TERMPAPER

The purpose of this term paper is to make bridge between the theoretical contents taught in this course with real world practice. The term report should be submitted in a group and each group should comprise of 3 to 4 members. Read the following case and prepare required budgets.

Hao Chi is a new startup by fresh graduates from NSU who home deliver Momos across Dhaka. They make momos using locally produced flour, yeast, chicken and all the other fresh ingredients of finest quality. They have two momos: the standard one steamed chicken momo and the customized one named fried momo. The standard momos are prepared with antibiotic free chicken along with other ingredients and the customized momos add number of options that are customized as per customer demand and are deep-fried.

For the third quarter of 2022, estimated sales in units for each product line are as follows:

Month Standard (in plates) Customized (in plates)

July 1,000 350

August 1,150 400

September 1,200 450

October 1,560 500

November 1,800 550

The CEO of the "Hao Chi Momos" provided you with the following additional information:

Sales: The actual sales for May and the forecasted sales for June were Tk. 1,050,000 and Tk.

1,200,000 respectively for the standard units. The relevant numbers for the customized ones are Tk.

500,000 in May and Tk. 650,000 in June.

Hao Chi Momo prices the standard momos at Tk. 400 per plate of 8 pcs and the customized momos Tk. 800 per plate of 8 pcs.

Inventory Policy: The Company believes in customer satisfaction and therefore doesn't store any ready products. Rather they're using lean production process where they're producing on demand. Production requirements: The standard momos require 250 gm of chicken per plate and the customized ones require 350 gm of chicken. Chicken costs Tk. 380 per Kg. The cost of all other material is Tk. 120 per plate for standard units and Tk.200 for the customized units.

The standard unit requires 0.50 direct labor hours per unit and the customized ones require 0.75 hours of labor time. Labor cost per hour is Tk. 200.

Fixed Manufacturing Overhead is expected to be Tk. 60,000 per month, of which Tk. 22,000 for non-cash

depreciation. Hao Chi applies manufacturing overhead to units based on direct labor hours and the variable manufacturing overhead rate is Tk. 25 per direct labor hours.

Inventory policy-raw materials: Chicken is the main ingredient of momos. With regard to the chicken used in production, Hao Chi likes to keep safety stock of 50% of its need of chicken for the next month's anticipated production. Hao Chi ended June, 2022 with 186 Kg of meat in stock.

Payables Policy: Hao Chi signed an MOU with Bengal Meat where Bengal Meat agrees to supply all the meat needs on credit. According to the credit policy of Bengal meat for Hao Chi, half of the monthly purchase is due on the month of purchase and the rest of the due is settled in following month of purchase. Accounts payable for materials and other items were expected to be Tk. 105,000 on June, 2022.

Costs of all other materials are purchased on a cash basis during the month of purchase according to the monthly production need.

Collection policy: Hao Chi mainly delivers their products to corporate offices, hence offering credit term to attract corporates. For both the standard and customized units, 40 percent of any month's sales are for cash. 10 percent of the credit sales are collected in the month of sale, 70 percent of credit sales are collected the following month and the rest of the dues are collected in the second month following the month of sales.

Sales and Administration costs: Monthly selling expenses consist of the following:

Salaries and wages: Tk. 75,000

Commissions: 6% of revenue

Rent: Tk. 50,000

Utilities: 4% of revenue

Cash and financing: Hao Chi expects to maintain a minimum cash balance of Tk. 300,000. Borrowing can make up any anticipated cash shortage at 10% annual interest. Bank will only lend (and accept repayments) in Tk. 1,000 increments. Cash balance to start the quarter is Tk. 350,000

Other information: Hao Chi will make a payment of Tk. 400,000 during July for equipment purchased on credit on April. The company also plans to pay dividends of Tk. 250,000 in August.

Required:

Prepare the following budgets for Hao Chi Momos for the months of the third quarter ending September,

2022.

1. The case budget

2. The budgeted income statement

Prepare the following schedules:

i. Expected cash collections

ii. Expected cash disbursements for materials

General Instructions:

Must show the calculations in MS Excel and the budgets should be formally reported.