The real-world (this company is in the northwest suburbs of Chicago) scenario:

Your company assembles wire (light-metal) closet shelving units at a manufacturing facility and ships them to home builders and "big box" do-it-yourself chains.

It is October, 2020 and you, the budget manager, just received an e-mail from the CFO, asking you to put together a 2021 budget.

The projected (because the year is not yet over) 2020 financial information is below.

Now you need to prepare a 2021 budget by filling in the 2021 boxes below and submitting to the CFO.

So what to fill in for 2021 (after completing the 2020 income statement)?

For a successful Master Budget, you would seek information and input from your company's:

Sales Manager

Production Manager

Administration Manager

This information (reflecting some real-world vagueness and uncertainty) is in the detail further below:

2020 Projected 2021 Budget

Sales 2,200,000

Production Costs:

Direct Material 630,000

Direct Labor 420,000

Manufacturing Overhead (you fill in)

Other Expenses:

Sales commissions 440,000

Office/Mgmt. Salaries 325,000

Rent 144,000

Utilities 9,000

Supplies 25,000

All Other 60,000

Total costs and expenses (you fill in)

Net Income (you fill in)

Budget input from key personnel:

SALES MANAGER

The Sales Manager is in charge of sales of wire shelving in linear feet (the key metric for this business)..

She solicits and receive orders from home builders and chain stores

The following is projected sales data for (full year) 2020:

190,000 linear feet to the home builders at a sales price of $10 per linear foot.

20,000 linear feet to the chain store market at a sales price of $15 per linear foot.

In 2020, COVID-19 had a detrimental effect of the home builders market, but it is expected

to improve somewhat in 2021.

However, COVID-19 had a favorable impact on the chain store market as more people

had more time to work on home improvement projects. This is expected to decline significantly

in 2021.

Sales prices (what is charged to the customers) per linear foot will remain the same in 2021.

PRODUCTION MANAGER

The production manager is in charge of assembly of these units in the assembly

facility adjacent to the office.

Production at the company facility is based on the assembly of the shelving by the linear foot.

You assemble what you need to fill orders, since there is no space for unsold inventory.

The production manager is also responsible for procurement of the raw materials (metal).

You currently pay at a rate of $3 per linear foot, but your supplier is planning a price increase.

The production manager is also responsible for the assemblers that he directly supervises.

They are paid by production at $2 per linear foot.

The production manager earns an annual salary (which is the entire manufacturing overhead).

That salary (unique to each student in the class, evidently some are more generous than others!)

is as follows:

Juana: $58,000

Nassar: $60,000

Preness: $63,000

Aidan: $65,000

Anais: $68,000

Ubon: $70,000

Tahara: $72,000

Jaerin: $75,000

Adrian: $77,000

Julian: $80,000

Luis: $82,000

Edgar: $84,000

Nkeonye: $87,000

Ariel: $89,000

Jacqueline: $92,000

Piotr: $95,000

Bobby: $98,000

Courtney: $102,000

Isha: $105,000

Tyler: $108,000

Jessica: $110,000

However, in all of the salary scenarios above, the production manager wants a raise next year!

Reminder: direct material and direct labor are both variable costs - An appropriate budget would be based on expected cost per linear foot x the number of expected linear feet in sales (based on the input from the sales manager)

ADMINISTRATION MANAGER

The administration manager is in charge of basically everything at your facility except sales and production.

A couple of the issues she is working on include:

Negotiating with the landlord - your lease is up in December and she wants to increase the rent.

Hiring an administrative assistant to help implement the new accounts payable software.

PROJECT 1 REQUIREMENTS:

Using either this Excel document or a separate format (for example, a Word document, but not Googledocs!), prepare a

2021 Master Budget by completing where applicable for 2020 and then filling in the boxes as applicable for 2021.

In addition, provide a 200-300 word description (either within the same document or a separate document such as Word, or in "Write Submission" tab/area, your choice) that specifies how you determined the 2021 Sales Budget (for each of the two markets) and the assumptions, as well as how you determined the numbers for all of the costs and expenses budgeted for 2021.

In other words, clearly show how you arrived at all of the numbers that you entered into the 2021 boxes, do NOT make instructor (or in the future, your supervisor, company controller or CFO) go on an analytical safari to try to figure it out!

(This type of safari, like many others, often does not end well!)

If using an Excel document, please make it in an easily printable (watch margin settings, etc.) format.