Individual Case Study 2
Budgeting
After two years study at UCW, you finally graduate and start a job as Junior accountant
at Godox Inc. Your manager is responsible for the nationwide distribution of creator
design sets. Because of the new social media influence among cu
ent generation, the
company has grown rapidly, and the prompt growth forces the management team to
improve their efficiency and manage their production effectively.
You have just been given responsibility for all planning and budgeting of the entire lighting
set division. Today is your first day, you have just given an assignment to prepare master
udget for the manager, who needs to present the budget and discuss the financial
objectives with the shareholders tomo
ow. During your job interview, you clearly stated
that you gained managerial accounting knowledge and hand on experience during your
MBA study.
Your first assignment is to prepare a master budget for the next fiscal year, starting
January 1, 2021. Your co-work has left a pile of files on your desk including the past sale
ecords, product information, manufacture schedule and supplier pricing list. Now, you
ealized that you should have pay more attention during the lecture. Now, you don’t know
where to start. Fortunately, you remember that you still kept a copy spreadsheet of the
master budget template in your laptop from the accounting course.
Note: The company desires a minimum ending cash balance each quarter on $2,000,000.
The Godox products are sold to retailers for $125 each and the sales have been in
demand due to the Covid-19. However, the marketing department has been conservative
toward the end of the year due market saturation. The marketing department has just
sent you their forecasted quarter sales and marketing budget.
Quarter 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2
Sales in
Unit
30,000 35,000 40, XXXXXXXXXX,000
Marketing
Expenses
$35,000 $20,000 $20,000 $35,000 $35,000 $25,000
Ending finished goods inventories are supposed to be equal to 20% of the next quarter’s
sales in units. Godox cu
ently does its own assembly production in house. Each unit
consists of 2 LED panels and the cost of each is $15. Each unit needs 0.50 labour hour
from assemble to finish package. The hourly pay rate to the assembling workers is $15
per hour. The production manager also required desired direct material ending inventory
to 30% of the next quarter production.
Purchases are paid for in the following manner: 50% in the quarter of the purchase and
the remaining 50% paid in the quarter following the purchase. All sales to the distributors
are made on credit terms with no discount (for now), and payable within 45 days. The
Godox has determined that only 50% of sales are collected by the end of the quarter in
which the sale occu
ed. An additional 50% is collected in the quarter following the sale.
Bad debts have been negligible, supporting the credit terms as favorable.
Below is a display of the Godox division quarterly manufacture overhead and selling and
administrative expenses:
Manufacture Overhead
Indirect Labour $ XXXXXXXXXXper labour hour
Indirect Materials $ XXXXXXXXXXper labour hour
Wages and Salaries $ 6,000.00
Utilities $ 6,000.00
Insurance $ 5,000.00
Depreciation $ 5,000.00
Selling and Administrative
Variable:
Sales Commissions $ XXXXXXXXXX
Freight $ XXXXXXXXXX
Fixed:
Wages and Salaries $62,000
Utilities $18,000
Insurance $3,200
Depreciation $5,500
Miscellaneous $8,000
Labour, Manufacture Overhead, and Selling and Administrative expenses are all paid
during the quarter, in cash, with the exception of depreciation (of course). Godox will
make a purchase of a parcel of land during the second quarter of 2021 for $3,500,000
cash. Godox’s balance sheet at the end of the fourth quarter last year is shown below:
Assets
Cash $35,000
Uncollected Accounts receivable in Q4 this year: $250,000
Liabilities
Accounts payable $85,000
An agreement with Bank of the West allows Godox to bo
ow up to a total loan amount
of $3,500,000. The interest rate on these loans is 12% annually (pretty high considering
market rates) but the interest is not compounded, meaning this is simple interest only.
Required:
Prepare a master quarterly budget for 2021. Include the following budget schedules and
financial statements:
1) Master Budget
2) Cash Budget. Show the cash budget by quarter.
3) Budgeted Income statement by quarter and in total
Activity/Competencies Demonstrated % of Final Grade
Budgetary Planning (100%)
a. Sales Budget 5
b. Production Budget 10
c. Direct Materials Budget 10
d. Direct Labour 5
e. MOH 10
f. S&GA 10
g. Cost of Goods Sold 5
h. Budgeted Income Statement 10
i. Schedule of Collection 10
l. Schedule of Purchase 10
m. Cash Budget 15
Total 100