This is a case on managerial accounting. I have been asked to:
1. Prepare a draft of the master budget, including a cash budget as well as budgeted financial statements.
I'm having some trouble. I hope you can provide me the solutions to this case as then it'll be easier for me to understand.
Please see attachment for case study. Thanks!
ACC4230 Accounting for Planning and Control IV
Case II Pialligo Stationery
Pialligo Stationery has changed from being a traditional stationery company to a producer of compact flash disks which it markets as a portable and reliable data storage solution. The Budget Director Jane Good is preparing to build its master budget for the coming year (2005). The budget will detail each quarter's activity and the activity for the year in total. The master budget will be based on the following information.
? Fourth quarter sales for 2004 are 55,000 units
? Projected unit sales by quarter for 2005 are as follows:
First quarter 65,000
Second quarter 70,000
Third quarter 75,000
Fourth quarter 90,000
? The selling price is $400 per unit. All sales are credit sales. Pialligo collects 85% of all sales within the quarter in which they are realised, the other 15% is collected in the following quarter. There are no bad debts.
? There is no beginning inventory of finished goods. Pialligo is planning the following ending finished goods for each quarter:
First quarter 13,000
Second quarter 15,000
Third quarter 20,000
Fourth quarter 10,000
? Each unit uses five hours of direct labour and three units of direct materials. Labour is paid at the rate of $25 per hour, and one unit of direct materials costs $25.
? There are 65,700 units of direct materials in beginning inventory as of January 1, 2005. At the end of each quarter Pialligo plans to have 30% of the direct materials needed for next quarter's unit sales. Pialligo will end the year with the same level of direct materials found in this years beginning inventory.
? Pialligo buys direct materials on account. Half the purchases are paid for in the quarter of acquisition, the remaining half are paid in the following quarter. Wages and salaries are paid on the 15th and 30th of each month.
? Fixed overheads total $1,000,000 each quarter. Of this total $350,000 represents depreciation. All other fixed expenses are paid in cash in the quarter incurred. The fixed overhead rate is computed by dividing the year's total fixed overhead by the year's expected actual units produced.
? Variable overhead is budgeted at $6 per direct labour hour. All variable overhead expenses are paid for in the quarter incurred.
? Fixed selling and administration expenses total $250,000 per quarter, including $50,000 depreciation.
? Variable selling and administrative expenses are budgeted at $10 per unit sold. All selling and administrative expenses are paid for in the quarter incurred.
? The Statement of financial position as of 31 December 2004 is as follows:
Direct materials inventory 5,256,000
Accounts receivable 3,300,000
,Plant and equipment 33,500,000
Total assets $2,306,000
Liabilities and shareholders' equity
Accounts payable $7,248,000*
Issued shares 27,000,000
Retained earnings 8,058,000
Total liabilities and shareholders' equity
* for purchase of direct materials only
? Pialligo will pay half yearly dividends of $600,000. At the end of the fourth quarter, $2,000,000 of equipment will be purchased.
The attached file gives the calculations for the income statement, cash budget and the balance sheet. Any other statements required can be prepared from ...
Then solution explains how to make a master budget and the related financial statements