1. Master Budget

VCP company just finished its first year of operation (12 months, Jan-Dec). The following is its traditional income statement and Balance Sheet

Sales (12,000 units) / $ 240,000

CGS 144,000

Gross Profit $ 96,000

Sales Commissions $24,000

Salaries 24,000

Depreciation expense 12,000

Net Income $36,000

Cash $5,000 AP $3,000

AR 5,000 Credit Line 9,000

Inventory Raw Mat 4,000

Inventory Finished Goods 6,000 Common Stock 20,000

Equipment60,000 Retained Earn 36,000

Acc Depreciation ( 12,000)

Total Assets $68,000 Total L & Eq $68,000

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 10% for the year. Price will increase 20%. Sales are spread evenly throughout the year. CGS should be calculated on a FIFO basis.

• 40% 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.

• Allraw materialsispurchased on credit($3perlb)and is the samepriceas last year. Each productrequires 2lbs).

• Ending inventory for both should be 20% of next months activity (activity is constant).

• Beginning and ending WIP is zero

• 25% of purchases are paid in the month of purchase, 75% in the following. All other expenses are paid with cash.

• Direct Labor is 0.2 hours per product at $20 per hour. Variable Overhead is $1 per product. Fixed Overhead is $550 per month.

• 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 beginning of January. Equipment is depreciated straight-line to zero salvage over 5 years. All of this is used in production.

• Sales commission rate will remain the same. Salaries will increase by 10%.

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

1. Page BreakSales 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 (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. Page BreakDM/RM Inventory/Purchases (10 points)

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

4. Capital Purchases (10 points)

	Jan	Feb	Mar
Capital Purchases
Equip Balance
Depreciation
Acc. Depreciation

5. Cost of Goods Manufactured (10 points)

	Jan	Feb	Mar
DM used (units)
DM used ($s)
DL
VOH
FOH
Depreciation
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. Page BreakCash Budget/Interest/Credit line (10 points)

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

9. Credit Line/Borrowing/Repay (10 points)

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