Portraits Unlimited Company Budgeting Project lan Jennings, president of Portraits Unlimited Company, was just concluding a budget meeting with his senior staff. It was November of 2022, and the group was discussing preparation of the firm's master budget for 2023. "I've decided to go ahead and purchase the industrial robot we've been talking about. We'll make the acquisition on January 3 of next year, and I expect it will take most of the year to train the personnel and reorganize the production process to take full advantage of the new equipment" In response to a question about financing the acquisition, Jennings replied as follows: "The robot will cost $250,000. There will also be an additional $50,000 in ancillary equipment to be purchased. We'll finance these purchases with a one-year $300,000 loan from Shark Bank and Trust Company on January 2. I've negotiated a repayment schedule of four equal installments on the last day of each quarter. The interest rate will be 10 percent per annum on the reducing balance basis, and interest payments will be quarterly as well. With that the meeting broke up, and the budget process was on. Portraits Unlimited Company is a manufacturer of metal picture Portraits. The firm's two product lines are designated as S (small Portraits; 5 x 7 inches) and L. (large Portraits; 8 x 10 inches). The primary raw materials are flexible metal strips and 9-inch by 24-inch glass sheets, Each S Portrait requires a 2-foot metal strip; and an L. Portrait requires a 3-foot strip. Allowing for normal breakage and scrap glass, the company can get either four S Portraits or two L Portraits out of a glass sheet. Other raw materials, such as cardboard backing, are insignificant in cost and are treated as indirect materials. Jane Williams, Portraits Unlimited's controller is in charge of preparing the master budget for 2023. She has gathered the following information: 1. Sales in the fourth quarter of 2022 are expected to be 50,000 S Portraits and 40,000 L Portraits. The sales manager predicts that over the next two years, sales in each product line will grow by 5,000 units each quarter over the previous quarter. For example, S Portraits sales in first quarter of 2023 are expected to be 55,000 units. 2. Portraits Unlimited Company sales history indicates that 60 percent of all sales are on credit, with the remainder of the sales in cash. The company's collection experience shows that 80 percent of the credit sales are collected during the quarter in which the sale is made, while the remaining 20 percent is collected in the following quarter. 3. The S Portrait sells for $10, and the L. Portrait sells for $15. These prices are expected to hold constant throughout 2023 4. The production manager attempts to end each quarter with enough finished goods inventory in each product line to cover 20 percent of the following quarter's sales. Moreover, an attempt is made to end each quarter with 20 percent of the glass sheets needed for the following quarter's production. Assume an ending inventory of glass sheets of 10,400 for the fourth quarter of 2023 Metal strips are purchased locally, the company buys them on a just-in-time basis; inventory is negligible. The opening inventory for quarter 4, 2022 for both finished goods and raw materials can be found by determining the desired ending inventory for quarter 3, 2022 based on the inventory principle provided 5. All direct-material purchases are made on account, and 80 percent of each quarter's purchases are paid in cash during the same quarter as the purchase. The other 20 percent is paid in the next quarter. 6. Indirect materials are purchased with cash as needed. Work-in-process is negligible. 