Part 2 (Quantitative) Sarah would like to hire you to prepare a Master Budget for her company Homestyle Furniture Manufacturing for her next fiscal year, beginning in January 2024. She has heard you are required to complete a Master budget for your BUAD 264 class and asks if you will use her company's financial information and projections (provided below) in the process. You accept, and begin working on the project today, October 24th To prepare the first quarter master budget for 2024 for Homestyle Furniture Manufacturing. Use the attached Excel Spread Sheet to prepare the 2024 Quarter 1 Master Budget including the following schedules: 1. Sales Budget \& Schedule of Expected Cash Collections 2. Production Budget 3 Direct Materials Budget \& Schedule of Expected Cash Disbursements 4. Direct Labour Budget 5. Manufacturing Overhead Budget 6. Ending Finished Goods Inventory Budget 7. Selling and Administrative Expense Budget 8. Prepare a monthly Cash Budget for the year ending March 31,2024 9. Prepare a budgeted Income Statement for the 2024 quarter 1. Information Sales Forecast Sarah has decided to focus all of her first quarter furniture manufacturing efforts (starting Jan 1, 2024) on selling her most popular furniture piece, the chase lounge. Homestyle Furniture Manufacturing marketing department is unsure which of the following forecasted sales units to use. They believe that if they set the selling price at $1,650, in January they will sell 80 units and sales will increase each month by 12%. $1,700, in January they will sell 80 units and sales will increase each month by 10% $1,750, in January they will sell 80 units and sales will increase each month by 8% Sarah has asked you to select one of the sales options the marketing team has presented. Once chosen, this will be sales projections you will use for the remainder of the budgeting process. Required Financing HFM opening cash balance at January 1,2024 is expected to be $80,000. Sarah has made an agreement with the local bank that if HFM maintains a minimum balance of $5,000 in its bank account, it will be given a line of credit at a preferred rate of 3% per annum ( 0.25% per month). - All borrowings and repayments are considered to have occurred at end of month. - All borrowings and repayments from the bank should be in multiples of $10,000 and interest must be paid the following month. - Interest is calculatedon the balance at the end of month, which includes any amounts borrowed or repaid that month. Fixed: The fixed manufacturing overhead costs for the YEAR are as follows: **Amortization is calculated using the straight-line method, with no amortization calculated in the year capital assets are acquired. Cash Disbursements 1. HFM pays for 65% of a month's purchases of direct materials in the month of purchase, 35% in the following month. 2. Accounts payable at the start of the year (Jan1st) is projected to be $3,000 3. All payroll costs are paid in the period in which they are incurred. 4. Fixed manufacturing overhead costs are incurred evenly over the year and "cashrelated" amounts are paid as incurred. Selling and Administration Variable selling and administrative expense is $50 per chaise lounge sold. Other Plans Over the next few years, Sarah is expecting a significant increase in customer growth and HFM's market share. To prepare for the growth, Sarah is planning to purchase a new manufacturing sewing machine to assist with the putting the materials onto the furniture. She has started to shop around and believes she will have to spend $55,000 on the machine. She hopes to purchase it in February. Cash Collection Sales are all on credit basis, with 48% collected during the month of the sale and 52% the following month. There are no early payment discounts for customers. Accounts receivable at the start of the year (Jan 1st ) is projected to be $50,000 Manufacturing Requirements to Meet Sales Forecast Needs 1. Direct Material: Cost: Each chase lounge required 125kg of foam, wood and upholstery. The average cost of the materials is $5.50/kg. Supply: Homestyle Furniture Manufacturing has missed manufacturing deadlines in the past resulting in unhappy customers. The cause was not receiving direct materials (foam, wood and upholstery) to manufacture the furniture in a reasonable amount of time. Sarah has decided to ensure this does not occur again, she would like to maintain a minimum a direct materials inventory balance of 35% of the followings months production needs. 2. Required Ending Inventory on-hand: From previous experience, management has determined that an ending finishedgoods inventory equal to 20% of the next month's sales is required to efficientlymeet customer demands. Therefore, the expected opening inventory units for January 1st will be 80 units * 20%. 3. Direct labour Time and Wage: Each chase lounge takes 5 hours of direct labour to manufacture. Sarah pays her carpenters $39/ hour. This includes Homestyle Furniture Manufacturing's portion of employee benefits. 