Create a multi-period master budget for manufacturing company using Microsoft Excel.
Complete an internet search, prepare a 12-month Master Budget for a manufacturing company of your choosing. Use this website to gather information on the components of a master budget: https://www.principlesofaccounting.com/chapter-21/…
Important components for consideration are: Sales budget; Production budget; Labour budget; Materials Budget; Selling and Administration budget; Factory Overhead Budget; Ending finished goods; Budgeted Financial Statements
Remember: As you are preparing the Master Budget, some information is NOT provided. You are required to decide or predict or forecast this information.
Guidelines
Task 1:
Provide a brief introduction for the company. The introduction should include:
-Name of company
-Location of company
-Name of owner
-Nature of the business.
-Type of product
-Fiscal period
Task 2:
a) Prepare a 12-month Master Budget showing each month’s activities – example January, February, March etc.
b) Include a column and a line Total and complete calculations of them by months and by Item line
c) Here are some considerations to include
-You must forecast your sales, purchases, direct labour and manufacturing overhead for each month and any other information as required.
-All sales are on accounts
-Expected collections are to be 50% in the month of the sale, 30 % in the first month following the sale, and 20% in the second month following the sale.
-Production the company will end each month with sufficient inventory to cover 20% of the following month’s sales. The new year started with 600 units in stock and plan to finish each year with 825 units in stock.
-The company pays 60% of direct materials purchased in cash in the month of purchase and the balance is due in the month following the purchase. It pays all other items above in the month incurred, except for selling and administrative expenses that include $1,000 of amortization per month.
-Cost of Goods Sold: 60% of the sale and desired ending inventory and 20% of next month’s sale
-Payment Pattern: 60% of purchases paid in the month of the purchase and 40% paid in the next month.
-Cash in Bank – January 2020 is $20,000.
-The company is expected to purchase equipment in March 2020 for $10,000.
-The dividend paid per quarter is $2,000.
-Selling and administration expenses per month are $ 40,000.
-Equipment balance for December 31, 2029 is $60,000. Accumulated depreciation – straight line; 5 years
-Common stock is $ 6,000
d) The company has access to a line of credit with the bank with the following terms – interest rate is 1% per month on the first day of the month; interest payable is calculated at 1% of the previous month’s outstanding balance. Borrowings in a given month are taken out at the beginning of the month.
e) The company wishes to maintain a minimum balance of $10,000 at all times.
f) Ensure that your total boxes correctly total up the rows in your columns.
