Master Budget Project

Sams Computers manufactures laptop computer stands which can be personalized after mass-production. The company is completing its fifth year of operations and is preparing its master budget for the coming year (2018) based upon the following information:

Fourth-quarter sales for 2017 are 55,000 units. Third quarter sales for 2017 were 50,000 units.

Unit sales by quarter are projected as follows:

First quarter 2018 65,000

Second quarter 2018 70,000

Third quarter 2018 75,000

Fourth quarter 2018 90,000

First quarter 2019 80,000

Second quarter 2019 70,000

Each unit sells for $95. Sams Computers estimates that 50% of sales will be collected in the quarter of sale. The company also estimates that 30% will be collected in the quarter following the sale and that 20% of each quarters sale will be collected in the second quarter following the sale.

Sams tries to maintain at least 20% of next quarter sales forecast in inventory.

Each computer unit uses three hours of direct labor, three pieces of wood, and four cement moldings. Laborers are paid $10 per hour, one piece of wood costs $8, and cement moldings are $1.25 each.

At the end of each quarter, Sams plans to have 20 percent of the wood needs and 30 percent of the molding needs for the next quarters projected production needs.

Sams buys wood and cement moldings on account. Half of the purchases are paid for in the quarter of acquisition, and the remaining half are paid for in the following quarter. Wages and salaries are paid on the 30^th of each month.

Fixed overhead totals $900,000 each quarter. Of this total, $200,000 represents depreciation. All other fixed expenses are paid for in cash in the quarter incurred.

Variable overhead is budgeted at $2 per direct labor hour. All variable overhead expenses are paid for in the quarter incurred.

Fixed selling and administrative expenses total $250,000 per quarter, including $50,000 depreciation.

Variable selling and administrative expenses are budgeted at $5 per unit sold. All selling and administrative expenses are paid for in the quarter incurred.

Sam will pay quarterly dividends of $300,000.

At the end of the third quarter, a $250,000 long-term debt payment will be made.

During the fourth quarter a $330,000 piece of equipment is purchased with cash.

At the end of the fourth quarter, taxes of $75,000 are due.

Sams beginning cash balance is $300,000. Sam must maintain a minimum balance of $250,000 at quarter end. He has access to a line of credit and borrows in multiples of $5,000. Interest of 5% is due quarterly.

Required:

Prepare a master budget for Sams Computers for each quarter of 2018 and for the year in total. The following component budgets must be included:

Sales budget

Production budget

Wood direct material budget

Cement moldings direct material budget

Direct labor budget

Overhead budget

Selling and administrative expenses budget

Cash receipts budget

Summary cash budget

You may work in groups of up to three or complete the project on your own. The master budget must be completed in Excel, and formulas must be used. Each group must turn in a hard copy of the master budget and a formula sheet on Tuesday, April 10. (Press CTRL + ` [grave accent] to switch between formulas and values in Excel).

Only one copy will need to be turned in for each group; however, each group member will need a copy for the in-class master budget quiz on April 10, which is part of the required course points.