Msc.

In Accounting and Finance (Advanced Cost and Management Accounting Individual

assignment (Prepared by:Bekama Tesfaye ,Submitted to Mr.Mohammed G (Asst.Prof) (12/2022)

Master Budget
A. Calculate a sales budget for the second quarter (monthly and in total).
The second quarter consists months of April, May and June. Therefore, it is calculated as:-
April May June Quarter
Budget Sales Unit 68,400 103,400 53,400 225,200
Selling Price per Unit 16 16 16 16
Total sales Br.1,094,400 1,654,400 854,400 3,603,200
Calculation
Total Sales = Budget sales unit x selling price per unit
Schedule of Expected Cash collection in the 2 nd quarter.

April May June Quarter

February sales Br.47,040 47,040
March Sales 486,080 69,440 555,520
April sales 218,880 766,080 109,440 1,094,400
May sales 330,880 1,158,080 1,488,960
June Sales 170,880 170,880
Total cash collections 752,000 1,166,400 1,438,400 3,356,800

Calculation shows cash collected is as following:-

- 20% of total sales at the month of sales.For Example20% of total sales of April month is
218,880= 1,094,400 x 20%
- 70% of total sales at the following month of the sales’ month
- 10% of total sales collected at second month of following sales’ month
B. Calculate a Purchases budget (monthly and in total).

April May June Quarter

Budget Unit Sales 68,400 103,400 53,400 225,200
Add Desired Ending Inventory 41,360 21,360 13,360 13,360
Total needs 109,760 124,760 66,760 238,560
Less Beginning Inventory 27,360 41,360 21,360 27,360
Required Purchase 82,400 83,400 45,400 211,200
Unit Cost 5.70 5.70 5.70 5.70
Required Birr Purchase 469,680 475,380 258,780 1,203,840
Calculation
a. Desired ending inventory :-
i. For April=40% x103,400(Budgeted unit of May)
ii. For May=40%x53400(Budgeted Unit of June)
iii. For June=40%x33400(Budgeted unit of July)
Msc. In Accounting and Finance (Advanced Cost and Management Accounting Individual
assignment (Prepared by:Bekama Tesfaye ,Submitted to Mr.Mohammed G (Asst.Prof) (12/2022)
b. Beginning Inventory:-
i. For April= 40% x 68,400
ii. For May=40%x103,400
iii. For June=40%x53,400
c. 𝑹𝒆𝒒𝒖𝒊𝒓𝒆𝒅 𝒑𝒖𝒓𝒄𝒉𝒂𝒔𝒆 = 𝑇𝑜𝑡𝑎𝑙 𝑛𝑒𝑒𝑑𝑠 − 𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
d. 𝑹𝒆𝒒𝒖𝒊𝒓𝒆𝒅 𝒃𝒊𝒓𝒓 𝒑𝒖𝒓𝒄𝒉𝒂𝒔𝒆𝒔 = Required purchase x unit cost

C. Calculate a direct labor budget. (Monthly and in total).

April May June Quarter

Expected Sales (units) 68,400 103,400 53,400 225,200

Sales price per unit 16 16 16

Total sales revenue Br1,094,400 1,654,400 854,400 3,603,200

Sales commissions (4%) 4% 4% 4%

Total sales Commission (DL) Br 43,776 66,176 34,176 144,128

D. Cash receipt budget

April May June Quarter

Beginning cash balance Br 91,000 91,000

Collection From customers Br752,000 1,166,400 1,438,400 3,356,800

Total available cash Br.3,447,800

E. Create a cash disbursements budget. (Monthly and in total).

April May June Quarter

Accounts payable Br117,000 117,000
April Purchase Br 234,840 234,840 469,680
May Purchase 237,690 237,690 475,380
June Purchase 129,390 129,390
Total Br351,840 472,530 367,080 1,191,450
Msc. In Accounting and Finance (Advanced Cost and Management Accounting Individual
assignment (Prepared by:Bekama Tesfaye ,Submitted to Mr.Mohammed G (Asst.Prof) (12/2022)
F. Create an overall Cash Budget

April May June Quarter

Beginning cash Balance 91,000 67,134 109,828 91,000
Add Collection from Customers 752,000 1,166,400 1,438,400 3,356,800
Total Cash available (W) 843,000 1,233,534 1,548,228 3,447,800
Less Cash Disbursements
Merchandise Purchase Br351,840 472,530 367,080 1,191,450
Advertising Br370,000 370,000 370,000 1,110,000
Rent Br35,000 35,000 35,000 105,000
Salaries Br140,000 140,000 140,000 420,000
Commissions ) Br 43,776 66,176 34,176 144,128
Utilities Br 15,500 15,500 15,500 46,500
Equipment purchase 24,500 57,000 81,500
Dividend Paid Br27,750 27,750
Total Cash Disbursements(X) 983,866 1,123,706 1,018,756 3,126,328
Excess(deficiency) of Cash (Y) (140,866) 109,828 529,472 321,472
(Y=W-X)
Financing
Borrowings 208,000 208,000
Repayments (208,000) (208,000)
Interests (6,240) (6,240)
Total Financing (Z) 208,000 (214,240) (6,240)
Ending Cash Balance(=Y+Z) 67,000 109,828 315,232 315,232
Msc. In Accounting and Finance (Advanced Cost and Management Accounting Individual
assignment (Prepared by:Bekama Tesfaye ,Submitted to Mr.Mohammed G (Asst.Prof) (12/2022)

G. Created Budget Income Statement

Budget Income Statement

For second quarter

Sales Br 3,603,200

Variable expense

Cost of Goods sold (x5.70 per pair of earnings ) Br1,283,640

Commission- 4% of sales Br144,128

Total variable expenses Br1,427,768

Contribution margin Br2,175,432

Less Fixed Expenses

Salaries Br420,000

Utilities Br46,500

Insurance Br14,100

Advertising Br1,110,000

Rent Br 105,000

Depreciation Br93,000

Total fixed expense Br1,788,600

Net operating income Br386,832

Interest expense

Interest on short term loan Br6,240

Net Income Br380,592

Msc. In Accounting and Finance (Advanced Cost and Management Accounting Individual
assignment (Prepared by:Bekama Tesfaye ,Submitted to Mr.Mohammed G (Asst.Prof) (12/2022)
H. Budgeted Balance Sheet
Budgeted Balance Sheet
Second Quarter
Assets
Current Assets
Cash Br315,232
Accounts receivable Br848,960
Inventory Br76,152
Prepaid insurance Br15,400
Fixed Assets Br1,255,744
Property and equipment Br1,120,000
Add purchase Br81,500
1,201,500
Less Depreciation during the quarter -Br93,000 1,108,500
Total assets Br 2,364,244
Liabilities and stock holders’ equity
Current Liabilities
Accounts payable Br129,390
Dividends payable Br27,750
Stock holders’ equity
Common stock Br1,140,000
Retained earnings Br1,067,104

Total Liabilities and stock holders’ equity Br2,364,244