Master Budget Assignment Solution VA

Data for Budget Assignment: Master Budget Case for
Version v(A.0)
fiscal year end
31-Dec
ToyWorks Ltd.
For the year ended December 31, 2008

estimated sales:
2007 (in units)
2008 (in units)
2009 (in units)
price per unit
$ 10.00
cost per unit previous year
cost per unit previous year
Sales pattern
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
475,000
500,000
500,000
$
$
7.30 Absorption Costing

6.0520 Variable Costing
1%
5%
1%
10%
1%
1%
2%
2%
2%
15%
20%
40%
100%
desired ending inventory (finished goods)
25% of next month's sales
rental cost--Admn & Selling cost

Sep
Oct
Nov
Dec
$
$
$
$
20,000
20,000
20,000
20,000
Raw material: SSA

required for each unit of product
cost per kilogram
desired ending inventory (raw materials)
Accounts payable payment pattern:
Beginning Accounts Payable:

November Sales
December sales
5 kg
0.45
40%
20%
45%
35%
70,000
150,000
next month's production needs

in the month of purchase
in the month following the purchase
in the 2nd month following the purchase
Nov
70,000
37,500
107,500
17,500
90,000
Dec
150,000
1,250
151,250
37,500
113,750
Jan
5,000
6,250
11,250
1,250
10,000
SAA per unit

Total raw material needed
desired ending inventory
total required
Less: beginning inventory
RM to be purchased
cost per unit
$
Cost of purchases
$
5
450,000
227,500
677,500
180,000
497,500
0.45
223,875
5
50,000
$
$
5
568,750
20,000
588,750
227,500
361,250
0.45
162,563
Nov
Dec
Jan
Feb
44,775
100,744
78,356
$
$
$
$
32,513
73,153
56,897
208,406
Sales in units
Desired ending inventory
Total required
Less: beginning inventory
Production required
Time in production
rate of pay
paid
paid
payable
payable
18 minutes or
9.00 per hour
per unit variable manufacturing:

Utilities
Indirect materials
Plant maintenance
Environmental fee
Other
fixed manufacturing:
training & devel
property/bus tax
supervisor's salary
amortization
insurance
other
Less: one time pay
cash disbursements
Selling and Admin
$
$
$
$
$
$
$
$
$
Feb
25,000
0.30 hour
0.60
0.20
0.30
0.14
0.06
1.30
$
$
$
$
$
$
$
$
$
43,200
39,000
149,400
178,800
96,000
117,600
624,000
96,000 insurance
39,000 Property tax
$
$
178,800
349,200 or
Prepaid (beg)
Purchased
Used
Ending Bal
$
$
$
$
$
8,000
3,200
3,300
14,900
29,100
Insurance
64,000
96,000
96,000
64,000
Tax
19,200
39,600
39,000
19,800
per month
per month from Jan to Jun
per month from Jul to Dec
per month
per month
Lowest level of sales

Highest level of sales
Per unit
fixed
375,000 total operating expenses

750,000 total operating expenses
$
$
Sales collection pattern

current month
following month
2 months after
uncollectible
Nov
Dec
Jan
Feb
Total sales
collected
collected
receivable
receivable
total receivable
Nov
$
$
$
$
$
$
Fixed asset purchase

Nov
payment
Dec
payment
Minimum bank balance

rate of interest
borrowing blocks
Opening balance sheet

Cash
Accounts receivable
Inventory-raw materials
44,580 per month
55.0%
35.0%
9.5%
0.5%
Monthly tax installments

outstanding from previous year
Income tax rate
Payment of dividends:
Mar
Jun
Sep
Dec
0.65
534,960 or
$
778,710
$ 1,022,460
$
$
$
$
$
$
$
700,000
385,000
245,000
66,500
Dec
$
1,500,000
$
$
$
$
825,000
525,000
142,500
734,000
5,000
21,500 to be paid in
25%
204,300
40% $
60% $
April
81,720
122,580
50,000
50,000
50,000
50,000
200,000
20,000
6% or
1,000
0.50% per month
83,365
734,000
9,000
Inventory-finished goods
Prepaid insurance
Prepaid tax
Capital assets (net)
total
Accounts payable
Income tax payable
Capital stock
Retained earnings
9,125
64,000
19,200
724,000
1,642,690
$
$
$
$
$
208,406
21,500
1,000,000
412,784
1,642,690
d December 31, 2008
ToyWorks Ltd.
Sales Budget
Jan
1%
5,000
Percent of Annual Sales