2 7. The following manufacturing overhead costs are budgeted for 2023: Indirect materials 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Indirect labour Other overhead Depreciation Total overhead costs 10,200.00 11,200.00 12,200.00 13,200.00 40,800.00 44,800.00 48,800.00 52,800.00 31,000.00 36,000.00 41,000.00 46,000.00 20,000.00 20,000.00 20.000.00 20000 00 $102,000.00 $112,000.00 $122,000.00 $132,000.00 8. Projected manufacturing costs in 2023 are as follows: S Portrait L Portrait Direct material Metal strips S: 2 $1 per foot 52 L: 3 ft. $1 per foot $3 Glass sheets S: % sheet @ $8 per sheet L: % sheet $8 per sheet 2 Direct labour: 0.1 hour $20 per hour 2 2 Manufacture overhead 0.1 direct-labour hour x $10 per hour Total manufacturing cost per unit $10 9. The following relates to past selling and administrative expenses. (Use regression analysis to derive a cost function and use this cost function to estimate the selling and administrative Selling and Admin cost S&L Sales Year Quarters Units 2021 ' 80,000 $200,000.00 2 70,000 180,000.00 3 60,000 150,000.00 4 100,000 250,000.00 2022 1 88,000 210,000.00 2 74,000 180,000.00 98,000 235,000,00 10. Jackson anticipates that dividend of $50,000 will be declared and paid in cash each quarter 11. Portraits Unlimited Company projected balance sheet as of December 31, 2022, follows Plant and equipment (net of accumulated depreciation) Cash Accounts receivable Inventory: Raw material Finished goods Total assets Accounts payable $ 8,000,000 95,000 132,000 59,200 167.000 8,453,200 99,400 Common stock 5,000,000 Retained earnings 3.353,800 Total liabilities and stockholders' equity 8,453,200 2 Finished goods Total assets Accounts payable Common stock 167,000 8,453,200 99,400 5,000,000 Retained earnings 3.353,800 Total liabilities and stockholders' equity 8,453,200 Required: Prepare Portraits Unlimited Company master budget for each quarter of 2023 and in total for the year by completing the following budgets and schedules (a) Sales budget (prepare 4 quarter of 2022 as well), (b) Schedule of cash collected from customers. (c) Production budget (prepare 4 quarter of 2022 as well). (d) Direct-material budget (prepare 4th quarter of 2022 as well). (8 marks) (10% marks) (19 marks) (19% marks) (e) Schedule of cash disbursement to suppliers for direct material. (8 marks) (f) Direct labour budget. (3 marks) (g) Manufacture overhead budget. (4 marks) (h) Selling and administrative budget. (Round off variable cost to 2 decimal places and fixed cost to the nearest whole number). Show regression computation. (i) Cash budget (5 marks) (15% marks) (j) Portraits Unlimited Company Budgeted Cost of Goods Manufactured and Sold for the year 2023. (Show budget for the entire year only). (9 marks) (k) Portraits Unlimited Company Budgeted Income Statement for 2023. (Show budget for the entire year only). (5 marks) (1) Portraits Unlimited Company Budgeted Statement of Retained Earnings for 2023. (Show budget for the entire year only). (4 marks) (m) Portraits Unlimited Company Budgeted Balance Sheet as of December 31, 2023 (9% marks) NOTE: Ensure your presentation has cell referencing and formulas. Marks are awarded for these. Portraits Unlimited Company Budgeting Project lan Jennings, president of Portraits Unlimited Company, was just concluding a budget meeting with his senior staff. It was November of 2022, and the group was discussing preparation of the firm's master budget for 2023. "I've decided to go ahead and purchase the industrial robot we've been talking about. We'll make the acquisition on January 3 of next year, and I expect it will take most of the year to train the personnel and reorganize the production process to take full advantage of the new equipment" In response to a question about financing the acquisition, Jennings replied as follows: "The robot will cost $250,000. There will also be an additional $50,000 in ancillary equipment to be purchased. We'll finance these purchases with a one-year $300,000 loan from Shark Bank and Trust Company on January 2. I've negotiated a repayment schedule of four equal installments on the last day of each quarter. The interest rate will be 10 percent per annum on the reducing balance basis, and interest payments will be quarterly as well. With that the meeting broke up, and the budget process was on. Portraits Unlimited Company is a manufacturer of metal picture Portraits. The firm's two product lines are designated as S (small Portraits; 5 x 7 inches) and L. (large Portraits; 8 x 10 inches). The primary raw materials are flexible metal strips and 9-inch by 24-inch glass sheets, Each S Portrait requires a 2-foot metal strip; and an L. Portrait requires a 3-foot strip. Allowing for normal breakage and scrap glass, the company can get either four S Portraits or two L Portraits out of a glass sheet. Other raw materials, such as cardboard backing, are insignificant in cost and are treated as indirect materials. Jane Williams, Portraits Unlimited's controller is in charge of preparing the master budget for 2023. She has gathered the following information: 1. Sales in the fourth quarter of 2022 are expected to be 50,000 S Portraits and 40,000 L Portraits. The sales manager predicts that over the next two years, sales in each product line will grow by 5,000 units each quarter over the previous quarter. For example, S Portraits sales in first quarter of 2023 are expected to be 55,000 units. 