You are an accountant working for a local accounting firm based in Ballina. You have been assigned
Question:
You are an accountant working for a local accounting firm based in Ballina. You have been assigned a new client,?Ice Blox!, the company behind?Flyin' Fox ice blox?(a boutique, family owned ethical business who hand craft award winning ice blox's in Murwillumbah).
Benna and her husband John launched their ice blocks back in 2009. Originally from the UK, they were in awe of the top quality fruit available here in Australia and identified a gap in the market for a range of quality ice blocks. At the forefront of the small batch, artisan ice block movement Flyin' Fox ice blox have reinterpreted the Australian ice block tradition.
They have requested for you to make a master budget for Flyin' Fox ice blox for 2021 which allows them to plan, work through "what if" scenarios and help them to make informed decisions to ensure their business continues to operate successfully into the future, particularly considering the impact of COVID-19 on the Australian economic circumstances in 2020.
The following information has been gathered about their business:
- Operations: Flyin' Fox ice blox operate on a calender-year basis. The business runs out of owned premises in Mullumbimby. Their sales team have provided the expected quarterly sales per carton of ice block. Each carton has 20 ice blocks.
- Plant and Equipment: Depreciation on the Plant and equipment totals $10,000 per quarter.
- Cash collections: The company expects to collect 80% of its credit sales in the quarter of sale and the remaining 20% of credit sales will be collected in the quarter after sales. The company's bad debts are negligible.
- Payments: The company plans to pay for 50% of its material purchases within the quarter of purchase and the remaining 50% in the following quarter.
- Ignore GST and Income Tax.
- All of the budget assumptions have been provided to you in a budget template ready for you to use to make the Master Budgets. Below are some screenshots of these assumptions.
Corporate Finance and Investment decisions and strategies
ISBN: 978-1292064062
8th edition
Authors: Richard Pike, Bill Neale, Philip Linsley