Expected sales in units
Feb
5%
25,000
Mar
1%
5,000
Apr
10%
50,000
May
1%
5,000
Jun
1%
5,000
Jul
2%
10,000
Aug
2%
10,000
Sep
2%
10,000
Oct
15%
75,000
Nov
20%
100,000
$
Dec
40%
200,000
Year
100%
500,000
Selling price per unit
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
Total Budgeted Sales
50,000
250,000
50,000
500,000
50,000
50,000
100,000
100,000
100,000
750,000
$ 1,000,000
2,000,000
5,000,000
Aug
55,000
35,000
Sep
55,000
35,000
Oct
412,500
35,000
Nov
550,000
262,500
Dec
1,100,000
350,000
94,750
99,500
457,000
822,000
1,521,250
ToyWorks Ltd.
Schedule of Expected Cash Collections
Current month sales 55%

Prior month's sales 35%
Jan
27,500
525,000
619,000
Two months prior sales 9.5%

Total cash collections
66,500
Feb
137,500
17,500
Mar
27,500
87,500
119,750
142,500
$
297,500
Apr
275,000
17,500
316,250
4,750
May
27,500
175,000
207,250
23,750
Jun
27,500
17,500
92,500
4,750
Jul
55,000
17,500
77,250
47,500
4,750
4,750
9,500
9,500
9,500
Year
2,750,000
1,575,000
71,250
399,000
$
4,724,000
Nov
Dec
95000
700000
190000
985000
ToyWorks Ltd.
Schedule of Expected Cash Collections
AR from November
AR from December
Jan
Feb
Mar
Apr
May
June
July
August
Sept
Oct
Nov
Dec
Jan
66,500
525,000
27,500
619,000
Feb
Mar
142,500
17,500
137,500
297,500
Apr
4,750
87,500
27,500
###
119,750
May
23,750
17,500
275,000
316,250
Jun
4,750
175,000
27,500
207,250
Jul
47,500
17,500
27,500
92,500
Aug
4,750
17,500
55,000
77,250
Sep
4,750
35,000
55,000
###
94,750
Oct
9,500
35,000
55,000
99,500
Nov
9,500
35,000
412,500
457,000
Dec
9,500
262,500
550,000
822,000
71,250
350,000
Year
66,500
667,500
49,750
248,750
49,750
497,500
49,750
49,750
99,500
99,500
99,500
746,250
900,000
1,100,000
1,100,000
1,521,250
4,724,000
ToyWorks Ltd.
Production Budget
Jan
Budgeted sales in units
Feb
5,000
Add desired ending inventory of

finished goods
Total needs
Less beginning inventory of finished
goods
Required production
Mar
25,000
5,000
6,250
1,250
11,250
26,250
Apr
May
Jun
50,000
5,000
5,000
12,500
1,250
1,250
2,500
17,500
51,250
6,250
7,500
Jul
Aug
10,000
Sep
Oct
75,000
Nov
Dec
Year
100,000
200,000
500,000
10,000
10,000
2,500
2,500
18,750
25,000
50,000
1,250
1,250
12,500
12,500
28,750
100,000
150,000
201,250
501,250
1,250
6,250
1,250
12,500
1,250
1,250
2,500
2,500
2,500
18,750
25,000
50,000
1,250
10,000
20,000
16,250
38,750
5,000
6,250
10,000
10,000
26,250
81,250
125,000
151,250
500,000
Nov
Dec
Year
125,000
151,250
ToyWorks Ltd.
Manufacturing Overhead Budget
Jan
Production in Units
Feb
10,000
Mar
20,000
Apr
16,250
May
38,750
Jun
5,000
Jul
6,250
Aug
10,000
Sep
10,000
Oct
26,250
81,250
500,000
Variable overhead rate per unit
1.30
1.30
1.30
1.30
1.30
1.30
1.30
1.30
1.30
1.30
1.30
1.30
1.30
Variable manufacturing overhead
13,000
26,000
21,125
50,375
6,500
8,125
13,000
13,000
34,125
105,625
162,500
196,625
650,000
Fixed manufacturing overhead:

