Individual Case Study 2 Master Budget, Cash Budget and Budgeted Income Statement

After two years study at UCW, you finally graduate and start a job as Junior accountant at Bigdream Inc. Your manager is responsible for the nationwide distribution of creator design sets. Because of the new social media influence among current generation, the company has grown rapidly, and the prompt growth forces the management team to improve their efficiency and manage their production effectively.

You have just been given responsibility for all planning and budgeting of the entire lighting set division. Today is your first day, you have just given an assignment to prepare master budget for the manager, who needs to present the budget and discuss the financial objectives with the shareholders tomorrow. During your job interview, you clearly stated that you gained managerial accounting knowledge and hand on experience during your MBA study.

Your first assignment is to prepare a master budget for the next fiscal year, starting January 1, 2022. Your co-work has left a pile of files on your desk including the past sale records, product information, manufacture schedule and supplier pricing list. Now, you realized that you should have pay more attention during the lecture. Now, you dont know where to start. Fortunately, you remember that you still kept a copy spreadsheet of the master budget template in your laptop from the accounting course.

Note: The company desires a minimum ending cash balance each quarter on $85,000. The Bigdream products are sold to retailers for $125 each and the sales have been in demand due to the Covid-19. However, the marketing department has been conservative toward the end of the year due market saturation. The marketing department has just sent you their forecasted quarter sales and marketing budget.

Quarter	2022 Q1	2022 Q2	2022 Q3	2022 Q4	2023 Q1	2023 Q2
Sales in Unit	35,000	32,000	45,000	50,000	55,000	60,000
Marketing Expenses	$35,000	$20,000	$25,000	$35,000	$35,000	$25,000

Ending finished goods inventories are supposed to be equal to 15% of the next quarters sales in units. Bigdream currently does its own assembly production in house. Each unit consists of 3 LED panels and the cost of each is $14. Each unit needs 0.12 labour hour from assemble to finish package. The hourly pay rate to the assembling workers is $12 per hour. The production manager also required desired direct material ending inventory to 25% of the next quarter production.

Purchases are paid for in the following manner: 45% in the quarter of the purchase and the remaining 45% paid in the quarter following the purchase. All sales to the

distributors are made on credit terms with no discount (for now), and payable within 45 days. The Bigdream has determined that only 60% of sales are collected by the end of the quarter in which the sale occurred. An additional 40% is collected in the quarter following the sale. Bad debts have been negligible, supporting the credit terms as favorable.

Below is a display of the Bigdream division quarterly manufacture overhead and selling and administrative expenses:

Manufacture Overhead Variable:

Indirect labour $5 per labour hour

Indirect Materials $2.00 per labour hour

Fixed:

Wages and Salaries $6,000

Utilities $6,000

Insurance $7,000

Depreciation $7,000

Selling and Administrative

Variable: Sales Commissions $5 per unit

Fixed (quaterly): Wages and Salaries $60,000

Utilities $18,000

Insurance $3,000

Depreciation $5,000

Miscellaneous $9,000

Labour, Manufacture Overhead, and Selling and Administrative expenses are all paid during the month, in cash, with the exception of depreciation (of course). Bigdream will make a purchase of a parcel of land during the first quarter of 2021 for $55,000 cash. Bigdreams balance sheet at the end of the fourth quarter last year is shown below:

Assets Cash $35,000

Uncollected Accounts receivable in Q4 this year: $250,000

Liabilities

Accounts payable $85,000

An agreement with Bank of the West allows Bigdream to borrow up to a total loan amount of $500,000. The interest rate on these loans is 12% annually (pretty high considering market rates) but the interest is not compounded, meaning this is simple interest only.

Please give me an answer for this question. Do not send me any previous references. the numbers and years are being changed.