Question

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 current 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 budget for the manager, who needs to present the budget and discuss the financial objectives with the shareholders tomorrow. 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 records, product information, manufacture schedule and supplier pricing list. Now, you realized 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 45,000 55,000 50,000 55,000 Marketing Expenses $35,000 $30,000 $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 currently 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 occurred. 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 $ 2.50 per labour hour Indirect Materials $ 0.75 per labour hour Wages and Salaries $ 6,000.00 Utilities $ 6,000.00 Insurance $ 5,000.00 Depreciation $ 6,000.00 Selling and Administrative Variable: Sales Commissions $ 1.00 Freight $ 0.50 Fixed: Wages and Salaries $62,000 Utilities $18,000 Insurance $3,200 Depreciation $6,000 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 $3,000,000 cash. Godox’s balance sheet at the end of the fourth quarter last year is shown below: Assets Cash $50,000 Uncollected Accounts receivable in Q4 this year: $250,000 Liabilities Accounts payable $85,000 An agreement with Bank of the West allows Godox to borrow 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

Answer 1

anwser

Budgeted Sales
S.No.	Quarter	2020 Q4	2021 Q1	2021 Q2	2021 Q3	2021 Q4
1	Sales in Unit	30000	35000	40000	65000	68000
2	Sell Price	20	20	20	20	20
3(1*2=3)	Total Sales	600000	700000	800000	1300000	1360000
	Estimated Production Budget
1	Quarter	2020 Q4	2021 Q1	2021 Q2	2021 Q3	2021 Q4	2022 Q1
2	Sales in Unit	30000	35000	40000	65000	68000	70000
3(20%*next Quarter Sale)	Desired Ending Inventory	7000	8000	13000	13600	14000
	Total required for the month	37000	43000	53000	78600	82000
	Less: Beginning FG inventory	30600	7000	8000	13000	13600	0
	Estimated Production Budget	30600	37000	43000	53000	78600
	Raw Material Budget
	Quarter	2020 Q4	2021 Q1	2021 Q2	2021 Q3	2021 Q4	2022 Q1
	Estimated Production Budget	30600	37000	43000	53000	78600	70000
	Desired ending raw material Inventory	11100	12900	15900	23580	21000
		41700	49900	58900	76580	99600
	Raw Material Needed Per unit	3	3	3	3
	Estimated Raw Material Inv.	125100	149700	176700	229740