Sweetums Cookies, Inc.: A Master Budget Case Introduction You knew they were good, but you never thought Grandma's old cookie recipe would bring you this far! It all started about three years ago when you began using your Grandma's cookie recipe to bake cookies as a little side business. You bake them right in your home and sell them to friends and local stores. Response has been great! People love the cookies, and you're making a little extra money. There is a small problem with all of this success. The volume of business has grown so much that you can no longer keep up with demand. Your desire to grow this hobby into a full-fledged business has led you to explore expanding. You have been investigating new facilities, equipment, and the requirements of hiring a few employees. However, you're missing one important element; money to fund this expansion! On the advice of a friend, you meet with a local banker. She says that the bank cannot lend you any money without a business plan that describes your financial results, marketing strategy, and projections for the future. You show the banker your income statement and balance sheet as of the most recent year-end, but what she really needs to see is your budget for the next year. When you return home after the meeting, you pull out your college accounting textbook and settle in to produce a plan for next year. You pull out Grandma's recipe to see what ingredients it takes to make a dozen cookies. Next, you go to your invoice files to determine the cost of each of the ingredients. You brainstorm to develop a list of the new costs that you must incur when you expand your operations. After analyzing all of this data you are able to break your costs into several categories. You realize that some costs are for raw materials while others are related to manufacturing overhead or operating expenses. You also realize that some costs appear to be fixed while other costs are variable. You now have the information you need to create a budget that will allow you to show the banker your plans for the coming year. This budget will also help you to understand your sales and the collection on those sales. You will be able to determine how much money you need to purchase the ingredients for your cookies and to pay your overhead and operating expenses. You realize that if you can estimate how many dozens of cookies you can sell, then you can calculate how many ingredients to buy and how much overhead and operating expenses will be. You will need to get yours sales estimate as accurate as possible.