4. Manufacturing Overhead Sarah and her team have decided manufacturing overhead should be allocated based on volume (i.e. the units produced). Variable: The variable manufacturing overhead rate is $170/ unit, consisting of: The term project-master budget is a continuation of the chapter 1-6 prework with Sarah and Homestyle Furniture Manufacturing. After reading chapter 7 of the textbook, read the updated information on Homestyle Furniture Manufacturing and follow the term projectmaster budget instructions: Homestyle Furniture Manufacturing has had a very successful quarter and Sarah is starting to think about increasing the amount of furniture she is manufacturing, growing her sales, and planning for the company's future. Sarah is concerned about the company's ability to stay "cash positive". Specifically, she is wondering if she will have to borrow funds in order to expand the business, while still having adequate cash available to pay her staff and incoming invoices. She is wondering if she should prepare a budget. She has completed personal budgets for herself before, but never one for a company. She is feeling overwhelmed about where to begin. She has heard corporations usually engage in the MASTER Budgeting process, rather than the TRADITIONAL Budgeting process. Once again, Sarah has come to you for guidance. Instructions The term project-master budget has 2 parts: Part 1 (Qualitative) Prepare a memo to Sarah and Homestyle Furniture Manufacturing explaining: 1. What is budgeting versus master budgeting and which process do you recommend Sarah engage in? 2. Why budgeting important for Homestyle Furniture Manufacturing. 3. Providing Sarah with an explanation on if she will have to borrow funds to stay "cash positive". Part 2 (Quantitative) Sarah would like to hire you to prepare a Master Budget for her company Homestyle Furniture Manufacturing for her next fiscal year, beginning in January 2024. She has heard you are required to complete a Master budget for your BUAD 264 class and asks if you will use her company's financial information and projections (provided below) in the process. You accept, and begin working on the project today, October 24th - To prepare the first quarter master budget for 2024 for Homestyle Furniture Manufacturing. Use the attached Excel Spread Sheet to prepare the 2024 Quarter 1 Master Budget including the following schedules: 1. Sales Budget \& Schedule of Expected Cash Collections 2. Production Budget 3 Direct Materials Budget \& Schedule of Expected Cash Disbursements 4. Direct Labour Budget 5. Manufacturing Overhead Budget 6. Ending Finished Goods Inventory Budget 7. Selling and Administrative Expense Budget 8. Prepare a monthly Cash Budget for the year ending March 31,2024 9. Prepare a budgeted Income Statement for the 2024 quarter 1. Information Sales Forecast Sarah has decided to focus all of her first quarter furniture manufacturing efforts (starting Jan 1, 2024) on selling her most popular furniture piece, the chase lounge. Homestyle Furniture Manufacturing marketing department is unsure which of the following forecasted sales units to use. They believe that if they set the selling price at - $1,650, in January they will sell 80 units and sales will increase each month by 12%. $1,700, in January they will sell 80 units and sales will increase each month by 10% $1,750, in January they will sell 80 units and sales will increase each month by 8% Sarah has asked you to select one of the sales options the marketing team has presented. Once chosen, this will be sales projections you will use for the remainder of the budgeting process. Part 2 (Quantitative) Sarah would like to hire you to prepare a Master Budget for her company Homestyle Furniture Manufacturing for her next fiscal year, beginning in January 2024. She has heard you are required to complete a Master budget for your BUAD 264 class and asks if you will use her company's financial information and projections (provided below) in the process. You accept, and begin working on the project today, October 24th To prepare the first quarter master budget for 2024 for Homestyle Furniture Manufacturing. Use the attached Excel Spread Sheet to prepare the 2024 Quarter 1 Master Budget including the following schedules: 1. Sales Budget \& Schedule of Expected Cash Collections 2. Production Budget 3 Direct Materials Budget \& Schedule of Expected Cash Disbursements 4. Direct Labour Budget 5. Manufacturing Overhead Budget 6. Ending Finished Goods Inventory Budget 7. Selling and Administrative Expense Budget 8. Prepare a monthly Cash Budget for the year ending March 31,2024 9. Prepare a budgeted Income Statement for the 2024 quarter 1. Information Sales Forecast Sarah has decided to focus all of her first quarter furniture manufacturing efforts (starting Jan 1, 2024) on selling her most popular furniture piece, the chase lounge. Homestyle Furniture Manufacturing marketing department is unsure which of the following forecasted sales units to use. They believe that if they set the selling price at $1,650, in January they will sell 80 units and sales will increase each month by 12%. $1,700, in January they will sell 80 units and sales will increase each month by 10% $1,750, in January they will sell 80 units and sales will increase each month by 8% Sarah has asked you to select one of the sales options the marketing team has presented. Once chosen, this will be sales projections you will use for the remainder of the budgeting process. Required Financing HFM opening cash balance at January 1,2024 is expected to be $80,000. Sarah has made an agreement with the local bank that if HFM maintains a minimum balance of $5,000 in its bank account, it will be given a line of credit at a preferred rate of 3% per annum ( 0.25% per month). - All borrowings and repayments are considered to have occurred at end of month. - All borrowings and repayments from the bank should be in multiples of $10,000 and interest must be paid the following month. - Interest is calculatedon the balance at the end of month, which includes any amounts borrowed or repaid that month. Fixed: The fixed manufacturing overhead costs for the YEAR are as follows: **Amortization is calculated using the straight-line method, with no amortization calculated in the year capital assets are acquired. Cash Disbursements 1. HFM pays for 65% of a month's purchases of direct materials in the month of purchase, 35% in the following month. 