Question

Course Project: Master Budget

Using Excel

Milo-Freeze Company

Description

This course contains a Course Project, where you will be required to submit the final completed project at the end of Week 7. Using the budgeting assumptions provided for Milo-Freeze Company, you will prepare a sales budget, a production budget, a direct materials budget and a schedule of expected cash payments for purchases of materials. An Excel template will be provided and required to use to complete and submit.

Budgeting Assumptions

Milo-Freeze Company manufactures and sells a product that has seasonal variations in demand, with peak sales coming in the third quarter. The following information concerns operations for Year 2- the coming year- and for the first two quarters of Year 3:

1. The company’s single product sells for $10 per unit. Budgeted sales in units for the next six quarters are as follows:

	Year 2 Quarter				Year 3 Quarter
	1	2	3	4	1	2
Budgeted unit sales	40,000	60,000	100,000	50,000	70,000	80,000

2. Sales are collected in the following pattern: 75% in the quarter the sales are made, and the remaining 25% in the following quarter. On January 1, Year 2, the company’s balance sheet showed $65,000 in accounts receivable, all of which will be collected by the end of first quarter. Bad debts are negligible and can be ignored.
3. The company desires an ending inventory of finished units on hand at the end of each quarter equal to 30% of the budgeted sales for the next quarter. On December 31, Year 1, the company had 12,000 units on hand.

4. Six pounds of raw materials are required to complete one unit of product. The company requires an ending inventory of raw materials on hand at the end of each quarter equal to 10% of the production needs of the following quarter. On December 31, Year 1, the company had 23,000 pounds of raw materials on hand.

5. The raw material costs $0.80 per pound. Purchases of raw material are paid for in the following pattern: 60% paid in the quarter the purchases are made, and the remaining 40% paid in the following quarter. On January 1, Year 2, the company’s balance sheet showed $81,500 in accounts payable for raw material purchases, all of which will be paid for in the first quarter of the year.

Overall Requirements

Prepare the following budgets and schedules for the year, showing both quarterly and total figures:

1. A sales budget.
2. A cash collections budget.
3. A production budget.
4. A direct materials budget.
5. Cash payments for purchases of materials schedule.

Your final project should be completed and submitted as an Excel file.

Grade Information

The entire project will be graded by the instructor at the end of the final submission in Week 7, and one grade will be assigned for the entire project. The project will count for 20% of your overall course grade.

Category	Points	%	Description
Sales Budget	40	20.0%	A quality sales budget report will have correct calculations of sales. Supporting calculations must be shown, either as a formula, or as text typed into a different cell.
Cash Collections Budget	40	20.0%	A quality cash collections report will have correct calculations of cash collected on credit sales. Supporting calculations must be shown, either as a formula, or as text typed into a different cell.
Production Budget	40	20.0%	A quality production report will have correct calculations of how many units are required to produce. Supporting calculations must be shown, either as a formula, or as text typed into a different cell.
Direct Materials Budget	40	20.0%	A quality direct materials report will have correct calculations of the materials to be purchased. Supporting calculations must be shown, either as a formula, or as text typed into a different cell.
Cash Payments for Purchases	40	20.0%	A quality cash payments report will have correct calculations representing the cash disbursements for purchases. Supporting calculations must be shown, either as a formula, or as text typed into a different cell.
Total	200	100.0%	A quality report will meet or exceed all of the above requirements.

