10:58 PM Sun Jul 23 31% PROJECT TOPIC - Preparing and Analyzing the Master Budget (using Excel) The demand for college graduates with data analytics skills has exploded, while the tools and techniques are evolving and changing rapidly. This case illustrates how data analytics can be performed using various tools including Excel, Power BI, and Tableau. As you analyze this case, you will be learning how to use EXCEL to drill down into a company's sales and cost data to gain a deeper understanding of the company's sales and costs and how this information can be used for planning and decision-making. Students, please note that the penalties for cheating (copying/plagiarism) are severe. MASTER BUDGET FACTS AND FIGURES: You have just been hired as a management trainee by Toronto-based Capri Fashions Inc., a nationwide distributor of designer Caps. The company has exclusive distribution of the Caps, and sales have grown so rapidly over the last few years that it has become necessary to add new members to the management team. You have been given responsibility for all planning and budgeting. Your first assignment is to prepare a Master Budget for the next 12 months starting July 1, 2023. You are anxious to make a favorable impression on the president and have assembled the information below. The company purchases the Caps from a factory in Montreal which costs the company $5.00 each (all on account). Purchases are made based on the current month's sales in units plus an ACCT_252 Group Project Page 1 ending inventory to equal 40% of the next month's sales in units. Purchases are paid for 40% in the month of purchase and the remaining 60% in the following month. The Caps are sold at wholesale to other resellers as well as through own stores to individual customers. 80% of total sales, all on account are made as wholesale for $8.00 each and $15.00 each to the individual customers in the mall stores (20% of total sales, all in cash). Recent and forecasted total sales in units are as follows: Months Units Months Units March 2023 Actual 20,000 June 2023 Actual 25,000 April 2023 Actual 24,000 July 2023 Budgeted 20,000 May 2023 Actual 26,000 August Budgeted 24,000 The company has found that only 60% of a month's credit sales are collected in the following month, and the remaining 40% is collected in the second month following the sales. Bad debts have been negligible. 1 of 310:58 PM Sun Jul 23 31% The company's monthly operating expenses are given below: Variable cost: Sales Commission (retail stores only) $2.00 per Cap sold. Fixed Costs: Wages and Salaries $30,000 Utilities 4,000 Insurance 1,200 Depreciation 3,000 Office rent 4,000 Miscellaneous expenses 3,000 All operating expenses are paid during the month in cash. The company pays a salary of $7,000 each month to the owner Henry Paul, payable on the 1st week of next month. The company's balance sheet on June 30, 2023, is given below: ACCT_252 Group Project Page 2 ASSETS Cash .. ...... . ... . .................................................. $ 20,000 Accounts Receivable ($66,560 from May sales; $200,000 from June Sales. ..... 266,560 Inventory (8,000 units) ....................................................."; 40,000 Fixed Assets Net of Depreciation ......... . . . . . . . 250,000 Total Assets ....... $ 576,560 LIABILITIES AND SHAREHOLDER'S EQUITY Accounts Payable $ 69,000 Salaries Payable ". . . . . . . . . ... 7,000 Capital Stock ........ 300,000 Retained Earnings ....... 200,560 Total Liabilities and Shareholders' Equity ...... $ 576,560 The company maintains a policy to have a minimum ending cash balance of $20,000 at the end of each month. It has a Line of Credit agreement with the Popular Bank of Canada that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total line of credit of $100,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. Whenever possible, the company would repay the bank as much of the loan as possible (in increments of $1,000), while still retaining at least $20,000 in cash balance. Interest on the loan is paid only at the time of repayment of the loan and only on the repayment amount. Required: Prepare a master budget for the 12 months from July 1, 2023 to June 30, 2024. Include the following detailed budgets: 1. a. A Sales Budget, by month and in total. of[10 Marks] b. A Schedule of expected cash collections from sales. by month and in total. [15 marks]10:58 PM Sun Jul 23 . . . 31% ASSETS Cash .... . . ..... $ 20,000 Accounts Receivable ($66,560 from May sales; $200,000 from June Sales...... 266,560 Inventory (8,000 units) ...........................................; 40,000 Fixed Assets Net of Depreciation .... 250,000 Total Assets ........ $ 576,560 LIABILITIES AND SHAREHOLDER'S EQUITY Accounts Payable. $ 69,000 Salaries Payable ........ . . . . . . . . . . ... 7,000 Capital Stock ......... 300,000 Retained Earnings ....... 200,560 Total Liabilities and Shareholders' Equity .... $ 576,560 The company maintains a policy to have a minimum ending cash balance of $20,000 at the end of each month. It has a Line of Credit agreement with the Popular Bank of Canada that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total line of credit of $100,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. Whenever possible, the company would repay the bank as much of the loan as possible (in increments of $1,000), while still retaining at least $20,000 in cash balance. Interest on the loan is paid only at the time of repayment of the loan and only on the repayment amount. Required: Prepare a master budget for the 12 months from July 1, 2023 to June 30, 2024. Include the following detailed budgets: 1. a. A Sales Budget, by month and in total. [10 Marks] b. A Schedule of expected cash collections from sales, by month and in total. [15 marks] c. A Merchandise Purchases budget in units and dollars. Show the budget by month and in total. [10 Marks] d. A Schedule of Expected Cash Disbursements for merchandise purchases, by month and in total. [10 Marks] 2. A Cash Budget. Show the budget by month. [30 Marks] 3. A Budgeted Income Statement for the year ending June 30, 2024. [10 Marks] 4. A Budgeted Balance Sheet as of June 30, 2024. [10 Marks] 5. Because sales have increased after the opening of the new store, do you think that the company made a wise decision by opening the store. The owner could have invested the $50,000 interest-free Loan elsewhere earning an 8% interest annually. Explain your answer supported by numbers/calculations. [5 Marks] Note: Please make sure that you round off all the sales in units and other amounts. Because of this round-off, your Budgeted Balance Sheet may have a difference of around $5 to $20 between Total Assets and Total Liabilities. You may ignore this difference or add it to any account to balance. ACCT_252 Group Project Page 3 3 of 3