Read the case (attached file) and answer base on the requirement below:
(using file Word) 1500 words
REQUIREMENTS:
1. Prepare a sales budget in good form.
2. Prepare a narrative report
explaining how your sales budget was determined. Use the table above in
your analysis. (Hint: Many companies would develop their budgets using
average sales and average unit costs.)
Whatever budget
determination method you use should be explained. In your explanation,
you should include a discussion of why you believe sales and selling
prices fluctuated last year.
3. Prepare a production budget in units.
4.
Prepare a purchases budget. Remember that you will need to purchase
enough materials to have the required ending inventories shown. You will
also need to purchase enough to manufacture and sell the products on
your sales forecast. Do not forget that you have beginning inventories.
5. Prepare a narrative report
explaining how you prepared the purchases budget. Be as detailed as
necessary to be sure that the president and general manager will
understand the calculations and costs.
6. Prepare a budgeted income statement.
7. Prepare a contribution margin income statement.
8. Prepare a narrative report explaining how the expenses on the income statement were determined.
9. Prepare a cash budget. Be sure that you show all cash inflows and outflows.
10. Prepare a narrative report explaining your cash budget process.
11. If necessary, prepare a capital expenditure budget. Explain your entries. Use only the facts in this case to prepare the budget.
Summary:
Your finished case will consist of six
or seven budgets (a sales budget, a production budget in units, a
purchases budget, a budgeted income statement, a contribution margin
income statement, a cash budget, and, if necessary, a capital
expenditure budget.)
You will also have
four or five narrative reports (a sales budget report, a purchases
budget report, an income statement report, a cash budget report, and an
explanation of your capital budget, if necessary).
Narrative
reports are reports that are in the form or a white paper that clearly
explains the numeric entries on your budgets. The length of the
narrative reports will depend on the particular report. In general, you
should be able to prepare the sales budget report on one or two pages,
the purchases budget report on one or two pages, the income statement
report on one page, and the cash budget report on one page. In this
case, the capital budget report would be less than one page. You should
not worry if one of your reports is more or less than the recommendation
given here—just be sure you cover all of the important points and
satisfactorily explain the numeric entries in your budget. Also, be sure
you explain the process of “how” your numbers were determined. In this
regard, it is not necessary or desirable to explain the exact
calculations. Consider your audience and prepare a report that would be
suitable for executives making plans and decisions for the upcoming
year.
1Harvey’s budget is adapted from a published case. (Source and citation are available upon request to faculty only).
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