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Group project

Master Budget of A Tea


Stall
1

Spring - 2016
Course: Act-202
Section 22

Submitted to:
Mr.
Lecturer
Department of Accounting & Finance,
North South University.

Submitted by:
Ashab Abid Shad
Md. Akif khan
Saifur Rahman
Aniruddha Sen

1420165030
1421033030
1421148030
1231174630

Date: 05.04.16

Table of Content

Serial

Contents

Page
Numbers

Introduction

Letter of Submission

Executive Summary

Sales Budget

Production Budget

Direct Materials Budget

10

Direct Labor Budget

12

Manufacturing Overhead Budget

13

Ending Finished Goods inventory Budget

14

10

Selling and Administrative Budget

15

11

Cash Budget

16

12

Budgeted Income Statement

18

13

Budgeted Balance Sheet

19

14

References

20

Introduction
Alauddin Tea Stall is one of the most popular tea
stall in Bashundhara R/A. It is a small business
owned by a person named Alauddin. It is situated
behind Apollo Hospitals near Dutch Bangla Banks
Vatara Branch. After eviction of illegal footpath tea

stalls by police this stall has become one of the


major tea stall in that area. Everyday all most three
hundred people come to this stall to drink tea. The
owner open the stall at 6 a.m. and close it around
12 a.m. The stall is generally run by its owner and
an employee who works under him. Along with tea
there biscuits, bread and cigarettes available. As
this stalls popularity is increasing day by day some
other tea stall owners have removed their stall
from that place. As a result, Alauddin Tea Stall is
doing an excellent business out there. Thats why
we prepared this project on that on the basis of
that stall.

Letter of Submission

Respected Sir,

It is been a great pleasure for us to submit this


project on Master Budgeting of a small business.
This report has been prepared by a group of 4
people as a part of this course. We have tried our
best to implement our learning from this course. It
is prepared after doing some research and
gathering information. We tried to include all the
required information in this report. We would like to
thank you for giving us an opportunity to survey,
analyze and enhance our knowledge and specially
for helping us to understand the master budgeting.

Sincerely,
Ashab Abid Shad 1420165030
Md. Akif khan 1421033030
Saifur Rahman 1421148030
Aniruddha Sen 1231174630

Executive Summary
This project is based on the master budgeting of a tea
stall named Alauddin Tea Stall. It was focuses on the

number of separate but independent budgets that


formally lay out the businesses sales, production, and
financial goals. The master budget culminates in a cash
budget, a budgeted income statement, and a budgeted
balance sheet. At first, we did sales budget which
contains the stalls expected sales. Then, we did
production budget which contains the number of the
stalls estimated production. After that, we prepared the
direct materials budget which contains the estimation of
future direct materials. Then, we did direct labor budget
which shows the direct labor hours required to satisfy the
production budget. Later, we prepared manufacturing
overhead budget which lists all costs of production other
than direct materials and direct labor. Then, we
calculated the ending finished goods inventory budget
which gives us all the data to compute unit product cost.
After completing that, we calculated the selling and
administrative budget which gives budgeted expenses for
areas other than manufacturing. Then, we prepared the
cash budget, which is composed of four major sections.
After that, we prepared the budgeted income statement
which is which shows the revenues, expenses and
income. At last, we prepared the budgeted balance sheet
which estimates the businesses assets liabilities and
stockholders equity.

Overview of Master Budget

geted unit

s
ing price per

al Sales

inning A/R

quarter sales

quarter sales

quarter sales

Sales Budget:
The master budget consists of a number of independent budgets
that formally lay out the companys sales, production and
financial goods. The master budget culminates in a cash budget,
a budgeted income statement and budgeted balance sheet.
Sales Budget: The first step in the budgeting process is the
preparation of sales budget which is a detailed schedule showing
the expected sale for the budget period. In a sales budget, we get
budgeted units sales, budgeted selling price per unit and
accounts receivable will be collected as follows.
Alauddin Tea Stall
Sales Budget
For the Year Ended December 31, 2017
Quarter 1

Quarter 2

Quarter 3

Quarter 4

Year

27000

25000

30000

26000

108000

162000

150000

180000

156000

648000

Expected Cash Collection


60000
145800

60000
16200
135000

162000
15000
162000

150000
18000

180000

quarter sales

al cash

205800

151200

177000

140400

140400

158400

692400

ection

geted unit

s
sired units of

Cash collection from last years fourth quarter


sales:
162000*90%; 162000*10%
150000*90%; 150000*10%
180000*90%; 180000*10%
156000*90% Uncollected fourth-quarter sales 15600.

