This assignment asks you to set up an Excel budget spreadsheet file that automatically prepares the master budget for a company, given sales projections and information on beginning balances, production requirements, desired ending inventories, etc. Information on developing the budgets appears in Chapter 8 of your text, and examples of budget worksheets appear in the schedules throughout the chapter.

Data

Oxford Inc. produces and sells backpacks. Below is information on its activities for the next few months.

1. Actual sales in February were 60,000 units; actual sales in March were 90,000 units.

Sales projections for the coming months are as follows:

Estimated Sales (in units)

	April	May	June	July
Backpacks	80,000	110,000	130,000	120,000

Each backpacks selling price is $65/unit. Desired ending inventory of backpacks is 5,000 units plus 10% of the following months projected sales. There are 7,500 units of backpacks in inventory as of April 1.

2. Estimated cash collections from sales of backpacks to customers are as follows: 40% collected in the month of sale, 30% collected in the month following sale, 28% collected in the second month following sale, and 2% never collected.

3. Three materials are used in the production of backpacks: Rayon, Linen, and Leather. Materials requirements per unit of backpack are as follows: one unit of Rayon, 5 units of Linen, and 3 units of Leather.

Costs of materials are:

Rayon $1.6/unit, Linen $1.80/unit, Leather $3.00/unit

Desired ending inventory of Rayon is 20% of the following months production need because it is sometimes in short supply. Desired ending inventory of Linen and Leather is 5% of the following months production need because they are easy to get. Inventories of materials as of April 1 are: 5,600 units of Rayon, 28,000 units of Linen, and 6,800 units of Leather.

4. The company pays for all materials (including Rayon, Linen and Leather) purchases as follows: 60% in the month of purchase, 40% in the month following purchase. Total purchases of all materials for the month of March were $350,000.

5. There are two types of direct labor costs to incur before a backpack is completed. Direct labor costs are paid in cash as incurred.

Department Direct labor hours per unit of backpack Cost per direct labor hour

Cutting: 0.12 hour $20

Sewing: 0.08 hour $25

6. Total variable manufacturing overhead is estimated at $8/direct labor hour. Total fixed manufacturing overhead is estimated at $250,000/month, of which $80,000 is depreciation. Overhead costs are paid when incurred.

7. Total variable selling and administrative costs are $1.50/unit of backpacks sold. Total fixed selling and administrative costs are estimated at $350,000/month, of which $180,000 is depreciation. Selling and administrative costs are paid as the costs are incurred.

8. The beginning balance of cash account on April 1 is $1,080,000. The company desires to maintain a minimum cash balance at the amount of $1,000,000.

9. The company has an agreement with a local bank that would supply any amount of loan it needs to maintain the minimum cash balance. For simplicity, assume that interest is not compounded and that interest is paid each month but principal is paid at the year end. Annual interest rate is 12%.

10. The company plans to purchase $50,000 of equipment in April and $40,000 in May.

11. Cash dividends is $15,000 each month.

Preparation of Spreadsheet File

Create one Excel spreadsheet file consisting of the following six separate worksheets:

Sheet 1: Data

This worksheet contains the data necessary to do all the other worksheets. List on this worksheet all of the data shown above, clearly labeled. None of the other worksheets should contain any numbers; they should contain ONLY FORMULAS all cells on the other worksheets should be linked to cells in the data worksheet, cells within the same worksheet, or cells in the other worksheets. For example, the cell for direct labor cost for April should contain a formula that multiplies the production in units for April (from the production schedule) times the labor hours per unit (from the data worksheet) times the hourly wage rate (from the data worksheet). So if the sales estimate for backpacks changes, you should be able to make the change only on the data worksheet; all the other worksheets should automatically adjust to the changes. The production amounts will change; the manufacturing costs will change, etc. The data worksheet can be in any format; just be sure to label each data item clearly.

Sheet 2: Include the following two budgets on the second worksheet, clearly labeled:

Sales Budget: Prepare a schedule of sales revenue and cash receipts from sales for each of the months of April, May and June. List cash collections separately on lines as follows: cash collections from sales two month ago, cash collections from sales one month ago and cash collections from sales in the current month. Also, list total cash collections in April, May and June.

Production Budget: Prepare a production budget for backpacks, in units, for each of the months of April, May and June.

Sheet 3: Include the following one budget on the third worksheet, clearly labeled:

Direct Materials Budget: Prepare a direct materials purchases budget, in units and in total dollars, for April and May. List Rayon purchase costs, Linen purchase costs, Leather purchase costs and total material purchase costs separately. List payments for current month purchase, payments for prior month purchase, and total payments on separate lines.

Sheet 4: Include the following one budget on the fourth worksheet, clearly labeled:

Direct Labor Budget: Prepare the budget for costs of direct labor used for April and May, in hours and in total dollars. List cutting cost, sewing cost, and total labor cost separately. Also, list total cash payments for each month.

Sheet 5: Include the following two budgets on the fifth worksheet, clearly labeled:

Manufacturing Overhead Budget: Prepare a manufacturing overhead budget for April and May. Show variable manufacturing overhead, fixed manufacturing overhead and total manufacturing overhead costs separately for each month. Also, list total cash payments for each month.

Selling & Administrative Expense Budget: Prepare a selling and administrative expense budget for April and May. Show variable selling and administrative costs, fixed selling and administrative costs and total selling and administrative costs separately for each month. List total cash payments for each month.

Sheet 6: Include the following one budget on the sixth worksheet, clearly labeled:

Cash Budget: Prepare a cash budget for April and May. List total amount of beginning cash balance, cash receipts, cash disbursements, cash excess or deficiency, borrowing at the beginning of the month, and ending cash balance separately.