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Creating a Budget for a Company

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Scenario: Four Flags is a retail department store. The following cost-volume relationships were used in developing a flexible budget for the company for the current year:

Yearly Fixed Expenses Variable Expenses per Sales Dollar

Cost of merchandise sold 0 $0.600
Selling and promotion of expenses $210,000 0.082
Building occupancy expenses 186,000 0.022
Buying expenses 150,000 0.040
Delivery expenses 111,000 0.010
Credit and collection expenses 72,000 0.002
Administrative expenses 531,000 0.003
Totals $1,260,000 $0.759

Management expected to attain a sales level of $12 million during the current year. At the end of the year, the actual results achieved by the company were as follows:

Net sales $10,500,000
Cost of goods sold 6,180,000
Selling and promotion expenses 1,020,000
Building occupancy expenses 420,000
Buying expenses 594,000
Delivery expenses 183,000
Credit and collection expenses 90,000
Administrative expenses 564,000

A) Prepare a schedule comparing the actual results with the flexible budget amounts developed for the actual sales volume of $10,500,000. Organize your schedule as a partial multiple-step income statement, ending with operating income. Include separate columns for (1) flexible budget amounts, (2) actual amounts and (3) any amount over (under) budget. Use the cost-volume relationships given in the problem to compute the flexible budget amounts.
B) Write a statement evaluating the company's performance in relation to the plan reflected in the flexible budget.

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Develop a master budget in excel - Harrison Company

PROJECT ONE HARRISON COMPANY BUDGET INSTRUCTIONS

Below you will find the data for Project One. You will be completing budgets and schedules for the firm's first quarter of operations in the year 20XY. Do all schedules and budgets showing the three months of January-March and a Total column, except for the balance sheet. Your budgets and schedules should include the following:

1. Sales budget and Schedule of Sales Cash Collections (Note - for Sales, Production and Direct Materials budgets you may need projections for April and May.)
2. Production budget
3. Direct Materials budget and Schedule of Cash Disbursements for Materials
4. Ending Raw Materials Inventory budget
5. Direct Labor budget and Schedule of Cash Disbursements for Direct Labor
6. Total Fixed and Variable Manufacturing Overhead budget and Schedule of Cash Disbursements for Overhead, and Unit Costs for Overhead
7. Ending Finished Goods Inventory budget
8. Cost Goods Manufactured and Cost of Goods Sold budgets
9. Fixed and Variable Selling and Administrative Expense budget and Schedule of Cash Disbursements for S & A Expenses
10. Schedule of Other Collections and Disbursements not included in budgets or schedules above, or other data in additional data (see below)
11. Cash budget
I suggest you do one month at a time to figure financing needs, repayments of principal, interest and ending cash balance; if financing is needed see additional data on financing.
12. Budgeted Income Statement
You will need to go back and forth between the cash budget and income statement to figure interest expense.
13. Budgeted Balance Sheet for March 31, 20XY
Just show the balance sheet for the end of the quarter not for each month.

Additional Data:
PROJECT ONE HARRISON COMPANY BUDGET INSTRUCTIONS

Below you will find the data for Project One. You will be completing budgets and schedules for the firm's first quarter of operations in the year 20XY. Do all schedules and budgets showing the three months of January-March and a Total column, except for the balance sheet. Your budgets and schedules should include the following:

1. Sales budget and Schedule of Sales Cash Collections (Note - for Sales, Production and Direct Materials budgets you may need projections for April and May.)
2. Production budget
3. Direct Materials budget and Schedule of Cash Disbursements for Materials
4. Ending Raw Materials Inventory budget
5. Direct Labor budget and Schedule of Cash Disbursements for Direct Labor
6. Total Fixed and Variable Manufacturing Overhead budget and Schedule of Cash Disbursements for Overhead, and Unit Costs for Overhead
7. Ending Finished Goods Inventory budget
8. Cost Goods Manufactured and Cost of Goods Sold budgets
9. Fixed and Variable Selling and Administrative Expense budget and Schedule of Cash Disbursements for S & A Expenses
10. Schedule of Other Collections and Disbursements not included in budgets or schedules above, or other data in additional data (see below)
11. Cash budget
I suggest you do one month at a time to figure financing needs, repayments of principal, interest and ending cash balance; if financing is needed see additional data on financing.
12. Budgeted Income Statement
You will need to go back and forth between the cash budget and income statement to figure interest expense.
13. Budgeted Balance Sheet for March 31, 20XY
Just show the balance sheet for the end of the quarter not for each month.

Additional Data:

? The firm will sell fully depreciated equipment for a $5,000 (thus a gain of $5,000 as well as a cash flow); the equipment originally cost $50,000.
? The firm will acquire new equipment at the end of March for $100,000.00.
? The firm has a line of credit with the bank to finance deficits in cash flow. It can borrow in increments of $10,000. Borrowing is always made at the end of the month in which money is needed. It must pay any interest due at the end of each month. The bank accrues 12% annual interest (1% interest per month). Repayments of any loans are made at the end of the month and can be any amount for which the firm has excess cash; but the firm must maintain a minimum cash balance of $50,000.00.
? Note - interest and income tax expense will have to be computed each month, before moving to the next month. Interest will have to be computed in doing the cash budget, and taxes when doing the income statement.

? The firm will sell fully depreciated equipment for a $5,000 (thus a gain of $5,000 as well as a cash flow); the equipment originally cost $50,000.
? The firm will acquire new equipment at the end of March for $100,000.00.
? The firm has a line of credit with the bank to finance deficits in cash flow. It can borrow in increments of $10,000. Borrowing is always made at the end of the month in which money is needed. It must pay any interest due at the end of each month. The bank accrues 12% annual interest (1% interest per month). Repayments of any loans are made at the end of the month and can be any amount for which the firm has excess cash; but the firm must maintain a minimum cash balance of $50,000.00.
? Note - interest and income tax expense will have to be computed each month, before moving to the next month. Interest will have to be computed in doing the cash budget, and taxes when doing the income statement.

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