, prepare the following budgets for the twelve-month period from January 2018 to December 2018.

Management accounting

Management accounting

Due before end of December ie 30

This assignment is worth 30 marks

Sun Worship Leisure Wear manufactures swimwear and accessories for men and women. They operate out of rented premises in Burleigh Heads where the factory is split into a manufacturing and storage area and a retail space.

The business produces 4 products:

• Bikinis for women

• Board shorts for men

• Beach Towels

• Beach Bags

You, as the management accountant for the firm, have been asked to prepare a range of budgets for the 2018 year. The following information has been gathered:

Sales Bikini Board short Towel Beach Bag

January 2018 1,600 1,200 200 400

February 2018 1,400 1,100 180 300

March 2018 1,300 1,160 160 260

April 2018 1,000 1,000 120 140

May 2018 400 600 60 80

June 2018 500 700 40 40

July 2018 400 500 40 40

August 2018 200 400 40 40

September 2018 1,300 1,160 160 260

October 2018 1,200 1,100 180 300

November 2018 1,200 1,100 180 300

December 2018 1,500 1,200 200 400

January 2019 1,600 1,400 220 440

February 2019 1,400 1,200 200 400

Bikini Board short Towel Beach Bag

Selling Price $100 $75 $55 $45

Product Bikini Board short Towel Beach Bag

Direct Materials & Direct Labour per unit

Fabric $18.75 $31.25 $26.25 $25

Elastic/Trim $13.50 $3.00 $5.25 $1.5

Direct Labour (sewing time/machine hours)

1 hour 0.75 hours 0.4 hours 0.6 hours

Other Cost information: Production Related Costs Operating Costs

Direct Labour $28/hour

Indirect Labour $1/unit

Indirect Materials $2/unit

Utilities $550/month $50/month

Insurance $2,400/year $6,000/year

Factory Supervisor’s Salary $52,000/year

Administration Staff Wages $2,500/month

General Office Expenses $1,500/month

Rent $5,600/month $1,400/month

Repairs and Maintenance See below

Inventory: At the end of each month the business plans to have 50% of the following month’s sales units in stock as finished goods and 75% of the direct materials required for the next month’s production.

Cash Collections: 20% of sales are through the retail outlet at the factory. These customers pay for their purchases at the time of sale. The remainder of sales are to businesses that resell Sun Worship Leisure Wear products. Credit is extended to all business customers. It is estimated 60% of these sales are collected in the month of sale and the remaining 40% are collected in the following month.

Cash Payments: All purchases, other than the purchase of direct materials, are paid at the time the expense is incurred. It is estimated 30% of accounts payable will be paid in the month the direct materials are purchased and the remaining 70% will be paid in the following month.

The interest rate payable on the loan is 6% per annum. Interest is paid monthly. The loan is on an interest only basis and the principle can be repaid at any time.

Depreciation of plant and equipment totals $9,000 for the year. Depreciation is recorded monthly.

Repairs and maintenance related to manufacturing plant and equipment is estimated to be $2,500 each quarter payable in March, June, September, and December.

Variable manufacturing overhead is allocated based on machine hours.

Fixed manufacturing overhead is allocated based on units of production.Ignore GST and Income Tax. Round amounts other than unit costs to nearest dollar value.

The opening Balance Sheet is provided below:

Sun Worship Leisure Wear

Balance Sheet

As at 31 December 2017


Current Assets

Cash 32,250

Accounts Receivable 123,650

Finished Goods Inventory 99,150

Materials Inventory 114,375

Total Current Assets $369,425

Non-current Assets

Equipment 85,000

Less: Accumulated Depreciation ( 8,000)

Total Non-Current Assets $77,000

Total Assets $446,425

Liabilities & Shareholder Equity

Current Liabilities

Accounts Payable 92,500

Total Current Liabilities $92,500

Long-Term Liabilities

Bank Loan 175,000

Total Long-Term Liabilities $175,000

Total Liabilities $267,500

Shareholders’ Equity

Share Capital 150,000

Retained Earnings 28,925

Total Shareholder Equity $178,925

Total Liabilities & Shareholders’ Equity $446,425


1. Using Excel, prepare the following budgets for the twelve-month period from January 2018 to December 2018. The first worksheet should contain your raw data and assumptions and all future worksheets should be linked to this data. Use a different worksheet for each budget. Show all calculations and use Excel functions where possible. While you should use examples in your text as a guide, the key to using spreadsheets is that they are structured so that others can use them and follow the flow of information without difficulty.

a. Monthly Sales Revenue and Cash Collection Budget

b. Production Budget in Units

c. Direct Materials and Cash Purchases Budget

d. Direct Labour Budget

e. Manufacturing Overhead Budget (break into variable and fixed components)

f. Monthly Operating Cost Budget

g. Ending Inventory budget for Finished Goods

h. Cost of Sales Budget

i. Budgeted Income Statement for the year ended 31 December 2018

j. Monthly Cash Budget

Your budget spreadsheet must be submitted in Excel Format (not as an appendix in your WORD document).

