Group Master Budget Project
Comprehensive Budgeting Problem
Summer 2014
The Irish Beverage Company, Inc.
Comprehensive Budgeting Problem
The assignment for this problem is to prepare the Irish Beverage Company, Inc.’s,
comprehensive budget for September 2013 and October 2013. Your budget MUST be
completed in EXCEL. The format of the Proforma Income Statement must be a
contribution margin income statement. NOTE: You MUST use formulas to link the
budgets and values within the budgets where possible. Failure to exploit Excel in linking
and using formulas will result in a zero for this assignment.
The Irish Beverage Company, Inc. sells a wide variety of beverages and snack foods.
The Irish Beverage Co., Inc. Sales Forecast for Sept. to Nov., 2013
September
October
November
Sales Revenue (all Sales are
$780,000
$820,000
$850,000
on Credit)
Irish Beverage Company, Inc
Balance Sheet
As of August 31, 2013
Assets:
Cash
Accounts receivable
Inventory
Prepaid Insurance
Current assets
Property, Plant & Equipment
Land
Plant & Equipment
Accumulated depreciation
Total assets
$ 30,640
675,000
54,600
33,000
$ 793,240
Liabilities:
Accounts payable
Sales commissions payable
Advertising Expense Payable
Income taxes payable
Dividends payable
Current liabilities
Long-term debt
100,000
400,000
(100,000)
$1,193,240
Stockholders' equity
Common stock
Retained earnings
Total SE & Liabilities
© Copyright of Michael J. Meyer 2013. Use by permission only.
$
__
__
$
105,420
75,000
87,500
52,000
0
319,920
350,000
$ 100,000
423,320
$1,193,240
Policies and Plans used by The Watter’s Beverage Company, Inc., in budgeting
1. All Sales are on Credit. Sales are collected 10% in the month of sale and 90% in
the month following sale.
2. Cost of goods sold is budgeted to be 62% of sales.
3. The Irish Beverage Company, Inc. plans to end each month with inventory levels
equal to 10% of the next month’s cost of sales.
4. The company pays for 80% of the purchases of merchandise in the month of the
purchase and 20% in the following month.
5. The Irish Beverage Company, Inc. pays a sales commission of 10% on all sales.
The selling commission is paid in the month after the salesmen earn the
commission.
6. The company believes that advertising expense is a mixed cost. Upon reviewing
their past two years of financial data, they believe that advertising expense (y
variable) is related to sales (x variable). They use the high-low method to
determine the variable rate and fixed portion of advertising expense. [Calculate
the high-low method by hand, not in Excel]
Sales
Advertising Expense
High Month 900,000
95,000
Low Month 300,000
65,000
7. The company pays all of its advertising expense in the month AFTER it is
incurred.
8. The Irish Beverage Company, Inc. estimates its general and administrative
expenses using a flexible budget formula: Other general & administrative
expense =6% of budgeted sales plus $50,000. The general and administrative
expenses budgeted with this formula are paid in the month in which they are
incurred.
9. Depreciation is $18,000 per month on the property, plant and equipment owned
on August 31, 2013 for the period of this budget.
10. On July 31, 2013, the company purchased and paid cash of $36,000 for a twelvemonth policy covering the period August 1, 2013 to July 31, 2014 and recorded
the cost in Prepaid Insurance.
11. On September 15, 2013, the company purchased Land for $175,000, paying cash.
© Copyright of Michael J. Meyer 2013. Use by permission only.
12. The Irish Beverage Company, Inc. records interest expense and accrues interest
payable at the rate of 1% per month (simple interest) based on the beginning
balance of Long-Term Debt for that month. The Irish Beverage Company, Inc.
will pay interest in the month it is incurred.
13. The Irish Beverage Company must maintain a minimum cash balance of $30,000.
If it must borrow any funds, it must borrow in $1,000 increments. Any excess
cash will be used to pay down long-term debt. The company may either borrow
funds or repay funds, but not both in the same month.
14. The Irish Beverage Company, Inc. records income tax expense and accrues
income tax payable monthly using a 25% estimated tax rate. Income taxes are
paid in the month AFTER they are incurred.
15. The company will declare a cash dividend on September 20, 2013 for $50,000.
The cash dividend will be paid on October 15, 2013. No other dividends were
declared or paid.
Once you have completed the budget, determine the following balances. On the
template, make sure you link your answer to the appropriate cell. Failure to link to
the appropriate cell will result in zero credit for that answer. Failure to complete
this part of the assignment will result in a ZERO for the entire assignment,
regardless if you completed the six budgets.
1. Total Cash Receipts for September and October
2. Total Inventory Purchases for September and October
3. Total Cash Payments for Inventory Purchases for September and October
4. Total Variable Selling & Administrative Costs for September and October
5. Total Fixed Selling & Administrative Costs for September and October
6. Total Cash Payments for September and October
7. Total Cash Surplus (Deficit) for September and October
8. Total New Borrowing (Repayments) for September and October
9. The Contribution Margin for September and October
10. Total Interest Expense for September and October
11. Pre-tax Income for September and October
12. Income tax expense for September and October
13. Ending Balance of Accounts Receivable for September and October
14. Ending Balance of Inventory for September and October
15. Ending Balance of Prepaid Insurance for September and October
16. Ending Balance of Accumulated Depreciation for September and October
17. Ending Balance of Accounts Payable for September and October
18. Ending Balance of Commissions Payable for September and October
19. Ending Balance of Long-Term Debt for September and October
20. Ending Balance of Retained Earnings for September and October
© Copyright of Michael J. Meyer 2013. Use by permission only.
INSTRUCTIONS:
1. Using the EXCEL template for this assignment, complete the Sales Budget,
Inventory Purchases Budget, Selling & Administrative Expense Budget, Cash
Budget, Proforma Income Statement, and Proforma Balance Sheet on the
appropriate sheets (each budget has its own sheet) for both September and
October. Note that the first five budget sheets on the template are blank, thus
requiring students to complete the budget from scratch. The balance sheet is
already set up.
2. One all budgets are created, students must find link/calculate each of the 20
balances for both months of the budget. Points are awarded for linking from your
budget to determine the 20 balances.
Rules regarding the completion of the Group Project #3:
1)
You MUST use the Excel Template provided for this project. The project is available at the
ACCT 20200 website at www.acct20200.com (you will need to register for the site in order to
access the template).
2)
You must use Microsoft EXCEL and not any other spreadsheet program. Failure to use MS
Excel will result in a zero grade.
3)
You MUST sign the HONOR CODE PLEDGE or you will automatically receive a zero--NO
EXCEPTIONS!
4)
You MUST use formulas and links whenever possible. If you simply type in your solutions
rather than use formulas, you will receive a zero.
5)
You MUST name your Excel file “Last Name First Name (all group members) Class time
Group Project 3.” Failure to name your Excel file correctly will result in a zero--NO
EXCEPTIONS.
6)
Your Instructor will inform you how to they wish to receive your project (either in electronic
form or paper form). Failure to follow YOUR INSTRUCTOR’S INSTRUCTIONS will
result in a grade of zero for the assignment (note that each instructor may have his/her own
required method of turning in the assignment).
© Copyright of Michael J. Meyer 2013. Use by permission only.