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ACC 302 Final Project Project Orientation and Overview Every year at the state fair your parents have run a pretzel booth. Over the years you have experimented with new pretzel recipes, and many have been successfully incorporated into the selection of pretzels now offered each year at the state fair. Your parents are ready to retire and turn the business over in your name. You want to capitalize on your parents' success and expand by offering pretzels at a store location. In order to expand, you will need to secure a bank loan to cover expansion costs and overhead. To consider your proposal, the banker will want to see a business plan, specifically a master budget. Your task for this final project is to prepare and present all the necessary documents so that you can ask for that loan. This task is broken down into four parts: Part 1: Mission Statement and Partial Business Plan, due at the end of Week Five Part 2: Budgets, Financial Statements, and Analysis, due at the end of Week Six Part 3: Complete Business Plan and Cover Letter, due at the end of Week Seven Part 3: Business Plan Presentation, due on Day 1 of Week Eight Part 1 - Mission Statement and Partial Business Plan, due Week Five Review the following chapters: o o o Chapter 18: The Changing Business Environment: A Manager's Perspective Chapter 19: Cost Concepts and Cost Allocation Chapter 23: Cost Behavior Analysis Complete the Mission Statement Template Handout to record information about your pretzel company, its mission, and its featured product. Use the tables and information in Exhibit 1 on the next page to calculate the costs of running your business and to complete the short answer section of the Mission Statement Template Handout. o o o o Calculate total variable costs per dozen pretzels. Calculate sales price per dozen pretzels using 120% markup on variable costs. Calculate contribution margin per dozen pretzels. Calculate breakeven point for the quarter (three months) in dollars and units. Submit the completed Mission Statement Template Handout to \"My Assignments\" in My West. ACC 302 Final Project 1 01/30/12 Exhibit 1: Cost of Goods If your pretzel recipe has ingredients that are not included here, simply consider them part of your overhead expenses. Direct Materials Unit Unit Cost Flour (any kind) per cup $ 0.15 Sugar (any kind) per cup $ 0.15 Dry Yeast per cup $ 0.50 1 Stick of Butter, Shortening, Oil per 1/2 cup $ 1.00 Egg per cup $ 0.10 Salt Specialty Ingredients (any kind, e.g., chocolate chips, cinnamon, cheese, pepperoni, etc.) per 1/2 cup per cup $ $ 0.75 2.00 Direct Labor Information regarding direct labor cost is not maintained because your facility is highly automated. Direct labor is included as part of manufacturing overhead. Manufacturing Overhead and Operating Expenses Manufacturing Overhead Utilities Other Indirect Materials and Labor Maintenance Depreciation Supervision Totals Operating Expenses Sales Commission Shipping Costs Salaries Depreciation Other Totals ACC 302 Final Project Variable (per dozen) $ 0.50 $ 0.75 $ 1.25 Variable (per dozen) $ 0.50 $ 1.00 $ 2 1.50 Fixed (per month) $ 500.00 $ 2,000.00 $ 2,500.00 $ 5,000.00 Fixed (per month) $ 5,000.00 $ 200.00 $ 1,800.00 $ 7,000.00 01/30/12 Part 2 - Budgets, Financial Statements, and Analysis, due Week Six Review Chapter 24: The Budgeting Process. Use the tables and information presented in Exhibit 2 on the next page to determine production and financial budget data. Create a spreadsheet that provides the following budgets: o o o o Create documents that show your projected income and your cash needs. More specifically, use the budgets and other documentation that you have created for this project to create the following documents: o o o o Proforma (projected) variable income statement Proforma absorption income statement Proforma balance sheet Cash budget Respond to the following short answer questions using a word processing program: o o o o o Sales budget/cash collections budget Direct materials purchases budget/cash disbursements budget Manufacturing overhead budget Operating expenses budget Discuss the importance of beginning the master budget process with an accurate sales budget. What are some important factors that a manager should consider when developing a sales budget? State why each is important. Distinguish between operating expenses and disbursements for operating expenses. What is the main difference between the variable and absorption income statements? What are the major benefits of budgeting? Submit the budgets, financial documents, and short answer questions to \"My Assignments\" in My West. ACC 302 Final Project 3 01/30/12 Exhibit 2: Production Budget Information It is a few months before your store is opening. You expect to open the doors of your pretzel company as of January 1. You are starting fresh with no raw materials, no accounts receivable, and no accounts payable. You were able to secure several contracts with local businesses (i.e., sales associates that are paid on commission); based off these contracts, you were able to make projects for the first four months of the year. Because your pretzels are made fresh daily, there is no work-in-process or finished goods inventory. You plan to maintain a raw direct material inventory of 10% of the next month production. Payment for raw direct materials is 25% in the month of purchase and 75% in the following months. Your monthly sales projections are based off your last name, and sales are sold per dozen. January February March April A-F 3750 3750 3750 3750 G-L 2750 3250 4000 5000 M-S 2000 3500 4500 5000 T-Z 1750 3750 3500 6000 Collections on Sales Cash sales collected in the current month: 40% Credit sales are collected in the following month: 60% Financial Budget Information Your initial investment in your business is $50,000, and you are looking to secure a bank loan for $50,000 with additional line of credit. However, you must always have a minimum cash end-of-month balance of $10,000. If there is any cash over $10,000 available at the end of the month, you must repay your outstanding balance in $1,000 increments. If the end-of-month cash balance falls below $10,000, you must make additional borrowing from the line of credit. These borrowings are also in increments of $1,000. Your bank loan and line of credit has an annual interest rate of 12% which is paid monthly on the total outstanding borrowings at the end of the prior month. Additional Information: Fixed asset acquisition in January is $90,000. Your income taxes are paid each quarter on net income at a rate of 25%. ACC 302 Final Project 4 01/30/12 Part 3 - Complete Business Plan and Cover Letter, due Week Seven Write a cover letter to a banker explaining why the banker should approve your loan. Compile and complete your business plan, including all supporting documentation created for this project. Submit your complete business plan as one document to \"My Assignments\" via My West. Part 4 - Business Plan Presentation, due in-class, Week Eight Create a 5-15 slide Microsoft PowerPoint presentation of your business plan. The slides will be evaluated for: o o o o Content Relevance Layout Readability TM Present your business plan in person (on campus) or via Adobe Acrobat Connect during the online class meeting. Your presentation must be 10-15 minutes long (including Q & A) and will be evaluated on: o o Delivery of the content Answers to follow-up questions from the class and instructor For online students: If you are to be absent from class, your slides must include detailed speaker notes containing the content that would have been delivered in the live session. Note to instructor: Time devoted to final presentations may need to be adjusted to account for large class sizes. These adjustments are at the discretion of the instructor. *Note this assignment only focuses on a mission statement and the financial portion of a business plan. ACC 302 Final Project 5 01/30/12