Management Accounting$/$Cost and Management Accounting

Group Assignment

This assignment is to be done in groups of $3-5.$ All budgets and schedules must be done in Excel, using appropriate formulas. Responses to questions $1$ and $2b$ must be done in Word and formatted in accordance with the requirements of the APA $7^{th}$ edition style.

If most companies find their forecasts are inaccurate, why should managers engage in budgeting at all? $[8$ marks$]$

Abeng Corp, a rapidly$-$expanding crossbow distributor, is in the process of formulating plans for $2021.$ James Chambers, director of marketing, has completed his $2021$ forecast and is confident that sales estimates will be met or exceeded. The following forecasted sales figures show the growth expected and will provide the planning basis for other corporate departments:

$\backslash$table$[[$Month$,\backslash$table$[[$Sales$],[($units$)]],$Month Sales $($units$)],[$January$,,$July,$12,000],[$February$,7,200,$August,$11,000],[$March$,,$September,$12,800],[$April$,8,000,$October,$13,600],[$May$,,$November,$12,000],[$June$,\backslash$table$[[7,200],[8,800],[10,000]],$December,$14,000]]$

$11,200$

Ellen Eglin, assistant controller, has been given responsibility for formulating the cash flow projections, a critical element during a period of rapid expansion. The following information will be used in preparing the cash analysis:

i$.$ Bows are sold at an average price of $$150.$ ii$.$ Abeng has experienced an excellent record in accounts receivable collection and expects this trend to continue. The company collects $30\%$ of its billings in the month of sales, $50\%$ in the first month following sale and the balance in the second month after sale. iii. The purchase of crossbows is Abeng's largest expenditure; the cost of these items is $55\%$ of sales. The company maintains an ending inventory equal to $60\%$ of the next month's requirements.

iv$.$ Prior experience shows that $75\%$ of accounts payable is paid by Abeng $1$ month after purchase and $25\%$ in the second month after purchase.

v$.$ Wages, including fringe benefits, are a function of sales volume and

vi$.$ Administrative expenses are projected to be $$2,640,000$ for $2021.$ All of these expenses are incurred uniformly throughout the year except for the property taxes. Property taxes are paid in four equal installments in the last month of each quarter. The composition of the expenses is:

vii. A dividend of $$150,000$ will be

$\backslash$table$[[$Salaries$,$$$480,000$are equal

Required:

a$.$ Prepare the following for the third quarter of the year:

i$.$ Sales budget

$[3$ marks$]$

ii$.$ Schedule of cash collections

$[10$ marks$]$ iii.

Purchases

budget

$[10$ marks$]$ iv$.$

Schedule of cash

disbursement for purchases

$[7$ marks$]$

v$.$ Cash budget

$[20$ marks$]$

b$.$ Why is cash budgeting important for a roppidly expanding business such as Abeng? $[10$ marks$]$

$\backslash$table$[[$Item$,$Mark allocation$],[$Question $1,8$ marks$],[$Question $2,60$ marks$],[$Grammar$,$ punctuation, and spelling $($see rubric$),5$ marks$],[,],[$Authorship statements $(1$ per group member$),2$ marks$],[$APA Style $($see rubric$),15$ marks$]]$to $15\%$ of the current month's sales.