Production Budget:
The production budget is prepared after the sales budget. The
production budget lists the number of units that must be
produced to satisfy the sales needs and to provide for the desired
ending finished goods inventory.
Alauddin Tea Stall
Production Budget
For the Year Ended December 31, 2017
Quarter 1

Quarter 2

Quarter 3

Quarter 4

Year

27000

25000

30000

26000

108000

5000

6000

5200

4100

4100

l needs

ts of BFGI

ires

32000

31000

35200

30100

112100

3500

5000

6000

5200

3500

28500

26000

29200

24900

108600

uction in units

Twenty percent of next quarters sales. For example, the second


quarter sales are 25000 units. Therefore the desired ending
inventory of finished goods for the first quarter would be
20%*25000 = 5000 units. The beginning inventory in each
quarter is the same as the prior quarters ending inventory.

Direct Material Budget:


A direct materials budget is prepared after the production
requirements have been computed. This budget details the raw
materials that must be purchased to fulfill the production budget
and to provide for adequate inventories.

uired Unit

uction
s of RM needed

cup
s RM needed

esired units ERMI

al units of RM

ded
ts of BRMI

s of RM to be

Alauddin Tea Stall


Direct Materials Budget
For the Year Ended December 31, 2017
Quarter 1

Quarter 2

Quarter 3

Quarter 4

Year

28500

26000

29200

24900

108600

114000

104000

116800

99600

434400

10400

11680

9960

8500

8500

124400

115680

126760

108100

442900

7200

10400

11680

9960

7200

117200

105280

115080

98140

435700

hased
of RM per unit
of RM to be

0.5

0.5

0.5

0.5

0.5

58600

52640

57540

49070

217850

hased

10% of the next quarters production needs. For example, the


second-quarter production needs are 104000. Therefore, the
desired ending inventory for the 1st quarter would be
10%*104000=10400.

Expected Cash Distribution

nning A/P

60000

uarter purchases

29300

quarter purchases

60000
29300
26320

quarter purchases

58600
26320
28770

quarter purchases

al Cash

89300

55620

55090

52640
28779

57540

24535

24535

53305

253315

ursement for

erials

Cash payments for last years fourth-quarter


purchases:
58600*50%; 58600*50%
52640*50%; 52640*50%
57540*50%; 57540*50%
24535*50%. Unpaid 4th quarter purchases.

Direct Labor budget:

The direct labor budget shows the direct labor hours required to
satisfy the production budget. By knowing in advance how much
labor time will be needed throughout the budget year, the
company can develop plants to adjust the labor force as the
situation requires.
Alauddin Tea Stall
Direct Labor Budget
For the year ended December 31, 2017

uired

duction in units
hours per unit

al DL hours

ded
cost per hour

al DL cost

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Year

28650

26000

29200

24900

108600

0.2

0.2

0.2

0.2

0.2

5700

5200

5840

4980

21720

12

12

12

12

12

68400

62400

70080

59760

260640

This budget assumes that the direct labor work force will be fully
adjusted to the total direct labor hours needed each quarter.

Manufacturing Overhead Budget:


The MOH budget lists all costs of production other than direct
material and direct labor.
Alauddin Tea Stall
Manufacturing Overhead Budget
For the Year Ended December 31, 2017

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Year

5700

5200

5840

4980

21720

s
able MOH

able MOH

11400

10400

11680

9960

43440

d MOH

15000

15000

15000

15000

15000

al MOH

26400

25400

26680

24960

58440

5000

5000

5000

5000

20000

21400

20400

21680

19960

38440

geted DL

preciation

ursements for

al MOH (a)

58440

geted DL

21720

s (b)
R for the

2.69

{(a)/(b)}

Ending Finished Goods Inventory Budget:


