Workplace simulation- Case Study Jenny's Corporation sells apple juice. It produces bottled apple juice from fruit concentrate purchased from various suppliers in Australia. Concentrate and water are the only ingredients in the juice. The juice is blended, pasteurised and bottled in 1 litre glass bottles. Most of this process is automated and five machines are used for mixing and bottling of the juice. Company employs two employees for handling these five machines and 800 bottles can be processed per hour altogether. At Jenny's Corporation, factory workers are paid $15 an hour including fringe benefits. The juice is sold by several supermarkets, restaurants and cafes under the name of Jenny's Corporation. The business uses a Sales forecasting model based on prior sales, expected changes in demand and economic factors affecting the industry. Currently the business is expecting a 4.2% growth. Jenny's sellsthe juice for $1.50 per litre bottle in cartons of 25 bottles. AS this business is seasonal in nature, sales have huge fluctuations. The actual sales for 2021 are as below: Jenny's Corporation Actual sates in the year 2021 January 245,000 bottles February 320,000 bottles March 415,000 bottles April 470,000 bottles May 375,000 bottles June 405,000 bottles July 360,000 bottles Aug 375,000 bottles Jenny's tries to maintain at least 8% of the next month's expected sales in inventory at the end of each month. The business doesn't want to take the risk of running out of juice for customers or shipping delays, so it always keeps this minimum amount of stock. The business prepares two purchase budgets- one for the apple concentrate and another for the bottles that are purchased from outside suppliers. Jenny's has determined that it takes 1 litre of apple concentrate for every 32 bottles of finished product. Each litre of concentrate costs $4.80. Each glass bottle costs $0.10. The business also requires 20% of the next month's direct material needs to be on hand at the end of each month. For budgeting purposes, Jenny's separates variable overheads from fixed overheads and calculates a predetermined overhead rate for variable manufacturing overhead costs. It has estimated that variable manufacturing overheads will total $438,000 forthe year and the machines will run approximately 6,000 hours atthe projected production voiume for the year (4,800,000 bottles). 80 variable manufacturing overhead is costed at $73.00 per direct labour hour. The business has also estimated fixed manufacturing overheads to be $1,480,000 per year which includes depreciation of $1 ,240,000 per year on existing property, plant and equipment. messes _0 The business has the following other forecasted expenses for the quarter: Jenny's Corporation Other expenses for the half year ending June 2022 Jan$ Feb$ March$ Ar$ Ma 5 June$ Variable Selling and admin Commissions 10% on sales Shin a in- costs 5% on sates Supplies 1% on cost of production Fixed Selling and admin $ $ insurance $ 6,000 $ 6,000 $ 6.000 $ 5,000 $ 6,000 $ 6,000 Salaries $ $ AdvertISIng $ 9,000 $ 9,000 $ 9.000 $ 9.000 $ 95000 9 300 All sales of the business are on account. Jenny's estimates that 50% of sales of each month will be collected for in the month of sale. It also estimates that 35% of each month's sales will be collected in the month following sale and the remaining 15% will be collected in the second month following sale. Assume that actual sales in November and December were $200,000 and $250,000 respectively. Jenny's has a policy of paying 50% of the direct material purchases (concentrate and bottles) in the month of purchase and the balance in the month after purchase. All direct labour costs are paid in the month incurred. All manufacturing overheads excluding non-cash overheads are paid 50% in the month incurred and the remaining the following month. Selling and admin expenses are paid in the same month in which they incur. Jenny's plans to upgrade some part of plant and machinery and is expecting to pay an advance payment of $100.000 in March 2022. The company also plans on paying a dividend of $60,000 in February 2022 . The business also wants to keep a cash balance of at least $30,000 on hand at the end of any month. If the projected cash balance is less than that, short term loan will be taken from the bank and will be used to make up the shortfall. Money will be borrowed at the beginning of the month. Repayments are made at the end of the month in which there is sufficient excess cash (over $30,000) to pay back the short-term loan. If after paying the short-term loan, the business still has cash over $30000 then it should be used for repayment of long term loan. Please ignore interest calculations on short term and long-term loans. The business also has outstanding payables of $17,279 related to purchases of apple concentrate, $12,146 related to bottles purchases and $20,917 related to manufacturing overheads as of 31 5' Dec 2021. Budgeted balance sheet of Jenny's Corporation is as follows: Jenny's Corporation Budgeted Balance Sheet as on 31 December 2021 Current Assets Cash at bank $50,000.00 Accounts Receivable $155,000.00 Inventory: Direct materials (1 330.39 ltr concentrate and 55,3725 bottles) $13,843.13 Finished Goods (26,910 bottles) $20,280.00 Total current assets $239,123.13 Fixed assets (net of accumulated depreciation $5,000,000.00 Total Assets $5,239,123.13 Current Liabilities Accounts payable $50,342.00 Short term loans $0.00 Total Current liabilities $50,342.00 Long Term loans $1,200,000.00 Total Liabilities $1,250,342.00 Owners' equity Share Capital $3,500,000.00 Add: Retained earnings $488,781.13 Total owners' equity $3,988,781.13 Total liabilities and owners' equity $5,239,123.13 The business wants to analySe the operations of the business by comparing the budget with actual results. Its main objective is to improve budgetary control of the business and to take corrective measures ifanysignificant variances arise. Jenny's aim is to keep the actual results in line with the original planning and key performance indicators set by management and is more effectively conducted on a continuing basis ratherthan being simply an annual and of period exercise. Budgets are prepared by the management accountant and his team as part of the ptanning phase. The business encourages accurate reporting that promotes accurate resource allocation and maximising profits. To achieve this, Jenny's has a policy of giving a fixed salary to the managers to avoid any potential conflicts between ptanning and control phases. Jenny's Corporation finalised the actual balances forthe half year ending 30 June 2022 and the accountant has provided the following information