Training and development
3,600
3,600
3,600
3,600
3,600
3,600
3,600
3,600
3,600
3,600
3,600
3,600
Property and business taxes
3,200
3,200
3,200
3,200
3,200
3,200
3,300
3,300
3,300
3,300
3,300
3,300
39,000
Supervisor Salaries
12,450
12,450
12,450
12,450
12,450
12,450
12,450
12,450
12,450
12,450
12,450
12,450
149,400
Amortization on equipment
14,900
14,900
14,900
14,900
14,900
14,900
14,900
14,900
14,900
14,900
14,900
14,900
178,800
8,000
8,000
8,000
8,000
8,000
8,000
8,000
8,000
8,000
8,000
8,000
8,000
96,000
Insurance
Other
Total fixed manufacturing OH
Total manufacturing OH
Less prepaid property tax
Less prepaid insurance
Less amortization
Cash disbursements for
manufacturing OH
43,200
9,800
9,800
9,800
9,800
9,800
9,800
9,800
9,800
9,800
9,800
9,800
9,800
117,600
51,950
64,950
3,200
8,000
51,950
77,950
3,200
8,000
51,950
73,075
3,200
8,000
51,950
102,325
3,200
8,000
51,950
58,450
3,200
8,000
51,950
60,075
3,200
8,000
52,050
65,050
3,300
8,000
52,050
65,050
3,300
8,000
52,050
86,175
3,300
8,000
52,050
157,675
3,300
8,000
52,050
214,550
3,300
8,000
52,050
248,675
3,300
8,000
624,000
1,274,000
39,000
96,000
14,900
14,900
14,900
14,900
14,900
14,900
14,900
14,900
14,900
14,900
14,900
14,900
178,800
38,850
51,850
46,975
76,225
32,350
33,975
38,850
38,850
59,975
131,475
188,350
222,475
960,200
ToyWorks Ltd.
Direct Materials Budget - SAA (kilograms)
Jan
Units to be produced
Nov
Dec
10,000
20,000
16,250
38,750
5,000
6,250
10,000
10,000
26,250
81,250
125,000
151,250
50,000
100,000
81,250
193,750
25,000
31,250
50,000
50,000
131,250
406,250
625,000
756,250
2,500,000
Raw Materials needed per unit

Production needs
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Year
500,000
Add desired ending inventory
40,000
32,500
77,500
10,000
12,500
20,000
20,000
52,500
162,500
250,000
302,500
20,000
20,000
Total needs
90,000
132,500
158,750
203,750
37,500
51,250
70,000
102,500
293,750
656,250
927,500
776,250
2,520,000
Less beginning inventory
20,000
40,000
32,500
77,500
10,000
12,500
20,000
20,000
52,500
162,500
250,000
302,500
20,000
Raw materials to be purchased
70,000
92,500
126,250
126,250
27,500
38,750
50,000
82,500
241,250
493,750
677,500
473,750
2,500,000
Cost of SAA per kilogram
0.45
0.45
0.45
0.45
0.45
0.45
0.45
0.45
0.45
0.45
0.45
0.45
Total cost of purchases of SAA
31,500
41,625
56,813
56,813
12,375
17,438
22,500
37,125
108,563
222,188
304,875
213,188
0.45
$ 1,125,000
ToyWorks Ltd.
Schedule of Expected Cash Disbursement for Purchases of Raw Material SAA
Jan
Current month's purchases 20%
Prior month's purchases 45%

