Jessica Rabbit Case Project- 100 points
Jessica Rabbit and George Foreman are contemplating becoming business partners of an out-door grill company appropriately named, “Outdoor Chef Grill.” Jessica solicited George to be her business partner to prove to her husband, Roger, that she has more to offer than singing at cocktail lounges and drinking martinis. Jessica has been a customer of George Foreman’s grills for years, to cook low-fat foods and maintain her figure. George accepted her proposal, as he believes that Jessica’s name and image will bring in a new demographic of shoppers. Although Jessica is an outgoing lady, she has not managed her money and needs to obtain funding from her husband to buy into the company. Although Roger loves Jessica, he has asked to see budgets and forecasts for the revenue and expenses of the company. Since George’s finance department is in the process of preparing budgets for 4Q of 2016, he is having the finance department create a special monthly forecast budget for Roger as well as an annual forecast and budget. You, being one of George’s employees, is asked to prepare the monthly budget for October2016.
Budget Requirements:55 points
Using the information below, please prepare
1. Sales Budget including a schedule of expected cash collection.
2. Production Budget
3. Direct Materials budget including a schedule of expected cash disbursements.
4. Direct Labor Budget
5. MOH Budget including cash disbursements for overhead
6. S&A budget including cash disbursements for S&A
7. Budgeted Income Statement.
a. When calculating COGS please illustrate how you computed the COGs per unit.
8. Cash Budget
For Budgets 1-6:There are two product lines, Master & Backyard, prepare only 1 of each budget above that includes the data for both products. Both Product Lines should appear on the Budgets and not be combined. This will require some creative thinking in regards to the layout of the budgets.
For Budgets 7 & 8: The financial data will NOT BE SEPARATED BY PRODUCT LINE and all numbers will be combined. For example, on the Income Statement, there will be one Revenue number that includes the revenue from both Backyard and Master.
For Budgets 1-8: If rounding is necessary, please round to two decimals.
The budgets are to be completed in Excel. Please use the Excel File uploaded on Blackboard.
The Excel Requirements are as follows:
1. Each Budget will appear in an individual worksheet with the each Tab labeled with appropriate Budget’s Name.
2. All calculations must be completed in excel using formulas. The formulas must reference other cells (within the Excel workbook) in the calculations. In other words, you will not be manually inputting numbers in the formulas but instead referencing other cells in the workbook.
3. The following are the minimumFormularequirements for each budget.
a. Sales Budget – minimum of 9 cells that contain formulas.
b. Production Budget – minimum 6 cells that contain formulas
c. DM Budget – minimum 20 cells that contain formulas
d. DL Budget – minimum of 8 cells contain formulas
e. MOH Budget – minimum 5 cells that contain formulas
f. S&A Budget – minimum 3 cells that contain formulas
g. COGS calculations: All numbers (DM, DL, VMOH, FMOH) should be cell referenced from appropriate budget worksheets within the Excel Workbook. Minimum 6 cells that contain formulas. Cell Referencing is not included in the minimum 6 formula count.
h. Income Statement: Minimum 3 cells that contain formulas. All other line items that do not include a formula, should be entered by cell referencing from another worksheet within the Workbook.
i. Cash Budget: Minimum 4 cells that contain formulas. 6 cells should contain information from cell referencing other worksheets within the workbook.
Presentation Requirements:15 points
Each Budget must have a layout that is “reader friendly.” The audience for these budgets are “managers” who are not accountants and want to find the information easily. When creating the layout of the budget, please consider the message you are communicating to management. Please feel free to use various fonts, sizes, and color schemes to help emphasize areas of the budget.
Please refer to the budget examples in your textbook for additional information. Also, Excel offers budgets templates and remember the Internet is at your fingertips too!
