Question
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
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Master Budget
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:
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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.
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40% of sales is collected in the month of sale; the remainder is collected the next month.
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Inventory:
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Last years Finished Goods and Cost of Goods Sold had a constant cost per unit.
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Allraw materialsispurchased on credit($3perlb)and is the samepriceas last year. Each productrequires 2lbs).
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Ending inventory for both should be 20% of next months activity (activity is constant).
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Beginning and ending WIP is zero
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25% of purchases are paid in the month of purchase, 75% in the following. All other expenses are paid with cash.
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Direct Labor is 0.2 hours per product at $20 per hour. Variable Overhead is $1 per product. Fixed Overhead is $550 per month.
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The credit line is used for cash shortfalls. Excess cash will pay down this line. Interest is 1% per month of last months balance.
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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.
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Sales commission rate will remain the same. Salaries will increase by 10%.
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VCP wants to maintain a minimum cash balance of at least $5,000. Excess to repay credit line.
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Page BreakSales A/R Collections (10 points)
| Jan | Feb | Mar |
New Price |
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Sales (units)
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Sales ($s) |
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AR Beg Bal
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Sales ($s)
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Collections |
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AR End Balance |
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Finished Goods/Production (10 points)
| Jan | Feb | Mar |
Beginning Unit Cost |
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Beg Inv (units)
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Sales (units) |
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Req ending Bal (units) |
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Production (units) |
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Actual Ending Finished goods Balance (units) |
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Page BreakDM/RM Inventory/Purchases (10 points)
| Jan | Feb | Mar |
Beginning Raw materials (units) |
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Use (units) |
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Minimum Required Inventory (units) |
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Purchases (units) |
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Purchases ($) |
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Actual Ending Inventory Balance (units) |
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Ending Balance ($) |
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Capital Purchases (10 points)
| Jan | Feb | Mar |
Capital Purchases |
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Equip Balance |
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Depreciation |
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Acc. Depreciation |
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Cost of Goods Manufactured (10 points)
| Jan | Feb | Mar |
DM used (units) |
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DM used ($s) |
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DL |
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VOH |
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FOH |
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Depreciation |
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Total |
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Cost per unit |
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Cost of Goods Sold/Ending Finished Goods (FIFO) (10 points)
| Jan | Feb | Mar |
Beg FG (units) |
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Cost per unit, BEG FG |
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Quantity produced (units) |
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Cost per produced unit |
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Quantity of Units sold |
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Cost of Goods Sold |
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Units in Ending FG |
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Cost of Ending FG |
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AP/Cash Payments (10 points)
| Jan | Feb | Mar |
AP Beg Bal |
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Purchases ($s) |
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AP Payments |
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AP End Balance |
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Page BreakCash Budget/Interest/Credit line (10 points)
| Jan | Feb | Mar |
Cash Beg Bal |
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Collections |
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AP Payments |
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Other Cash Payments: |
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Cash subtotal
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Credit Line/Borrowing/Repay (10 points)
Credit Line Beginning balance |
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Borrowing/(Repayment) of credit line |
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Credit Line Ending balance |
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Cash ending balance |
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