Two month's prior purchases 35%
Total cash disbursements for
purchases of raw material
Feb
6,300
Mar
8,325
Apr
11,363
May
11,363
Jun
2,475
Jul
3,488
Aug
4,500
Sep
7,425
Oct
21,713
Nov
44,438
Dec
60,975
42,638
Year
$
225,000
78,356
14,175
18,731
25,566
25,566
5,569
7,847
10,125
16,706
48,853
99,984
137,194
488,672
73,153
56,897
11,025
14,569
19,884
19,884
4,331
6,103
7,875
12,994
37,997
77,766
342,478
257,597
$ 1,056,150
157,809
79,397
41,119
51,497
47,925
28,941
16,678
23,653
46,294
106,284
198,956
ToyWorks Ltd.
Schedule of Expected Cash Disbursement for Purchases of Raw Material SAA
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Year
A/P from November
78,356
A/P from December
73,153
56,897
6,300
14,175
11,025
8,325
18,731
14,569
11,363
25,566
19,884
11,363
25,566
19,884
2,475
5,569
4,331
3,488
7,847
6,103
4,500
10,125
7,875
7,425
16,706
12,994
21,713
48,853
37,997
44,438
99,984
77,766
222,188
60,975
137,194
198,169
Jan
Feb
78,356
Mar
130,050
Apr
31,500
May
41,625
Jun
56,813
Jul
56,813
Aug
12,375
Sep
17,438
Oct
22,500
Nov
Dec
157,809
208,406
79,397
41,119
51,497
47,925
28,941
16,678
###
23,653
46,294
106,284
37,125
108,563
42,638
42,638
198,956
257,597
1,056,150
106,706
95,934
74,616
277,256
ToyWorks Ltd.
Direct Labour Budget
Jan
Units to be Produced
Direct Labour time per unit (hours)
Total hours of direct labour time
needed
Nov
Dec
10,000
Feb
20,000
Mar
16,250
Apr
38,750
May
5,000
Jun
6,250
Jul
10,000
Aug
10,000
Sep
26,250
Oct
81,250
125,000
151,250
Year
500,000
0.30
0.30
0.30
0.30
0.30
0.30
0.30
0.30
0.30
0.30
0.30
0.30
0.30
3,000
6,000
4,875
11,625
1,500
1,875
3,000
3,000
7,875
24,375
37,500
45,375
150,000
Direct Labour cost per hour
9.00
9.00
9.00
9.00
9.00
9.00
9.00
9.00
9.00
9.00
9.00
9.00
9.00
Total direct labour cost
27,000
54,000
43,875
104,625
13,500
16,875
27,000
27,000
70,875
219,375
337,500
408,375
1,350,000
ToyWorks Ltd.
Selling and Administrative Expense Budget
Jan
Budgeted sales in units
Feb
5,000
Mar
25,000
Apr
5,000
May
50,000
Jun
5,000
Jul
5,000
Aug
10,000
Sep
10,000
Oct
10,000
75,000
Nov
Dec
100,000
200,000
Year
500,000
Variable selling and administrative

expense per unit
0.65
0.65
0.65
0.65
0.65
0.65
0.65
0.65
0.65
0.65
0.65
0.65
0.65
Variable expenses
3,250
16,250
3,250
32,500
3,250
3,250
6,500
6,500
6,500
48,750
65,000
130,000
325,000
Fixed selling and administrative

expenses
Bad Debts
Warehouse rental
Total budgeted selling and
administrative expenses
44,580
44,580
44,580
44,580
44,580
44,580
44,580
44,580
44,580
44,580
44,580
44,580
534,960
250
1,250
250
2,500
250
250
500
500
500
3,750
5,000
10,000
25,000
20,000
20,000
20,000
20,000
80,000
48,080
62,080
48,080
79,580
48,080
48,080
51,580
51,580
71,580
117,080
134,580
204,580
964,960
939,960
Less: non-cash items

