Sunny Days manufactures swimwear and beach accessories for men and women.  They operate out of rented premises in Currumbin Creek Road where the factory is split into a manufacturing and storage area and a retail space.

The business produces 4 products:

  1. One-piece swimsuits for women
  2. Board shorts for men
  3. Beach Towels
  4. Beach Umbrellas

You, as the management accountant for the firm, have been asked to prepare a range of budgets for the 2020 year.  The following information has been gathered:

Sales One-piece swimsuits Board short Towel Beach Umbrellas
January 2020 1,800 1,600 400 200
February 2020 1,400 1,100 300 180
March 2020 1,300 1,160 260 160
April 2020 1,000 1,000 140 120
May 2020 400 600 80 60
June 2020 400 500 40 40
July 2020 300 400 20 20
August 2020 600 400 80 40
September 2020 1,300 1,160 260 160
October 2020 1,200 1,100 300 180
November 2020 1,200 1,100 300 180
December 2020 1,500 1,200 400 200
January 2021 1,600 1,400 440 220
February 2021 1,600 1,400 400 200

Table 1: Forecasted Sales volume per product per month

  One-piece swimsuits Board short Towel Beach Umbrella
Selling Price $80 $75 $30 $35
Product One-piece swimsuit Board short Towel Beach Umbrella
Direct Materials & Direct Labour per unit
Fabric $15.75 $11.25 $19.00 $12.20
Elastic/Trim $3.50 $3.00 $1.25 $0
Direct Labour (sewing time/machine hours)

 

1 hour 0.75 hours 0.4 hours 2.0 hours
Other Cost information: Manufacturing Costs Operating Costs
Direct Labour $28/hour  
Indirect Labour $1/unit  
Indirect Materials $2/unit  
Utilities $450/month $50/month
Insurance $2,200/year $6,000/year
Factory Supervisor’s Salary $60,000/year  
Administration Staff Wages   $2,500/month
General Office Expenses   $1,500/month
Rent $4,600/month $1,400/month
Repairs and Maintenance See below  

Table 2: Manufacturing and Operational Costs

Inventory:  At the end of each month the business plans to have 50% of the following month’s sales units in stock as finished goods and 25% of the direct materials required for the next month’s production.

Cash Collections:  20% of sales are through the retail outlet at the factory.  These customers pay for their purchases at the time of sale.  The remainder of sales are to businesses that resell Sunny Days products. Credit is extended to all business customers.  It is estimated 60% of these sales are collected in the month of sale and the remaining 40% are collected in the following month.

Cash Payments:  All purchases, other than the purchase of direct materials, are paid at the time the expense is incurred.  It is estimated 40% of accounts payable will be paid in the month the direct materials are purchased and the remaining 60% will be paid in the following month.

The interest rate payable on the loan is 4.88 % per annum.  Interest is paid monthly.  The loan is on an interest only basis and the principle can be repaid at any time.

Depreciation of plant and equipment totals $8,000 for the year.  Depreciation is recorded monthly.

Repairs and maintenance related to manufacturing plant and equipment is estimated to be $1,500 each quarter payable in March, June, September, and December.

Variable manufacturing overhead is allocated based on machine hours. Fixed manufacturing overhead is allocated based on units of production. Ignore GST and Income Tax.  Round amounts other than unit costs to nearest dollar value.

The opening Balance Sheet is provided below:

Sunny Days

Balance Sheet

As at 31 December 2019

Assets
Current Assets
     Cash  45,015
     Accounts Receivable  113,650
     Finished Goods Inventory 79,150
     Materials Inventory  54,275
Total Current Assets $292,090
Non-current Assets
     Equipment  55,000
     Less: Accumulated Depreciation ( 8,000)
Total Non-Current Assets  $47,000
Total Assets  $339,090
Liabilities & Shareholder Equity
Current Liabilities
     Accounts Payable  42,500
Total Current Liabilities  $42,500  
Long-Term Liabilities
     Bank Loan  164,900
Total Long-Term Liabilities  $164,900
Total Liabilities  $207,400
Shareholders’ Equity
     Share Capital 102,765
     Retained Earnings  28,925
Total Shareholder Equity  $131,690
Total Liabilities & Shareholders’ Equity  $339,090

Required:

  1. Using the Excel template provided, prepare the following budgets for the twelve-month period from January 2020 to December 2020.  The first worksheet should contain your raw data and assumptions and all future worksheets should be linked to this data.  Use a different worksheet for each budget. Show all calculations and use Excel functions where possible.  While you should use examples in your text as a guide, the key to using spreadsheets is that they are structured so that others can use them and follow the flow of information without difficulty.
    1. Monthly Sales Revenue and Cash Collection Budget
    2. Production Budget in Units
    3. Direct Materials and Cash Purchases Budget
    4. Direct Labour Budget
    5. Manufacturing Overhead Budget (break into variable and fixed components)
    6. Monthly Operating Cost Budget
    7. Ending Inventory budget for Finished Goods
    8. Cost of Sales Budget
    9. Budgeted Income Statement for the year ended 31 December 2020
    10. Monthly Cash Budget

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