2. Accounts payable at the start of the year (Jan1st) is projected to be $3,000 3. All payroll costs are paid in the period in which they are incurred. 4. Fixed manufacturing overhead costs are incurred evenly over the year and "cashrelated" amounts are paid as incurred. Selling and Administration Variable selling and administrative expense is $50 per chaise lounge sold. Other Plans Over the next few years, Sarah is expecting a significant increase in customer growth and HFM's market share. To prepare for the growth, Sarah is planning to purchase a new manufacturing sewing machine to assist with the putting the materials onto the furniture. She has started to shop around and believes she will have to spend $55,000 on the machine. She hopes to purchase it in February. Cash Collection Sales are all on credit basis, with 48% collected during the month of the sale and 52% the following month. There are no early payment discounts for customers. Accounts receivable at the start of the year (Jan 1st ) is projected to be $50,000 Manufacturing Requirements to Meet Sales Forecast Needs 1. Direct Material: Cost: Each chase lounge required 125kg of foam, wood and upholstery. The average cost of the materials is $5.50/kg. Supply: Homestyle Furniture Manufacturing has missed manufacturing deadlines in the past resulting in unhappy customers. The cause was not receiving direct materials (foam, wood and upholstery) to manufacture the furniture in a reasonable amount of time. Sarah has decided to ensure this does not occur again, she would like to maintain a minimum a direct materials inventory balance of 35% of the followings months production needs. 2. Required Ending Inventory on-hand: From previous experience, management has determined that an ending finishedgoods inventory equal to 20% of the next month's sales is required to efficientlymeet customer demands. Therefore, the expected opening inventory units for January 1st will be 80 units * 20%. 3. Direct labour Time and Wage: Each chase lounge takes 5 hours of direct labour to manufacture. Sarah pays her carpenters $39/ hour. This includes Homestyle Furniture Manufacturing's portion of employee benefits. 4. Manufacturing Overhead Sarah and her team have decided manufacturing overhead should be allocated based on volume (i.e. the units produced). Variable: The variable manufacturing overhead rate is $170/ unit, consisting of: The term project-master budget is a continuation of the chapter 1-6 prework with Sarah and Homestyle Furniture Manufacturing. After reading chapter 7 of the textbook, read the updated information on Homestyle Furniture Manufacturing and follow the term projectmaster budget instructions: Homestyle Furniture Manufacturing has had a very successful quarter and Sarah is starting to think about increasing the amount of furniture she is manufacturing, growing her sales, and planning for the company's future. Sarah is concerned about the company's ability to stay "cash positive". Specifically, she is wondering if she will have to borrow funds in order to expand the business, while still having adequate cash available to pay her staff and incoming invoices. She is wondering if she should prepare a budget. She has completed personal budgets for herself before, but never one for a company. She is feeling overwhelmed about where to begin. She has heard corporations usually engage in the MASTER Budgeting process, rather than the TRADITIONAL Budgeting process. Once again, Sarah has come to you for guidance. Instructions The term project-master budget has 2 parts: Part 1 (Qualitative) Prepare a memo to Sarah and Homestyle Furniture Manufacturing explaining: 1. What is budgeting versus master budgeting and which process do you recommend Sarah engage in? 2. Why budgeting important for Homestyle Furniture Manufacturing. 3. Providing Sarah with an explanation on if she will have to borrow funds to stay "cash positive". Part 2 (Quantitative) Sarah would like to hire you to prepare a Master Budget for her company Homestyle Furniture Manufacturing for her next fiscal year, beginning in January 2024. She has heard you are required to complete a Master budget for your BUAD 264 class and asks if you will use her company's financial information and projections (provided below) in the process. You accept, and begin working on the project today, October 24th - To prepare the first quarter master budget for 2024 for Homestyle Furniture Manufacturing. Use the attached Excel Spread Sheet to prepare the 2024 Quarter 1 Master Budget including the following schedules: 1. Sales Budget \& Schedule of Expected Cash Collections 2. Production Budget 3 Direct Materials Budget \& Schedule of Expected Cash Disbursements 4. Direct Labour Budget 5. Manufacturing Overhead Budget 6. Ending Finished Goods Inventory Budget 7. Selling and Administrative Expense Budget 8. Prepare a monthly Cash Budget for the year ending March 31,2024 9. Prepare a budgeted Income Statement for the 2024 quarter 1. Information Sales Forecast Sarah has decided to focus all of her first quarter furniture manufacturing efforts (starting Jan 1, 2024) on selling her most popular furniture piece, the chase lounge. Homestyle Furniture Manufacturing marketing department is unsure which of the following forecasted sales units to use. They believe that if they set the selling price at - $1,650, in January they will sell 80 units and sales will increase each month by 12%. $1,700, in January they will sell 80 units and sales will increase each month by 10% $1,750, in January they will sell 80 units and sales will increase each month by 8% Sarah has asked you to select one of the sales options the marketing team has presented. Once chosen, this will be sales projections you will use for the remainder of the budgeting process