Surf N Seamanufactures swimwear and beach accessories for men and women.They operate out of rented premises in Kirra where the factory is split into a manufacturing and storage area and a retail space.

The business produces 4 products:

One-piece swimsuits for women

Board shorts for men

Beach Towels

Beach Umbrellas

You, as the management accountant for the firm, have been asked to prepare a range of budgets for the 2020 year.The following information has been gathered:

Expected sales volume (number of units) to be sold during 2020:

Sales

One-piece swimsuits

Board short

Towel

Beach Umbrellas

January 2020

1,800

1,600

400

200

February 2020

1,400

1,100

300

180

March 2020

1,300

1,160

260

160

April 2020

1,000

1,000

140

120

May 2020

400

600

80

60

June 2020

400

500

40

40

July 2020

400

500

40

40

August 2020

600

400

80

40

September 2020

1,300

1,160

260

160

October 2020

1,200

1,100

300

180

November 2020

1,200

1,100

300

180

December 2020

1,500

1,200

400

200

January 2021

1,600

1,400

440

220

February 2021

1,600

1,400

400

200

One-piece swimsuits

Board short

Towel

Beach Umbrella

Selling Price

$100

$80

$50

$45

Product

One-piece swimsuit

Board short

Towel

Beach Umbrella

Direct Materials & Direct Labour per unit

Fabric

$20.75

$31.25

$26.25

$20

Elastic/Trim

$13.50

$3.00

$5.25

$1.5

Direct Labour (sewing time/machine hours)

1 hour

0.75 hours

0.4 hours

2.0 hours

Other Cost information:

Production Related Costs

Operating Costs

Direct Labour

$28/hour

Indirect Labour

$1/ machine hour

Indirect Materials

$2 machine hour

Utilities

$450/month

$50/month

Insurance

$2,200/year

$6,000/year

Factory Supervisor's Salary

$60,000/year

Administration Staff Wages

$2,500/month

General Office Expenses

$1,500/month

Rent

$4,600/month

$1,400/month

Repairs and Maintenance

See below

Inventory:At the end of each month the business plans to have 50% of the following month's sales units in stock as finished goods and 75% of the direct materials required for the next month's production.

Cash Collections:20% of sales are through the retail outlet at the factory.These customers pay for their purchases at the time of sale.The remainder of sales are to businesses that resellSurf N Seaproducts. Credit is extended to all business customers.It is estimated 60% of these sales are collected in the month of sale and the remaining 40% are collected in the following month.

Cash Payments:All purchases, other than the purchase of direct materials, are paid at the time the expense is incurred.It is estimated 30% of accounts payable will be paid in the month the direct materials are purchased and the remaining 70% will be paid in the following month.

The interest rate payable on the loan is 9% per annum.Interest is paid monthly.The loan is on an interest only basis and the principle can be repaid at any time.

Depreciation of plant and equipment totals $10,000 for the year.Depreciation is recorded monthly.

Repairs and maintenance related to manufacturing plant and equipment is estimated to be $1,500 each quarter payable in March, June, September, and December.

Variable manufacturing overhead is allocated based on machine hours. Fixed manufacturing overhead is allocated based on units of production.Ignore GST and Income Tax.Round amounts other than unit costs to nearest dollar value.

The opening Balance Sheet is provided below:

Surf N Sea

Balance Sheet

As at 31 December 2019

Assets

Current Assets

Cash

32,250

Accounts Receivable

123,650

Finished Goods Inventory

79,150

Materials Inventory

114,275

Total Current Assets

$349,325

Non-current Assets

Equipment

85,000

Less: Accumulated Depreciation

( 8,000)

Total Non-Current Assets

$77,000

Total Assets

$426,325

Liabilities & Shareholder Equity

Current Liabilities

Accounts Payable

92,500

Total Current Liabilities

$92,500

Long-Term Liabilities

Bank Loan

154,900

Total Long-Term Liabilities

$154,900

Total Liabilities

$247,400

Shareholders' Equity

Share Capital

150,000

Retained Earnings

28,925

Total Shareholder Equity

$178,925

Total Liabilities & Shareholders' Equity

$426,325

Required:

1.Using the Excel template provided, prepare the following budgets for the twelve-month period from January 2020 to December 2020.The first worksheet should contain your raw data and assumptions and all future worksheets should be linked to this data.Use a different worksheet for each budget. Show all calculations and use Excel functions where possible.While you should use examples in your text as a guide, the key to using spreadsheets is that they are structured so that others can use them and follow the flow of information without difficulty.

a.Monthly Sales Revenue and Cash Collection Budget

b.Production Budget in Units

c.Direct Materials and Cash Purchases Budget

d.Direct Labour Budget

e.Manufacturing Overhead Budget (break into variable and fixed components)

f.Monthly Operating Cost Budget

g.Ending Inventory budget for Finished Goods

h.Cost of Sales Budget

i.Budgeted Income Statement for the year ended 31 December 2020

j.Monthly Cash Budget

Your budget spreadsheet must be submitted in Excel Format (not as an appendix in your WORD document).

2.Write a report (Maximum 1,500 words) for your manager to present to the upcoming Board meeting.The report should include:

an overview of the expected results for the 2020 year;

an analysis of the Contribution Margin for each product and recommendations regarding the productsSurf N Seamanufacture and sell;

recommendations regarding the cash position of the business; and

an analysis of current market conditions and future predictions that you believe should be considered when following year's 2020 budget is prepared.