Please complete the assignment, answer 1-5 on the spreadsheet

NAMES: [No names is like sending a business plan with no contact information] Budget Assumption Data Sales and Production/Purchasing This table is all actual amounts. Estimated sales in units Estimated average price Expected days sales in receivables Estimated unit cost of assembly Estimated unit cost of peripheral parts Estimated unit cost of die Estimated finished unit cost Work in process inventory Beginning Ending Beginning inventory of finished units Cost per unit Estimated days unit sales in ending inventory Inventory costing method SoCs 2,700,000 $92 Codecs 300,000 $160 45 45 $26 $0 $15 $41 $49 $6 $24 $79 0 0 0 0 340,000 $52 35,000 $86 65 50 FIFO FIFO FIFO means first-in-first-out, FIFO means first-in-firstout, which really means we determine Cost of Goods Sold with the earliest purchases and therefore, ending inventory are the last purchases Other budgeted expenses and revenues Dollar amounts in thousands: Annual Amounts Research and development expenses: Salaries and wages Purchases of supplies and services Depreciation of prop., equipment. and software Amortization of intangibles Total $45,500 $14,000 $5,000 $1,100 $65,600 Selling, general and administrative expenses: Salaries and wages Purchases of supplies and services Depreciation of prop., equipment. and software Total $23,000 $7,200 $1,800 $32,000 Interest expense (all cash) $0 Interest income (all cash) Planned income taxes as a % of pretax income Ending current assets and liabilities: Dollar amounts in thousands: Prepaid expenses and other assets Days purchases# in accounts payable # includes production purchases plus R&D and SG&A supplies and services Days wages and salaries in accrued comp. Other accrued expenses will grow proportional to Deferred revenue will grow in proportion to Expected investing activities: Dollar amounts in thousands: Purchases of prop., equipment. and software. Purchases of intangibles Maturities of short-term investments Purchases of short-term investments Disposals/purchases of other assets Expected financing activities: Dollar amounts in thousands: Financing activities: Proceeds from issuing stock (additional paid-in cap) Re-Purchase of common stock (all Additional PIC) $3,610 30% no change 44 14 Sales Sales $35,000 $3,000 $129,000 $170,000 $0 $10,000 -$5,000 Sales and Purchase Budgets Sales budget SoCs Codecs Total SoCs Codecs Total Estimated sales in units Estimated average price Estimated sales revenue Purchasing/production budget First, unmerge these cells, remove the highlight, and delete what I have written here. Then consider what you need to construct the purchasing/production budgets and the cost of good sold budget. Your final result WILL NOT be identical to class, but the logic and the thought process will be the same. This and then creating real financials with your result is the challenging part of this assignment (the sales budget should be pretty easy). Cost of goods sold budget SoCs Codecs Total See above. Note: Be sure to be consistent divide above totals by 1,000 for our financial statement budgets Income Statements Codecs & Sacs, Inc. (amounts in thousands) Year Ended December 31, 2016 2015 Consolidated Statements of Income (Budget) (Actual) Revenues, net $201,384 Cost of goods sold -92,107 Gross profit 109,277 Operating expenses: Research and development -32,022 Selling, general and administrative -15,952 Operating Income 61,303 Interest income 2,110 Interest expense -23 Income (loss) before income taxes 63,390 Income taxes Net income (loss) Balance Sheets Codecs & Sacs, Inc. (amounts in thousands) Consolidated Balance Sheets ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories, net Prepaid expenses and other assets Total current assets Property, equipment and software, gross Accumulated depreciation Property, equipment and software, net Intangible assets, gross Accumulated amortization Intangible assets, net Other assets Total assets LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities: Accounts payable Accrued payroll Other accrued expenses Deferred revenue Total current liabilities Other liabilities Total liabilities Common stock, $0.0001 par value Additional paid-in capital Accumulated surplus (deficit) Total stockholders' equity Total liabilities and stockholders equity BS Check -9,983 $53,407 December 31, 2016 2015 (Budget) (Actual) 19,812 122,586 40,574 20,690 1,906 205,568 19,475 -12,359 7,116 5,605 -1,248 4,357 1,285 $218,326 $24,347 2,217 7,810 7,286 41,660 116 41,776 4 163,417 13,129 176,550 $218,326 $0 Cash Flows--Indirect Codecs & Sacs, Inc. (amounts in thousands) Year Ended December 31, 2016 2015 (Budget) (Actual) Cash flows from operating activities: Net income (loss) $53,407 Adjustments to reconcile to net cash provided by (used in) operating activities: Depreciation and amortization Changes in assets and liabilities: Accounts receivable, net Inventories, net Prepaid expenses and other assets Accounts payable Accrued payroll Accrued expenses Deferred revenue Net cash provided by (used in) operating activities Cash flows from investing activities: Proceeds from maturities of short-term investments Purchases of short-term investments Purchases of prop., equipment., software and intangibles. Net cash used in investing activities Cash flows from financing activities: Net proceeds from issuance of common stock Re-purchase of common stock Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year BS/SCF Check 4,814 -24,585 -6,587 -573 9,550 1,347 1,916 3,641 42,930 77,801 -143,211 -9,182 -74,592 10,702 -21,021 -10,319 -41,981 61,793 $19,812 $0 Patrick Badolato: Financing New Ventures The University of Texas at Austin's McCombs School of Business 2016 Case #3: Codecs & Socs 20161 GROUP Assignment: Master Budgeting and Preparation of Budgeted Financial Statements Overview We are a fabless semiconductor company that designs, develops, and markets proprietary, analog-intensive, mixedsignal integrated circuits, or ICs, for a variety of products in the consumer electronics and computing markets, including portable compressed audio players, such as MP3 players, notebook and desktop PCs, consumer audio, including DVD players, digital televisions, and set-top boxes, and Universal Serial Bus, or USB, infrared devices. We provide our customers complete, system-level solutions that