Faculty of Business Studies

Department of Business Administration (General)

Management Accounting
Term paper on
Master Budgeting
Submitted to
Assistant Professor Azharul Islam
Date: 25 October, 2023

Submitted by
Asif Ahmed Chowdhury
ID: 2123011157
Sec: A
 Table of Contents

1.0 Introduction 3
2.0 Feasibility Study 3
❖ Financial Feasibility 3
❖ Market Feasibility 3
❖ Organisational Feasibility 4
❖ Environmental Feasibility 5
3.1 Sales Budget 6
3.2 Schedule of Cash Collection 6
3.3 Production Budget 7
3.4 Direct Materials Budget 7
3.5 Cash Disbursement Budget 8
3.6 Direct Labor Budget 8
3.7 Manufacturing Overhead Budget 9
3.8 Selling and administrative expense budget 9
3.9 Cash Budget 10
3.10 Budgeted Income Statement 11
3.11 Budgeted Balance Sheet 11
Conclusion: 12

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 Letter of Transmittal

Azharul Islam

Assistant Professor

Department of Business Administration

Bangladesh University of Professionals.

Subject: Term paper on an entrepreneur and his business.

Dear Sir,

It brings me immense pleasure to present you with the report on master budgeting.

While preparing the report, I closely focused on the topic & made every effort to assimilate and offer
the most thorough information possible. I think it will present you with a clear picture of the
company’s master budget

I thank you for allowing me to do a term paper on master budgeting. This will undoubtedly provide
me with experience that I can apply to my professional lives. I will always be ready to answer any
more questions about this report.

Sincerely,

Asif Ahmed

Section (A)

I.D. 2123011157

Department Of Business Administration.

2
 Onana Chips

1.0 Introduction
Introducing Onana Chips: These affordable, crispy banana-flavoured chips are a healthier,
preservative-free option, providing an authentic burst of banana goodness in every bite.
Perfect for snacking, movie nights, or parties, they're the ultimate choice for banana
enthusiasts and budget-conscious snackers. Satisfy your cravings with Onana Chips and
experience the delicious taste of real bananas.

2.0 Feasibility Study

Our feasibility study covers the following dimensions:

❖ Financial Feasibility

ROI is a great indicator to identify financial feasibility

Particulars Y1 Y2 Y3 Y4 Y5
Net income 181000 267000 210000 151000 769133
Total Investment 1262200 1109800 1199800 1338600 1417000
ROI 14.34 24.06 17.50 11.28 54.28

❖ Market Feasibility

Onana Chips has a promising market feasibility with a target audience that encompasses a
diverse range of consumers. Onana Chips can cater to a broad range of customers, including
students, office workers, families, and snack enthusiasts. The versatility of this snack makes
it suitable for various locations, including schools, colleges, offices, parks, and home
consumption. However, the key target markets are:

● Snack Enthusiast
● Health Conscious Consumers
● Impulsive buyers
● Tourists and Travellers

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❖ Organisational Feasibility

Leadership and Management:

- Ensure a strong and experienced leadership team with expertise in the snack food
industry, including production, marketing, and distribution.

Operational Capability:
- Invest in efficient production facilities and equipment to meet demand while
maintaining product quality.

Supply Chain Management:

- Build a robust supply chain, establishing relationships with reliable banana
suppliers and other essential partners.

Distribution Network:
- Create an efficient distribution network to reach a wide range of consumers.

Legal and Regulatory Compliance:

- Comply with all relevant food industry regulations and quality standards..

Innovation and Adaptability:

- Encourage innovation in product development and be adaptable to changing
consumer preferences and market trends.

❖ Environmental Feasibility

Certainly, Onana Chips prioritises environmental sustainability by:

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1. Sourcing bananas from responsible and sustainable suppliers.

2. Using eco-friendly packaging materials.

3. Implementing energy-efficient practices in production.

4. Reducing waste and food waste in the manufacturing process.

6. Optimizing transportation and logistics for reduced emissions.

7. Pursuing relevant environmental certifications and adhering to standards.

8. Seeking feedback and making continuous improvements in environmental sustainability.

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 3.0 Budgeting Plan for the First five Years

3.1 Sales Budget

Detailed budgeting for the first five years includes:

1st Year 35000 units

2nd Year 37000 units
3rd Year 40000 units
4th Year 45000 units
5th Year 52000 units
6th Year 53000 units

3.2 Schedule of Cash Collection

Onana Chips collection pattern is

70% collected in the year of sale,
30% collected in the year following sale

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3.3 Production Budget

Onana chip’s desired ending inventory is 20% of next year’s sale unit

6th Year 53000 units * 20% = 10600

3.4 Direct Materials Budget

Onana Chips has the following additional information:

For Onana Chips 5 parts of raw materials are required per unit of product.
Management wants materials on hand at the end of each year equal to20% of the
following year’s production.
Per part material cost is BDT 2

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3.5 Cash Disbursement Budget

Onana Chips’s half of a year’s purchases are paid for in the year of purchase; the other half is paid
in the following year.

3.6 Direct Labor Budget

For Onana Chips, each unit of product requires 0.2 hours of direct labour.

Labours are paid BDT 35 per hour

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3.7 Manufacturing Overhead Budget

Easy uses a variable manufacturing overhead rate of BDT 3 per unit

Fixed manufacturing overhead is BDT 100000 per year and includes BDT 30,000 of
noncash costs (primarily depreciation)

3.8 Selling and administrative expense budget

For Onana Chips, variable selling and administrative overhead rate is BDT 6
Fixed selling and administrative overhead cost is BDT 60000
BDT 6000 in noncash cost

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3.9 Cash Budget

BDT 4000000 cash on hand on year 1

Maintains a balance of BDT 2500000 each year
Borrowings are paid next year
3% interest is paid on borrowings
Equipment purchase of BDT 20000 on year 1

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3.10 Budgeted Income Statement

Budgeted Income Statement

For the five years ended on December 31

3.11 Budgeted Balance Sheet

Budgeted Balance Sheet

For the five years ended on December 31

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Conclusion:

Initial Selling price per unit BDT 25. After 2 years, to increase sales we decided to lower the
selling price per unit. For buying an advanced technology to make a better quality product,
we raised the price to 30 on year 5. Overall Onana Chips is a volatile but promising business
by always holding an ROI above 10%, which is considered the ideal ROI for a venture.
Onana Chips will be one of the top among the chips industry ensuring the good health factor.

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