Budgeting Products: Coffee Beans

ACCT2031 Managerial Accounting

Budgeting Assignment

Due:  April 5, 2020

This is an individual assignment; please ensure you hand in original work.

Please ensure that you provide a 3-4 page, written report that includes all of your assumptions and conclusions.  In addition, provide an Excel workbook (use the demo sample worksheet provided) with all of your calculations.  Your report must include a cover sheet that has all of the following information:

• Your name
• Your student number
• Course name
• Course code
• My name
• Due date
• Assignment name

This assignment is worth 10% of your final grade.

Turn in a three to four page (12-point font, double-spaced with 2.5 cm margins).  The paper should include your budgets for each of the three months and for the quarter in total.  These budgets must be created in Excel, but can be imported into the Word document for final presentation.  The Excel workbook must also be submitted.

Budgeting for a Single Product.

In this case, you will create budgets for a single product for each of the months in an upcoming quarter.  Select a product that you could purchase in large quantities (e.g. at a warehouse sale or bulk store) and repackage into smaller quantities to offer for sale at a sidewalk café, event, flea market, or other similar venue.  Choose a selling price for the smaller (repackaged) items.  Make reasonable assumptions about how many of the smaller units you can sell in each of the next four months (you will need the fourth month’s sales in units for the operating budgets).

Steps:

1. Describe your product.  What is your cost of this product?  What size (quantity) will you purchase?  At what price will you sell your repackaged product?  Make projections of your sales in units in each of the upcoming three months.
2. Estimate how many hours you will spend in each of the upcoming three months doing the purchasing, repackaging, and selling.  Select a reasonable wage rate for yourself.  What will your total labour costs be in each of the upcoming three months?  What (if any) charge will there be for your sales venue (e.g. table cost for a flea market, commission to the café owner)?
3. Prepare a sales budget for each of the upcoming three months.
4. Prepare the direct material budgets for the upcoming three months, assuming that you need to keep 10% of the direct materials needed for next month’s sales on hand at the end of each month (this requirement is why you needed to estimate unit sales for four months).
5. Prepare a direct labour budget (for your labour) for each of the upcoming three months.
6. Think about any other expenses you are likely to have (i.e. booth rental fees, or a vendor license).  Prepare the operating expenses budget for each of the upcoming three months.
7. Prepare a pro forma (budgeted) income statement that reflects the budgets you prepared, including the sales budget, direct materials, direct labour budget, and operating budget.  Have one column for each of the three months, and a total column that shows total income and expenses for the entire quarter.