This budget helps us to determine cost of goods sold on the
budgeted income statement and then to value ending inventories
on the budgeted balance sheet. The cost of unsold units is
computed in the ending finished goods inventory budget.
Alauddin Tea Stall
Ending Finished Goods Inventory Budget
For the Year Ended December 31, 2017
Item

Quantity

Cost

Total

0.5

ect labor

0.2

12

2.4

nufacturing Overhead

0.2

2.69

0.54

duction cost per unit:

ect materials

t product cost (per cup)

4.94

geted finished goods

entory:
GI in units

4100

t product cost

4.94

GI in dollars

20246.30

Selling and Administrative Expense Budget:


The selling and administrative expense budget lists the budgeted
expenses for areas other than manufacturing. In large
organizations, this budget would be a compilation of many
smaller, individual budgets submitted by department heads and
other persons responsible for selling and administrative expenses.
Alauddin Tea Stall
Selling and Administrative Expense Budget
For the Year Ended December 31, 2017

geted unit sales

iable selling and administrative expense per unit

iable selling and administrative expense

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Yea

27000

25000

30000

26000

1080

1.2

1.2

1.2

1.2

32400

30000

36000

31200

1294

20000

20000

800

1.

ed selling and administrative expenses:

re rent

20000

20000

loyee salary

7000

7000

7000

7000

280

nder

6000

6000

6000

6000

240

ol

1000

1000

1000

1000

400

al fixed selling and administrative expense

34000

34000

34000

34000

1360

al selling and administrative expense

66400

64000

70000

65200

2656

preciation

h disbursements for selling and administrative

enses

Cash Budget:

6500

6500

6500

6500

260

59990

57500

63500

58700

2396

The cash budget is composed of four major sections:


1 The receipts section.
2 The disbursements section.
3 The cash excess or deficiency section.

The financing section of the cash budget details the borrowings


and principal and interest repayments projected to take during
the budget period. The cash balances at both the beginning and
end of the year may be adequately even though a serious cash
deficit occurs at some point during the year. The disbursements
section of the cash budget includes some types of cash
disbursements. The ending cash balance foe each period is
computed by taking the excess of cash available over
disbursements plus the total financing.

nning cash balance

sh Receipts

Alauddin Tea Stall


Cash Budget
For the year ended December 31, 2017
Quarter 1

Quarter 2

Quarter 3

Quarter 4

Year

350000

243700

142160

56720

350000

Collections from

162000

150000

180000

156000

648000

customer
al Cash Available

512000

393700

322160

212720

998000

DM

118600

111240

110180

106610

502380

DL

68400

62400

70080

59760

260640

MOH

21400

20400

21680

19960

38440

sh disbursements

Selling and

59990

57500

63500

58700

239600

administrative
al cash

268300

251540

265440

245030

1041060

ursements
ess of cash

243700

142160

56720

-32310

-43060

80000

80000

80000

80000

51690

51690

lable over

ursements
ncing
Borrowings(At

innings of quarter)
Repayments
Interest

al financing

ng cash balance

243700

142160

56720

Budgeted Income Statement:


All of the revenues and income statement shown on the budgeted
income statement comes from the in the beginning balance
sheet.
Alauddin Tea Stall
Budgeted Income Statement
For the Year Ended December 31, 2017
Sales

648000

- Cost of goods sold

324000

Gross Margin

324000

- Selling and administrative expenses

201520

Net operating income

122480

-Interest expense

1798

Net income

120682

Budgeted Balance Sheet:


The budgeted balance sheet is developing using data from the
balance sheet from the beginning of the budget period and data
contained in the various schedules.

Alauddin Tea Stall


Budgeted Balance Sheet
December 31, 2017
Assets
Current assets:
Cash
Accounts receivable
Raw materials inventory
Finished goods inventory
Total current assets
Land and equipment:
Land
Equipment
Net land and equipment
Total assets
Liabilities:
Accounts payable
Retained earnings
Total liabilities

17690
46800
4250
20246

20000
5000

13678.32
1000308.68

References:
1 Alauddin Tea Stall
2 Managerial Accounting, 15th Edition by Garrison, Noreen and
Brewer.
3 Invesotpedia.com