Act202 Project Final Tea Stall Docx Determine Cost Budget

Group project
Master Budget of A Tea

Stall
1
Summer - 2016
Course: Act-202
Section 20
Submitted to:
Shahid Talukder
Department of Accounting & Finance,
North South University.
Submitted by:
Fahad Chowdhury
Md. Akif khan
Saifur Rahman
Aniruddha Sen
1130540030
1421033030
1421148030
1231174630
Date: 27.07.16
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
Badol Mama Tea Stall is one of the most popular
tea stall in Bashundhara R/A. It is a small business
owned by a person named Badol Mama. 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, Badol Mama
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 3
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,
Fahad Chowdhury 1130540030
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 Badol Mama 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.
Badol Mama 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.
Production Budget
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

Direct Materials Budget
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.
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.
Manufacturing Overhead Budget
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.
Ending Finished Goods Inventory Budget
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.
Selling and Administrative Expense Budget
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

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.
Budgeted Income Statement
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.

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 Badol Mama Tea Stall
2 Managerial Accounting, 15th Edition by Garrison, Noreen and
Brewer.
3 Invesotpedia.com

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Group project

Master Budget of A Tea

Direct Materials Budget

Direct Labor Budget

Manufacturing Overhead Budget

Ending Finished Goods inventory Budget

Selling and Administrative Budget

Budgeted Income Statement

Budgeted Balance Sheet

one of the major tea stall in that area. Everyday all

It is been a great pleasure for us to submit this

number of separate but independent budgets that

Overview of Master Budget

Expected Cash Collection

Cash collection from last years fourth quarter

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

Direct Material Budget:

esired units ERMI

Badol Mama Tea Stall

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

Expected Cash Distribution

Cash payments for last years fourth-quarter

Direct Labor budget:

Manufacturing Overhead Budget:

Ending Finished Goods Inventory Budget:

duction cost per unit:

t product cost (per cup)

geted finished goods

Selling and Administrative Expense Budget:

geted unit sales

iable selling and administrative expense per unit

iable selling and administrative expense

ed selling and administrative expenses:

al fixed selling and administrative expense

al selling and administrative expense

h disbursements for selling and administrative

The cash budget is composed of four major sections:

The financing section of the cash budget details the borrowings

nning cash balance

Badol Mama Tea Stall

Budgeted Income Statement:

- Cost of goods sold

- Selling and administrative expenses

Net operating income

Budgeted Balance Sheet:

Badol Mama Tea Stall

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