Answer 1

Milo-Freeze Company
Sales Budget						Selling Price = $10 per unit
	Year 2 Quarter					Year 3 Quarter			Remarks
	1	2	3	4	Total	1	2	Total
Budgeted Unit Sales	40000	60000	100000	50000	250000	70000	80000	150000	Given in the Question
Budgeted Dollar value in Sales	$ 400,000.00	$ 600,000.00	$ 1,000,000.00	$ 500,000.00	############	$ 700,000.00	$ 800,000.00	$1,500,000.00	The Sales value is arrived at by multiplying the Budget Sales unit by the Selling Price Per Unit.
Milo-Freeze Company
Cash Collection Budget
	Year 2 Quarter					Year 3 Quarter			Remarks
	1	2	3	4	Total	1	2	Total
Cash Collected from Accounts Receivable	$   65,000.00	$ 100,000.00	$    150,000.00	$ 250,000.00	$ 565,000.00	$ 125,000.00	$ 175,000.00	$1,115,000.00	For Qtr 1 the closing balance of accounts receivable is given. For remaining Quarters this is equal to 25% of the Projected Sales of the Previous Quarter
Cash Collected from Quarter Sales	$ 300,000.00	$ 450,000.00	$    750,000.00	$ 375,000.00	############	$ 525,000.00	$ 600,000.00	$3,375,000.00	This is 75% of the Projected Sales for the given Quarter. The Information states to Ingnore the Baddebts.
Total Cash Colleced	$ 365,000.00	$ 550,000.00	$    900,000.00	$ 625,000.00	############	$ 650,000.00	$ 775,000.00	$4,490,000.00
Milo-Freeze Company
Production Budget
	Year 2 Quarter					Year 3 Quarter			Remarks
	1	2	3	4	Total	1	2	Total
Budgeted Unit Sales	40000	60000	100000	50000	250000	70000	80000	150000	Given in the Question
Planned Ending Units of Inventory	18000	30000	15000	21000	84000	24000		24000	This equal to 30% of the Projected Sales of the next Quarter
Total Production	58000	90000	115000	71000	334000	94000	80000	174000	Sum total of Budgeted Sales Unit and Planned Ending Units of Inventory.
Beginning Inventory of Finished Goods	12000	18000	30000	15000	75000	21000	24000	45000	Closing Inventory of Last year is taken as the Opening Inventory of Qyarter 1. And the Closing Inventory of the Previous Quarter is taken as the beginning Inventory of Finished Goods.
Units to be Produced	46000	72000	85000	56000	259000	73000	56000	129000
Milo-Freeze Company
Direct Material Budget
	Year 2 Quarter					Year 3 Quarter			Remarks
	1	2	3	4	Total	1	2	Total
Units to be Produced (from Production Budget)	46000	72000	85000	56000	259000	73000	56000	129000	Values Taken from Production Budget
Direct Material Per Unit (lbs)	6	6	6	6		6	6		Information Given in Question
Total Direct Material needed for Production (lbs)	276000	432000	510000	336000	1554000	438000	336000	774000	Units to be Produced multiply by direct material required per Unit for production.
Add: Desired ending Direct Material (lbs)	43200	51000	33600	43800	171600	33600		33600	10% of the Production Needs of the Next Quarter.
Less: Beginning Direct Material (lbs)	23000	43200	51000	33600	150800	43800	33600	77400	Closing Inventory of Last year is taken as the Beginning Inventory for Quarter 1. For the remaining, the closing units for previous quarter serves as the opening units for the following Quarter.
Direct Material Purchases (lbs)	296200	439800	492600	346200	1574800	427800	302400	730200	(Total Direct Material neede for Production) + (Desired ending Direct Material) - (Beginning Direct Material)
Cost per Unit	$          0.80	$          0.80	$             0.80	$          0.80		$          0.80	$          0.80		Information Given in Question
Cost of Direct Material Purchases	$ 236,960.00	$ 351,840.00	$    394,080.00	$ 276,960.00	############	$ 342,240.00	$ 241,920.00	$   584,160.00	Direct Material Purchases multiply by Material Cost per Unit.
Milo-Freeze Company
Cash Payments for Purchase of Material schedule
	Year 2 Quarter					Year 3 Quarter			Remarks
	1	2	3	4	Total	1	2	Total
Cost of Direct Material Purchases	$ 236,960.00	$ 351,840.00	$    394,080.00	$ 276,960.00	############	$ 342,240.00	$ 241,920.00	$   584,160.00	Values from Direct Material Budget
Cash Payments for the Direct Materials purchased for the Quarter	$ 142,176.00	$ 211,104.00	$    236,448.00	$ 166,176.00	$ 755,904.00	$ 205,344.00	$ 145,152.00	$   350,496.00	60% of the Value of Direct Material Purchases for the Quarter.
Cash Payments for the Direct Materials purchased for the Previous Quarter	$   81,500.00	$   94,784.00	$    140,736.00	$ 157,632.00	$ 474,652.00	$   66,470.40	$ 136,896.00	$   203,366.40	40% of the Value of Direct Material Purchases for the Previous Quarter. Accounts Payable for the Beginning of Quarter 1 is given in the Question.
Total Cash Payments for Purchase of Material	$ 223,676.00	$ 305,888.00	$    377,184.00	$ 323,808.00	############	$ 271,814.40	$ 282,048.00	$   553,862.40	Total of Cash Payments