Bad debt expense
Variable rate per unit:

High
Low
Change
250
1,250
250
2,500
250
250
500
500
500
3,750
5,000
10,000
47,830
60,830
47,830
77,080
47,830
47,830
51,080
51,080
71,080
113,330
129,580
194,580
Total Costs
Units
$ 1,022,460
750,000
778,710
375,000
243,750
375,000
Variable rate per unit
0.6500
Fixed expenses per year
534,960
25,000
ToyWorks Ltd.
Ending Finished Goods Inventory Budget (Absorption Costing)
Item
Production cost per unit:
Direct materials:
Direct Labour
Manufacturing overhead
Quantity
Cost/unit
Total
5.00
0.30
kg.
hr
0.45
9.00
2.25
2.70
1.00
unit
2.55
2.55
Unit product cost
7.50
Budgeted finished goods inventory:

Ending finished goods inventory in units
1,250
Unit product costs (see above)
7.50
Ending finished goods inventory in dollars
9,373
Budgeted cost of goods sold:

Beginning finished goods inventory
Plus cost of goods manufactured
9,125
3,749,000
Less: ending inventory
9,373
Budgeted cost of goods sold in dollars:
3,748,753
ToyWorks Ltd.
Ending Finished Goods Inventory Budget (Variable Costing)
Item
Production cost per unit:
Direct materials:
Direct Labour
Quantity
Cost/unit
Total
5.00
0.30
kg.
hr
0.45
9.00
2.25
2.70
1.00
unit
1.30
1.30
Unit product cost
6.25
Budgeted finished goods inventory:

Ending finished goods inventory in units
1,250
Unit product costs (see above)
6.25
Ending finished goods inventory in dollars
7,813
Budgeted cost of goods sold:

Beginning finished goods inventory
Plus cost of goods manufactured
Less: ending inventory
Budgeted cost of goods sold in dollars:
7,565
3,125,000
7,813
3,124,753
ToyWorks Ltd.
Cash Budget
Cash balance, beginning

Add receipts:
Collections from customers
Total cash available before financing
Less disbursements:
Direct materials
Direct labour
Selling and administrative expenses
Tax remittance
Tax payable
Prepaid insurance
Prepaid property and business tax
Capital asset purchases
Jan
83,365
Excess (deficiency) of cash available over

