The focus of this project is to create a master budget for the Williams Company based on the companys industry outlook, recent company outcomes, and the companys business rules. You will create a master budget for Williams Company, including their
The focus of this project is to create a master budget for the Williams Company based on the company’s industry outlook, recent company outcomes, and the company’s business rules. You will create a master budget for Williams Company, including their cash budget and the proforma financial statements.
Master Budget Project Details
This project is a master budgeting project using the Williams Company scenario presented below. Complete your master budget using the provided Excel spreadsheet template (i.e., Williams Company Template.xlsx) and submit the completed in this budget template using the submission link in this BBL folder.
The Williams Company manufactures PVC piping in long pipes which a finish manufacturer purchases and cuts to length for sale to retailers. Williams Company manufactures their piping using resin, sheets of raw PVC, and direct labor.
The Williams Company has the following balance sheet as of December 31st.
Balance Sheet on December 31st
Plant and Equipment
Less: Accumulated Depreciation
Liabilities and Stockholders’ Equity
Accounts Payable to Suppliers
Total Liabilities and Equity
The information shown below is extracted from the records of the Williams Company.
The Williams Company has projected its unit sales for the next five months to be:
All sales are made on accounts receivable. Each unit of PVC sells for $60. Forty percent of all sales are collected in the month of the sale. The remaining 60% of the sales are collected in the following month. May consider bad debts as non-existent.
Williams Company has a management rule that at the end of each month the ending finished goods inventory of PVC must be 20% of the following month’s forecasted sales. Williams Company’s finished goods inventory on December 31st consists of 1400 units of PVC piping.
In order to produce one unit of PVC pipe, the following units of raw PVC and resin are used.
The price of raw PVC sheets is now $4.00 per unit. The price of resin is $2.80 per unit. Management desires to maintain ending raw materials inventories for raw PVC and resin at 25% of the next month’s production needs. William Company’s December 31st raw material holdings were 18,000 units of raw PVC (at $4.00 per unit) and 10,800 units of resin (at $2.80 per unit).
Seventy percent of all purchases (raw PVC and resin) are paid in the month of purchase. The remaining 30% is placed on an account payable and paid the following month.
The production of PVC by Williams Company requires 30 minutes of direct labor time to complete. All labor costs are paid in the month incurred. Each hour of direct labor costs Williams Company $24.
Factory overhead is applied at the rate of $12 per direct labor hour. Actual overhead costs are paid as they are incurred. Monthly differences between applied and actual overhead costs are expected to be negligible.
Selling and Administrative expenses are $10,000 per month plus 10% of sales. All these expenses are paid in the month in which they are incurred.
Plant and equipment depreciate at the rate of $12,000 per year. This depreciation is incurred evenly throughout the year and is included in the factory overhead costs mentioned earlier.