5% interest per month. (pg. 315)

Prepare a budgeted income statement that reflects the budgets you prepared. This budgeted income statement should include columns for January, February and March and total. What is your projected profit by month and for the quarter? (pg. 317)

Include a one paragraph written response about the project. What did you learn from this assignment? Do you feel the assignment helped you learn the concepts in Chapter 7? After completing the assignment do you feel that you have the skills necessary to develop and explain a Master Budget?