include highly-integrated ICs, customizable firmware and software, software development tools, reference designs, and applications support. Our focus on providing system-level solutions enables our customers to rapidly introduce and offer electronic products that are small, light-weight, power-efficient, reliable, and cost-effective. Manufacturing We design and develop our products and electronically transfer our proprietary designs to third-party foundries to process silicon wafers and produce the ICs. The wafers are then shipped from foundries to our subcontractors, where they are assembled into finished ICs and electronically tested before delivery to our customers. [To be clear, the specifics of what they do are not critical to your mastery of this process, but you do need to be aware that they design, develop, and market proprietary products that are bought by other business in the consumer electronics and computing markets and that they are involved in the manufacturing of these products. This example should be informative to any firm that is involved in R&D, manufacturing, sales and/or marketing of any type of product.] Learning Objectives Gain an understanding of the master budgeting process. Learn how pro-forma (budgeted) financial statements can be generated through assumptions about future business activities as well as from processing transactions and making adjusting entries. Prepare the components of a master budget: o Sales budget; o Purchases or production budget o Cost of goods sold budget; o Budgeted income statement; o Budgeted balance sheet. o Budgeted cash flow statement; Ask and answer questions about the feasibility and consequences of a given set of budget assumptions. Ask and answer \"what if\" questions about possible variations in assumptions. 1 This case is loosely based on the historical financial statements of Codecs & Socs, Inc. as published in its Form 10K filed with the SEC (a public-record document). The case has been substantially fictionalized to smooth the way for students to begin their understanding of master budgeting. No consultations with Codecs & Socs representatives were undertaken. The budget assumptions are (mostly) fictional and intended only to introduce students to a master budgeting process. 1 Page Patrick Badolato: Financing New Ventures The University of Texas at Austin's McCombs School of Business 2016 Requirements: For the sake of simplicity, we will assume that all products in 2016 will fall into the two categories, SoCs (systems on chips) and Codecs (analog-digital coder-decoders), and that the proportions of net revenues derived from the two product lines will be approximately 90% and 10%, respectively. Manufacturing is outsourced. Foundries are contracted to produce silicon wafers with specified properties and to cut them into die (little rectangles) on which to build ICs (integrated circuits) for the two types of applications. Separate assembly contractors build the final SoCs and Codecs. Codecs & Socs pays each type of contractor a \"purchase\" price for their role in the manufacturing process. These costs are billed by the contractors as production orders are finished and shipped. 1. Below are the further budget assumptions for 2016 regarding sales and production/purchase requirements for ICs to be produced and sold. Prepare a sales budget, a purchasing/production budget and a cost of goods sold budget. See the tab for budgets in the handout Excel workbook. Note the differences between this firm and the in-class example including the fact that this firm outsources its manufacturing. Carefully consider how that would alter (and even simplify) the Direct Materials, Direct Labor and Overhead budgets. Note that these same assumptions are in the first tab of the handout Excel workbook made available to you. You need to build your entire master budget by referring to these figures directly in formulas you use to derive the amounts in your budget schedules and budgeted financial statements. You need to build your budgets so that if you change a number among the assumptions, everything related in the budgets will change accordingly. That is, hard-coded responses will not be accepted. 2 Page Patrick Badolato: Financing New Ventures The University of Texas at Austin's McCombs School of Business 2016 2. Using the information from the budgets you have built and the further assumptions below, construct a budgeted income statement in the appropriate tab in the workbook. 3. Using the information from the budgets that you have built and the further assumptions below, construct a budgeted ending balance sheet in the appropriate tab in the workbook. 3 Page Patrick Badolato: Financing New Ventures The University of Texas at Austin's McCombs School of Business 2016 4. After completing the budgeted balance sheet, construct a cash flow statement using the indirect method in the appropriate tab in the workbook.2 5. In the textbox alongside your Canvas submission, offer your comment on the following: What are the cash flow/cash balance implications of the budget? For example, does the cash balance appear to be adequate? Does Codecs & Socs appear to have any cash management challenges? Supplementalon-graded: 6. What would happen to the budget if the following new assumptions were considered? What should (could) Codecs & Socs do to adapt to these changes? a. Codecs & Socs failed to close a deal to deliver 1 million Socs to Apple that was included in the sales assumptions. b. The cost of die in both product lines jumped to $30/unit and the cost of assembly increased to $40 for Socs and $55 for Codecs. c. Codecs & Socs always needs $150 million in cash and short-term investments. 7. Go back to the original budget assumptions. Assume that Codecs & Socs would like to acquire a new subsidiarya non-public, early-stage company with exciting new technology that is a very promising complement to Codecs & Socs's existing technologies. Assume that the price will be $100 million 2 You may actually do this requirement simultaneously and interactively with requirement 3. 4 Page Patrick Badolato: Financing New Ventures The University of Texas at Austin's McCombs School of Business 2016 (after cash acquired) and that Codecs & Socs always needs $150 million in cash and short-term investments, what should (could) Codecs & Socs do to complete this deal? 5 Page