2. Portraits Unlimited Company sales history indicates that 60 percent of all sales are on credit, with the remainder of the sales in cash. The company's collection experience shows that 80 percent of the credit sales are collected during the quarter in which the sale is made, while the remaining 20 percent is collected in the following quarter. 3. The S Portrait sells for $10, and the L. Portrait sells for $15. These prices are expected to hold constant throughout 2023 4. The production manager attempts to end each quarter with enough finished goods inventory in each product line to cover 20 percent of the following quarter's sales. Moreover, an attempt is made to end each quarter with 20 percent of the glass sheets needed for the following quarter's production. Assume an ending inventory of glass sheets of 10,400 for the fourth quarter of 2023 Metal strips are purchased locally, the company buys them on a just-in-time basis; inventory is negligible. The opening inventory for quarter 4, 2022 for both finished goods and raw materials can be found by determining the desired ending inventory for quarter 3, 2022 based on the inventory principle provided 5. All direct-material purchases are made on account, and 80 percent of each quarter's purchases are paid in cash during the same quarter as the purchase. The other 20 percent is paid in the next quarter. 6. Indirect materials are purchased with cash as needed. Work-in-process is negligible. 2 7. The following manufacturing overhead costs are budgeted for 2023: Indirect materials 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Indirect labour Other overhead Depreciation Total overhead costs 10,200.00 11,200.00 12,200.00 13,200.00 40,800.00 44,800.00 48,800.00 52,800.00 31,000.00 36,000.00 41,000.00 46,000.00 20,000.00 20,000.00 20.000.00 20000 00 $102,000.00 $112,000.00 $122,000.00 $132,000.00 8. Projected manufacturing costs in 2023 are as follows: S Portrait L Portrait Direct material Metal strips S: 2 $1 per foot 52 L: 3 ft. $1 per foot $3 Glass sheets S: % sheet @ $8 per sheet L: % sheet $8 per sheet 2 Direct labour: 0.1 hour $20 per hour 2 2 Manufacture overhead 0.1 direct-labour hour x $10 per hour Total manufacturing cost per unit $10 9. The following relates to past selling and administrative expenses. (Use regression analysis to derive a cost function and use this cost function to estimate the selling and administrative Selling and Admin cost S&L Sales Year Quarters Units 2021 ' 80,000 $200,000.00 2 70,000 180,000.00 3 60,000 150,000.00 4 100,000 250,000.00 2022 1 88,000 210,000.00 2 74,000 180,000.00 98,000 235,000,00 10. Jackson anticipates that dividend of $50,000 will be declared and paid in cash each quarter 11. Portraits Unlimited Company projected balance sheet as of December 31, 2022, follows Plant and equipment (net of accumulated depreciation) Cash Accounts receivable Inventory: Raw material Finished goods Total assets Accounts payable $ 8,000,000 95,000 132,000 59,200 167.000 8,453,200 99,400 Common stock 5,000,000 Retained earnings 3.353,800 Total liabilities and stockholders' equity 8,453,200 2 Required: Prepare Portraits Unlimited Company master budget for each quarter of 2023 and in total for the year by completing the following budgets and schedules: (a) Sales budget (prepare 4th quarter of 2022 as well). (b) Schedule of cash collected from customers. (8 marks) (10% marks) (c) Production budget (prepare 4th quarter of 2022 as well). (19 marks) Required: Prepare Portraits Unlimited Company master budget for each quarter of 2023 and in total for the year by completing the following budgets and schedules: (a) Sales budget (prepare 4th quarter of 2022 as well). (b) Schedule of cash collected from customers. (8 marks) (10% marks) (c) Production budget (prepare 4th quarter of 2022 as well). (19 marks)