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Mike's Surf and Sea

Master Budget
Input Section

Sales Budget
Expected unit sales in the first quarter 150,000
Sales increase per quarter 5%
Selling price $ 9.00

Production Budget
Desired ending inventory 10% % of next quarter sales
Beginning Inventory 15,000 units
Cost of beginning inventory $ 7.40

Raw Materials Budget


Raw materials per unit 1.50 pounds
Cost per pound $ 2.50
Desired ending inventory 15%
Beginning inventory 33,000 pounds

Direct Labor Budget


Direct labor hours per unit 0.25
Direct labor cost per hour $ 12.00

Manufacturing Overhead Budget


Indirect labor $ 0.75 per hour
Indirect materials $ 0.60 per hour
Utilities $ 0.35 per hour
Maintenance $ 0.20 per hour
Supervisor salaries $ 72,000 per year
Rent $ 60,000 per year
Depreciation $ 24,000 per year
Insurance $ 12,000 per year

Selling and Administrative Expense Budget


Sales commissions 3.0% of sales
Delivery expenses $ 0.25 per unit
Sales salaries $ 120,000 per year
Office salaries $ 70,000 per year
Advertising expense $ 75,000 per year
Depreciation expense $ 6,000 per year
Insurance $ 24,000 per year
Rent $ 72,000 per year
Income Statement
Interest expense $ 14,000 per quarter
Income tax rate 20%

Cash Collections
Collected in quarter of sale 40%
Collected in the quarter following sale 60%

Cash payments
Paid in quarter of purchase 70%
Paid in following quarter 30%

Cash Budget
Sale of securities $ 5,000 fourth quarter
Purchase of equipment $ 50,000 first quarter

Balance Sheet, 12/31/03

Assets
Cash $ 120,000
Accounts Receivable 800,000
Finished goods inventory 111,000
Raw materials inventory 82,500
Investments 5,000
Equipment 150,000
Less: Accumulated depreciation 30,000
Total assets $ 1,238,500

Liabilities and Stockholders' Equity

Accounts payable $ 165,000


Notes payable 250,000
Common stock 500,000
Retained earnings, 12/31/03 323,500
Total liabilities and stockholders' equity $ 1,238,500
Mike's Surf and Sea
Operating Budgets
For the year ending 12/31/04

Sales Budget
Quarter 1 Quarter 2 Quarter 3

Expected unit sales


Selling price

Total Sales

Production Budget
Quarter 1 Quarter 2 Quarter 3

Expected unit sales


Desired ending finished goods inventory
Total units required
Less: Beginning finished good inventory

Required unit production

Direct Materials Budget


Quarter 1 Quarter 2 Quarter 3

Required unit production


Raw materials per unit (pounds)
Total pounds needed for production
Desired ending raw materials inventory
Total pounds required
Less: Beginning raw materials inventory
Raw materials purchases

Cost per pound


Total cost of raw materials purchases

Direct Labor Budget


Quarter 1 Quarter 2 Quarter 3
Units to be produced
Direct labor hours per unit
Total direct labor hours required
Direct labor cost per hour
Total direct labor cost
Manufacturing Overhead Budget
Quarter 1 Quarter 2 Quarter 3

Variable Costs
Indirect labor
Indirect materials
Utilities
Maintenance

Total variable costs

Fixed Costs
Supervisor salaries
Rent
Depreciation
Insurance

Total fixed costs


Total manufacturing overhead

Direct labor hours

Manufacturing overhead rate per direct labor hour

Selling and Administrative Expense Budget


Quarter 1 Quarter 2 Quarter 3

Variable Expenses
Sales commissions
Delivery expenses

Total variable expenses

Fixed Expenses
Sales salaries
Office salaries
Advertising expense
Depreciation expense
Insurance
Rent

Total fixed expenses

Total selling and administrative expenses


Cost of One Unit
Quantity
Direct materials
Direct labor
Manufacturing overhead

Total unit cost

Budgeted Income Statement


Quarter 1 Quarter 2 Quarter 3

Sales
Cost of goods sold
Gross profit
Selling and administrative expenses
Income from operations
Interest expense
Income before income tax
Income tax expense
Net income / (loss)
Quarter 4 Year

Quarter 4 Year

Quarter 4 Year

Quarter 4 Year
et
Quarter 4 Year

Budget
Quarter 4 Year
Cost/Rate Total

Quarter 4 Year
Mike's Surf and Sea
Financial Budgets
For the year ending 12/31/04

Schedule of Expected Cash Collections


Quarter 1 Quarter 2 Quarter 3 Quarter 4

Accounts receivable, 12/31/03


First quarter
Second quarter
Third quarter
Fourth quarter

Total collections

Schedule of Expected Cash Payments for Direct Materials


Quarter 1 Quarter 2 Quarter 3 Quarter 4

Accounts payable, 12/31/03


First quarter
Second quarter
Third quarter
Fourth quarter

Total payments

Cash Budget
Quarter 1 Quarter 2 Quarter 3 Quarter 4

Beginning cash balance

Add: Receipts
Collections from customers
Sale of securities

Total receipts
Total cash available

Less: Disbursements
Raw materials
Direct labor
Manufacturing overhead
Selling and administrative expenses
Equipment purchases
Interest
Income tax expense

Total disbursements
Ending Cash Balance
Budgeted Balance Sheet
December 31, 2004

Assets
Cash $ -
Accounts Receivable -
Finished goods inventory -
Direct materials inventory -
Investments 5,000
Equipment 150,000
Less: Accumulated depreciation 30,000
Total assets $ 125,000

Liabilities and Stockholders' Equity


Accounts payable $ -
Notes payable 250,000
Common stock 500,000
Retained earnings 323,500
Total liabilities and stockholders' equity $ 1,073,500