disbursements
Feb
425,876
Mar
472,299
Apr
$ 357,250
May
337,573
Jun
398,218
Jul
$ 268,498
Aug
207,139
Total financing
Cash balance, ending
Running total
Oct
20,758
Nov
20,868
Dec
20,732
Year
83,365
297,500
119,750
316,250
207,250
92,500
77,250
94,750
99,500
457,000
822,000
1,521,250
4,724,000
702,365
723,376
592,049
673,500
544,823
490,718
345,748
301,889
255,806
477,758
842,868
1,541,982
4,807,365
157,809
27,000
38,850
47,830
5,000
-
79,397
54,000
51,850
60,830
5,000
-
41,119
43,875
46,975
47,830
5,000
-
51,497
104,625
76,225
77,080
5,000
21,500
###
47,925
13,500
32,350
47,830
5,000
-
16,678
27,000
38,850
51,080
5,000
###
###
23,653
27,000
38,850
51,080
5,000
-
46,294
70,875
59,975
71,080
5,000
96,000
106,284
219,375
131,475
113,330
5,000
-
198,956
337,500
188,350
129,580
5,000
-
257,597
408,375
222,475
194,580
5,000
###
###
###
28,941
16,875
33,975
47,830
5,000
39,600
-
###
81,720
122,580
1,056,150
1,350,000
960,200
939,960
60,000
21,500
96,000
39,600
204,300
50,000
50,000
50,000
50,000
200,000
276,489
251,077
234,799
335,927
146,605
222,221
138,608
145,583
399,224
575,464
941,106
1,260,607
4,927,710
425,876
472,299
357,250
337,573
398,218
268,498
207,139
156,306 -
143,418 -
98,238
281,375
Financing:
Borrowing (at the beginning of the month)
Repayment (at the end of the month)
Interest expense (paid monthly)
Sep
156,306
619,000
Dividend payment
Total disbursements
165,000
97,707 -
120,000
120,345
121,000
406,000
259,000
259,000
$ 425,876
825
1,425
164,175
118,575
357,250
$ 337,573
268,498
$ 207,139
472,299
398,218
156,306
20,758
165,000
20,868
285,000
2,030
118,970 $
20,732
406,000
2,030
6,310
261,030
140,690
20,345
147,000
20,345
ToyWorks Ltd.
Budgeted Income Statement
Sales
Cost of goods sold
Gross Margin
Less:
Selling & administrative expenses
Net operating income
Less: Interest expense
Net income before taxes
Income taxes
Net Income
5,000,000
3,748,753
1,251,248
964,960
286,288
6,310
279,978
69,994
209,983
ToyWorks Ltd.
Budgeted Statement of Retained Earnings
Retained earnings beginning of year
Plus: Net Income
Sub-total
Less: Dividends declared
Retained earnings end of year
412,784
209,983
622,767
200,000
422,767
ToyWorks Ltd.
Budgeted Balance Sheet
December 31, 2008
Assets
Cash
Accounts Receivable
Inventory: Raw Materials
Inventory: Finished goods
Prepaid Insurance
Prepaid Property and Business Tax
Capital assets (net)
Total Assets
Liabilities and Shareholders' Equity
Liabilities
Bank Loan Payable
Accounts payable
Income taxes payable
Total Liabilities
Shareholders' Equity
Capital stock
Retained earnings
Total Shareholders' equity
Total Liabilities & Shareholders' Equity
20,345
985,000
9,000
9,373
64,000
19,800
749,500
1,857,018
147,000
277,256
9,994
434,251
1,000,000
422,767
1,422,767
1,857,018 $
ToyWorks Ltd.
Budgeted Income Statement
Sales
Less: Variable costs
Variable cost of goods sold
Variable selling & admin expenses
Contribution Margin
Less: Fixed costs
Selling & administrative expenses
Net operating income
Less: Interest expense
Net income before taxes
Income taxes
Net Income
$
3,124,753
325,000
5,000,000
3,449,753
1,550,248
624,000
639,960
1,263,960
286,288
6,310
279,978
69,994
209,983

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Data for Budget Assignment: Master Budget Case for

For the year ended December 31, 2008

7.30 Absorption Costing

desired ending inventory (finished goods)

25% of next month's sales

rental cost--Admn & Selling cost

Raw material: SSA

Beginning Accounts Payable:

next month's production needs

SAA per unit

per unit variable manufacturing:

Lowest level of sales

375,000 total operating expenses

Sales collection pattern

Fixed asset purchase

Minimum bank balance

Opening balance sheet

44,580 per month

Monthly tax installments

0.50% per month

d December 31, 2008

Percent of Annual Sales

Selling price per unit

Total Budgeted Sales

Current month sales 55%

Two months prior sales 9.5%

Add desired ending inventory of

Variable overhead rate per unit

Variable manufacturing overhead

Fixed manufacturing overhead:

Property and business taxes

Raw Materials needed per unit

Add desired ending inventory

Less beginning inventory

Raw materials to be purchased

Cost of SAA per kilogram

Total cost of purchases of SAA

Prior month's purchases 45%

A/P from November

A/P from December

Direct Labour cost per hour

Total direct labour cost

Variable selling and administrative

Fixed selling and administrative

Less: non-cash items

Variable rate per unit:

Variable rate per unit

Fixed expenses per year

Unit product cost

Budgeted finished goods inventory:

Unit product costs (see above)

Ending finished goods inventory in dollars

Budgeted cost of goods sold:

Less: ending inventory

Budgeted cost of goods sold in dollars:

Unit product cost

Budgeted finished goods inventory:

Unit product costs (see above)

Ending finished goods inventory in dollars

Budgeted cost of goods sold: