1. Master Budget

Pedros Pizza makes frozen pizza dough. The company just finished its first year of operation (12 months, Jan-Dec). The following is its traditional income statement and Balance Sheet

Sales (15,000 units) $ 300,000

CGS 180,000

Gross Profit $ 120,000

Sales Commissions $ 30,000

Salaries 30,000

Depreciation expense 6,000

Net Income $ 54,000

Cash $5,000 AP $3,000

AR 5,000 Credit Line 7,000

Inventory Raw Mat 9,000

Inventory Finished Goods 3,000 Common Stock 12,000

Equipment 60,000 Retained Earn 54,000

Acc Depreciation ( 6,000)

Total Assets $76,000 Total L & Eq $76,000

VCP wants to prepare a cash budget for the first 3 months of the next year.

Use the following estimates:

• The quantity sold is projected to increase 4% for the year. Price will increase 5%. Sales are spread evenly throughout the year. CGS should be calculated on a FIFO basis.

• 25% of sales is collected in the month of sale; the remainder is collected the next month.

• Inventory:

  • Last years Finished Goods and Cost of Goods Sold had a constant cost per unit.

  • All raw materials is purchased on credit ($1.50 per lb) and is the same price as last year. Each product requires 2.5 lbs).

  • Ending inventory for both should be 40% of next months activity (activity is constant).

  • Beginning and ending WIP is zero

• 20% of purchases are paid in the month of purchase, 80% in the following. All other expenses are paid with cash.

• Direct Labor is 0.2 hours per product at $30 per hour. Variable Overhead is $2.25 per product. Fixed Overhead is zero.

• The credit line is used for cash shortfalls. Excess cash will pay down this line. Interest is 1% per month of last months balance.

• Projections are to buy $6000 of new equipment at the end of January. Equipment is depreciated straight-line to zero salvage over 5 years. All of this is used in administration.

• Sales commission rate will remain the same. Salaries will increase by 4%.

• VCP wants to maintain a minimum cash balance of at least $5,000. Excess to repay credit line.

• 1. Sales A/R Collections (10 points)

• 	Jan	Feb	Mar
  New Price
  Sales (units)
  Sales ($s)

  AR Beg Bal
  Sales ($s)
  Collections
  AR End Balance

  2. Finished Goods/Production (Patties) (10 points)

• 	Jan	Feb	Mar
  Beginning Unit Cost
  Beg Inv (units)
  Sales (units)
  Req ending Bal (units)
  Production (units)
  Actual Ending Finished goods Balance (units)

3.DM/RM (Beef) Inventory/Purchases

	Jan	Feb	Mar
Beginning Raw materials (units)
Needed for Production (units)
Minimum Required Inventory (units)
Purchases (units)
Purchases ($)
Actual Ending Inventory Balance (units)
Ending Balance ($)

4. Capital Purchases

	Jan	Feb	Mar
Capital Purchases
Equip Balance
Depreciation
Acc. Depreciation

5.Cost of Goods Manufactured

	Jan	Feb	Mar
DM used (units)
DM used ($s)
DL
VOH
FOH
Total
Cost per unit

6.Cost of Goods Sold/Ending Finished Goods (FIFO) (10 points)

	Jan	Feb	Mar
Beg FG (units)
Cost per unit, BEG FG
Quantity produced (units)
Cost per produced unit
Quantity of Units sold
Cost of Goods Sold
Units in Ending FG
Cost of Ending FG

7. AP/Cash Payments (10 points)

	Jan	Feb	Mar
AP Beg Bal
Purchases ($s)
AP Payments
AP End Balance

8.Cash Budget/Interest/Credit line

	Jan	Feb	Mar
Cash Beg Bal
Collections
AP Payments
Other Cash Payments:
Cash subtotal

9.Credit Line/Borrowing/Repay

Credit Line Beginning balance
Borrowing/(Repayment) of credit line
Credit Line Ending balance
Cash ending balance

10.Projected monthly Income statement for Jan, Feb, Mar