2. Write a report (Maximum 1,500 words) for your manager to present to the upcoming Board meeting. The report should include:

• an overview of the expected results for the 2018 year;

• an analysis of the Contribution Margin for each product and recommendations regarding the products Sun Worship Leisure Wear manufacture and sell;

• recommendations regarding the cash position of the business; and

• an analysis of current market conditions and future predictions that you believe should be considered when the 2019 budget is prepared. You should use broader industry data and trends from sources such as IBISWorld and the Australian Bureau of Statistics to support your recommendations.

• Use visual aids such as tables and graphs to enhance your report presentation.

The report should be submitted as a WORD (not PDF) document.

Please use the templates provided to prepare the:

(1) Budget schedules (excel); and

(2) Board Report (word)

Assessment Criteria Poor Unsatisfactory Satisfactory Good Excellent

Spreadsheet layout and presentation (2.5 Marks)

Spreadsheet Layout including Raw Assumptions & Data, appropriate tabs correctly named for each section of the budget and use of Excel tools in spreadsheet.

Insufficient data. Spreadsheet has not been separated into worksheets. Inappropriate layout.

Poor use of Excel tools.

0 Marks Use of Worksheets but layout is difficult to follow. Worksheets have not been named.

Limited use of Excel tools.

Inconsistencies throughout.

1 Mark Use of appropriately named Worksheets. Reasonable use of Excel tools but application is inconsistent.

Reasonable layout.

1.5 Marks Use of appropriately named Worksheets.

Consistent use of Excel tools.

Layout appropriate but lacks consistency in some areas.

2 Marks Use of appropriately named Worksheets. Very good use of a range of Excel tools. All worksheets are linked resulting in a consistent flow of data between worksheets.

2.5 Marks

Preparation of Budgets (12.5 Marks)

For each Budget:

Appropriate layout (monthly) broken into product categories; Clear Headings; Accurate calculations for monthly totals and annual totals. Budgets are mostly inaccurate and incomplete. An understanding of the application of the course content in a business context has not been demonstrated.

0-2.5 Marks Some Budgets are accurate but there are inconsistencies in the data or basic calculations are incorrect. Assignment instructions have not been followed and key items have been left out.

3-6 Marks Most budgets are accurate but there are inconsistencies in the data or basic calculations. Key items have been included and a reasonable understanding of the application of course content has been demonstrated.

6.5-9 Marks All budgets have been prepared and are mostly accurate – minor errors arising from careless mistakes and lack of attention to detail. A very good understanding of the application of course content has been demonstrated.

9.5-10.5 Marks All budgets have been accurately prepared. An excellent understanding of course content has been demonstrated and executed.

11-12.5 Marks

Report for the Board (15 Marks)

The report must be professionally presented and cover all issues raised in the assignment instructions. A business report format must be used along with visual aids such as tables and graphs. Presentation is unprofessional with numerous spelling and grammatical errors and it does not cover the key requirements set out in the assignment instructions.

Inadequate analysis.

Not presented in the format of a business report.

Very limited use of visual aids.

0-3.25 Marks Presentation is reasonable but the key issues have not been adequately addressed. Spelling and grammatical errors make the report unpresentable requiring the report to be rewritten before it could be presented. Opinions expressed lack insight, are unsupported (inadequate referencing) or referenced external sources lack relevance. Not all aspects of a business report format have been utilised. Limited use of visual aids.

3.5-7 Marks Presentation is reasonable and the key issues have been addressed but more insight into the business could be demonstrated. Opinions expressed are unsupported (inadequate referencing) or referenced external sources lack relevance. Some minor spelling and grammatical errors. Most components of a business report format have been incorporated. Reasonable use of visual aids.

7.5-11 Marks Good, well written presentation and all issues have been covered. Demonstrates a solid insight into the business and recommendations are appropriate. Relevant external sources (at least 2) have been used to support recommendations and these have been appropriately referenced. All components of a business report format have been incorporated. Good use of visual aids.

11.25-12.75Marks Excellent presentation with no spelling or grammatical errors.

Demonstrates excellent insight into the business operations and external issues that may affect the business.

Extensive use of relevant external resources to support recommendations. Appropriate referencing. All components of a business report format have been incorporated. Excellent use of visual aids.

13-15 Marks

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