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Master Budget ACCT 310

This document contains financial information for Sail including budgets for revenue, production, direct materials purchases, direct labor, manufacturing overhead, ending inventories, support departments, cash receipts and disbursements, and short-term financing for the month of May. Key figures include budgeted revenue of $370,000, budgeted cost of goods sold of $200,386.92, and budgeted net income of $169,613.07. Administrative costs are high at 75% of that expense and direct labor hours and costs could be reduced to improve cash flow. A flexible budgeting approach that allows estimates at different sales volume levels would help Sail adjust to changing conditions.

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Yessica Leticia Sanchez
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113 views14 pages

Master Budget ACCT 310

This document contains financial information for Sail including budgets for revenue, production, direct materials purchases, direct labor, manufacturing overhead, ending inventories, support departments, cash receipts and disbursements, and short-term financing for the month of May. Key figures include budgeted revenue of $370,000, budgeted cost of goods sold of $200,386.92, and budgeted net income of $169,613.07. Administrative costs are high at 75% of that expense and direct labor hours and costs could be reduced to improve cash flow. A flexible budgeting approach that allows estimates at different sales volume levels would help Sail adjust to changing conditions.

Uploaded by

Yessica Leticia Sanchez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Units Cost

May Sales 5000 370000 74 each


Beg Inv 300 800 lbs
End Inv 500 1200 lbs
Pounds per unit 3
Hour Cost per unit Total Cost
DL 2 16
DM 0.6 3 per unit
Forecsted Overhead 2 20000 2000+2(#units)
Sales Commision 1
Administrative 15000

Depreciation 5000
New Purchase pay 1st month - 15000 150000 10 years Total 0.20% monthly Interest
Sales Last month 240000 15% 1st Month 82.50% 2nd Month
DM Purchased last month 6000 80% 1st month 20% 2nd month
135000
BALANCE SHEET
ASSETS
Cash $ 35,000.00
Accouts Receivable $ 314,500.00
Direct Materials $ 400.00
Work-In-Progress $ -
Finished goods inventory $ 4,650.00
Plant and Equipments (net) $ 245,000.00
Total Asstes $ 599,550.00
MASTER BUDGET
Revenue Budget
Budgeted sales unit in May 5000
Budgeted selling price per unit 74
Budgeted Revenue 370000

Production Budget
Budgeted Sales in units in May 5000
Desired ending FG inv 500
Total Units Required 5500
Less: Beg FG inv 300
Required Production (in units) 5200

DM Purchases Budget
Required Production (in units) 5200
DM required per unit (in lbs) 3
Total DM Required (in lbs) 15600
Less: Beg DM Inv. 800
Plus: Desired Ending DM Inv. 1200
Required DM Purchases (in lbs) 16000
Budgeted DM cost per pound 0.6
Budgeted cost of DM purchases 9600

DL Budget
Required Production (in units) 5200
DL Required per unit (in hours) 2
Total DL Hours Required 10400
Budgeted Cost per DL Hour 16
Budgeted Cost of DL 166400

Manafacturing Overhead Budget


Total DL Hours Required 10400
Budgeted Variable Overhead per DL hour 2
Total Budgeted Variable Overhead 20800
Budgeted Fixed Overhead 20000
Total Budgeted Overhead 40800
Liabilities and Equity
Accounts Payable $ 1,920.00
Common Stock $ 200,000.00
Retained Earnings $ 149,613.08
Total L & E $ 351,533.08

Budgeted Income Statement (May 31st)


Ending Inventories Budgets Sales Revenue
Budgted Cost of DM to be used 9360 Cost of Goods Sold
Budgeted Cost of DL 166400 Gross Margin
Total Budgeted Overhead 40800 Operating Costs
Total Budgeted Manafacturing Costs 216560 Administration 15000
Required Production (in units) 5200 Sales Comission: Variable 5000
Budgeted Manafacturing Cost per unit 41.646153846 Net Income
Budgeted Ending FG Inventory (in units) 500
Budgeted Cost of Ending FG Inv. 20823.076923 Cash Receipts Sales
From Current Month 370000
Cost of Goods Sold Budget From Prev. Month 240000
Beginning FG Inv. $ 4,650.00 Total Cash Receipts
Total Budgeted Manafacturing Costs 216560
Cost of Goods Available for Sale $ 221,210.00 Cash Disbursments
Less: Budgeted Ending FG Inv. 20823.076923 DM Purchases Purchases
Budgeted Cost of Goods Sold $ 200,386.92 From Current Month 9600
From Prev. Month 6000
Support Department Budget Total DM Payments
Administration 15000 Direct Labor
Sales Comission: Variable 5000 Overhead
Support Departments
Total Cash Disbursments

DM Usage Budget
Total DM required (in pounds) 15600
Budgeted DM cost per pound 0.6
Budgeted cost of DM usage 9360

Short-Term Financing Budget


Beginning Cash Balance -15000
Line of Credit
Borrowing: 150000
Repayments: 0
Interest on borrowing -270
Ending Cash Balance 134730

Beginning Line of Credit 150000


Ending Line of Credit 134730
370000
200386.9231
169613.0769

20000
149613.0769

Collection% Collection
15% 55500
82.50% 198000
253500

Collection% Collection
80% 7680
20% 1200
8880
166400
40800
20000
236080
C) When looking at the cash budgets, in the supporting costs you can see that administrative costs are up about 75% of that ex

D) According to the video, "Static & Flexible Budgets", static budgets are that when creating these budgets, it is static meaning

*See attached file*


sts are up about 75% of that expense. Reducing that cost would make room for less expenses incurred. Alongside that you can see that DL

se budgets, it is static meaning that the estimates are based on one sales activity/volume level, and if volume is changed the estimate is no
gside that you can see that DL hours costs are high. Reducing the DL hour costs by a few dollars would make a big difference since there is

e is changed the estimate is not useful for other volumes. This is supported in the book in Ch. 10 where they mention how a static budget
a big difference since there is a high amount of DL hours needed or reducing the amount of DL hours needed per unit. In order to increase

mention how a static budget can be biased when compared to other estimates with diffferent volumes and if the budgeted cash inflows a
d per unit. In order to increase cash inflow, Sail should find a way to encourage customers to pay more that 15% of their order in the first m

if the budgeted cash inflows and budgeted variable costs will be overstated if there is fewer units produces and vice versa. A method tha
15% of their order in the first month by providing a sort of incentive.

and vice versa. A method that would benefit Sail is to use the flexible budget approach in order to create estimate based on any sales vol
timate based on any sales volume level within a certain range. This would help so that you are able to adjust sales levels to see different e
t sales levels to see different estimates and compare them.

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