The caseis tobe completed in teams of 2. You will have threeweeks to complete the project. You may ask Sheila, other instructors, or tutors from the Academic Support Center for help or clarification but collaborating with other students is not permitted. Any evidence of collaboration will result in a zero for the assignment and possible withdraw from the class. The project will be worth 10% of your final grade.
Selected information concerning sales and production for October2016 is summarized as follows:
a. The sales budget must be divided up by product (Backyard and Master) but not required to be divided by location.
Estimated sales for October by sales territory:
Backyard Chef 280 units at $750 per unit
Master Chef 250 units at $1,500 per unit
Backyard Chef 210 units at $800 per unit
Master Chef 160 units at $1,600 per unit
Backyard Chef 305 units at $850 per unit
Master Chef 275 units at $1,700 per unit
Estimated sales for November for all territories:
Backyard Grills 620 grills
Master Grills 1,150 grills
Outdoor Chef Grill has a beginning accounts receivable balance of $550,000 in the month of October and expects to collect 30% of that balance. In addition, their accounting department has estimated that 80% of sales for the Master Grill will be paid in cash and 70% of the Backyard grill will be paid in cash.
b. Inventory of Grills
Beginning Inventory of Grills:
Backyard Chef 36 units
Master Chef 18 units
Outdoor Chef Grill has established a new ending inventory policy to take effect the month of October. From October and going forward, the ending inventory should be:
Backyard Chef 5% of November’s sales
Master Chef 2% of November’s sales.
c. Estimated direct material inventories at October 1:
Direct materials (available for the Master and Backyard Grill):
Grates 300 units
Stainless steel 1,800 lbs.
Burner subassemblies 150 units
Shelves 300 units
Desired inventories at October 31:
Direct materials (available for the Master and Backyard Grill):
Grates 320 units
Stainless steel 2,100 lbs.
Burner subassemblies 135 units
Shelves 285 units
d. Direct materials used in production:
Direct Materials required to produce one Backyard Chef Grill:
Grates 3 units per unit of product
Stainless steel 24 lbs. per unit of product
Burner subassemblies 2 units per unit of product
Shelves 4 units per unit of product
Direct Materials required to produce one Master Chef grill:
Grates 6 units per unit of product
Stainless steel 42 lbs. per unit of product
Burner subassemblies 4 units per unit of product
Shelves 5 units per unit of product
Anticipated purchase price for direct materials:
Grates $16 per unit
Stainless steel $5 per lb.
Burner subassemblies $125 per unit
Shelves $8 per unit
Because of their excellent relationships with the vendors, they pay the following percentages when placing their order:
Stainless Steel: 25%
Burner subassemblies 5%
Shelves 2%, if pay the entire balance within 35 days.
e. Direct labor requirements for one grill:
Stamping Department 0.60 hr. at $17 per hr.
Forming Department 0.80 hr. at $14 per hr.
Assembly Department 2.0 hrs.at $12 per hr.
Stamping Department .80 hr. at $17 per hr.
Forming Department 1.50 hrs. at $14 per hr.
Assembly Department 2.50 hrs. at $12 per hr.
f. Outdoor Chef Grill Company budgeted the following costs for anticipated production in October. The list below includes fixed MOH expenses and Fixed S&A expenses
Advertising Expenses $24,000
Sales monthly salary (not commission) $7,500
Factory Insurance $5,000
Production Supervisor Salary $4,900
Executive officer salaries $25,000
Indirect Labor Salaries for Quality Control $2,800
Factory Depreciation $4,000
Corporate Office Building Depreciation, $3,000
Total estimated VMOH expenses are $41,000 for the month of October. VMOH expenses are allocated to the products based on a single PDOR rate using the allocation base, Direct Material Cost.
FMOH is assigned to the products based on DL hours.
Note: You will have two PDOR’s for this assignment.
Variable S&A expenses are allocated at rate of $3 per grill.
g. Other Information:
a. Income Tax Rate is 35%
b. Minimum Cash Balance $500,000
c. Beginning Cash Balance $750,000