THE MASTER BUDGET

A Package of Related Budgets

Capital
expenditure
Budget

Production
Sales Schedule / Cash
Forecast/ Cost Budget /
Budget Purchases Budget Budget

Operating Budgeted
Expenses Income
Budget Statement

Budgeted
Balance
Sheet

Operating Budget Financial Budget

6 - Master Budget
ABC COMPANY LIMITED
SALES FORECAST
FOR THE YEAR ENDING DECEMBER 31, 2021

2021 2021
Annual
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Units Units Units Units Units Units Units Units Units Units Units Units Units

1. Electronics
Video camera 0
Digital camera 0
Calculators 0
0 0 0 0 0 0 0 0 0 0 0 0 0

2. Home Appliances
TV 0
Refrigerator 0
Microwave oven 0
0 0 0 0 0 0 0 0 0 0 0 0 0

3. Computer
Desktop 0
Notebook 0
0 0 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 0 0

6 - Master Budget
ABC COMPANY LIMITED
BUDGETED SELLING PRICE
FOR THE YEAR ENDING DECEMBER 31, 2021

2021

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
$ $ $ $ $ $ $ $ $ $ $ $

1. Electronics
Video camera
Digital camera
Calculators

2. Home Appliances
TV
Refrigerator
Microwave oven

3. Computer
Desktop
Notebook

6 - Master Budget
ABC COMPANY LIMITED
SALES BUDGET
FOR THE YEAR ENDING DECEMBER 31, 2021

2021 2021
Annual
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
$ $ $ $ $ $ $ $ $ $ $ $ $

1. Electronics
Video camera 0
Digital camera 0
Calculators 0
0 0 0 0 0 0 0 0 0 0 0 0 0

2. Home Appliances
TV 0
Refrigerator 0
Microwave oven 0
0 0 0 0 0 0 0 0 0 0 0 0 0

3. Computer
Desktop 0
Notebook 0
0 0 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 0 0

6 - Master Budget
ABC COMPANY LIMITED
CASH BUDGET
FOR THE YEAR ENDING DECEMBER 31, 2021

2021 2021
Annual
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
$ $ $ $ $ $ $ $ $ $ $ $ $

Opening Cash Balance b/f 0 0 0 0 0 0 0 0 0 0 0 0 0

Cash Receipts:
Sales 0

Total Cash Available 0 0 0 0 0 0 0 0 0 0 0 0 0

Cash Payment:
Cost of goods sold 0
Rent paid 0
Tax payment 0
Purchase of machine 0

Total Payments 0 0 0 0 0 0 0 0 0 0 0 0 0

Ending Cash Balance c/f 0 0 0 0 0 0 0 0 0 0 0 0 0

6 - Master Budget
ABC COMPANY LIMITED
SALES FORECAST
FOR THE 5 YEARS ENDING DECEMBER 31, 2025

2021 2022 2023 2024 2025

1H 2H 1H 2H 1H 2H 1H 2H 1H 2H
$ $ $ $ $ $ $ $ $ $

1. Electronics
Video camera
Digital camera
Calculators
0 0 0 0 0 0 0 0 0 0

2. Home Appliances
TV
Refrigerator
Microwave oven
0 0 0 0 0 0 0 0 0 0

3. Computer
Desktop
Notebook
0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0

6 - Master Budget
Ex. 1

2021

2021
Sales Budget Jan Feb Mar

Credit sales 80%

Cash sales 20%
Total sales

Cash collections budget

Cash sales this month

Collection - current month sales 50%
Collection - 1 month after sales 40%
Collection - 2 months after sales 10%
Sales Budget Nov Dec Jan Feb Mar Apr May

Credit sales 80% 180,000 156,000 144,000 168,000 192,000

Cash sales 20% 36,000 42,000 48,000
Total sales 180,000 210,000 240,000

Cash collections budget

Cash sales this month 36,000 42,000 48,000
Collection - current50%
month sales 72,000 84,000 96,000
Collection - 1 month40%
after sales 62,400 57,600 67,200
Collection - 2 months
10%
after sales 18,000 15,600 14,400
188,400 199,200 225,600

Purchases budget Apr May Jun Jul Aug Sep Oct

Ending inventory 220,000 270,000 250,000

Cost of good sold, 60% of sales 264,000 210,000 240,000
Total needed 484,000 480,000 490,000
Beginning inventory 250,000 220,000 270,000
Purchases 250,000 180,000 234,000 260,000 220,000

Disbursements for purchases

this month's purchases 10% 23,400 26,000 22,000
1 month after purchases 80% 144,000 187,200 208,000
2 months after purchases 10% 25,000 18,000 23,400
192,400 231,200 253,400
Ex. 2
Purchases budget Jun Jul Aug

Ending inventory
Cost of good sold, 60% of sales
Total needed
Beginning inventory
Purchases

Disbursements for purchases

this month's purchases 10%

1 month after purchases 80%
2 months after purchases 10%
Purchases budget Apr May Jun Jul Aug Sep Oct
Ending inventory 220,000 270,000 250,000
Cost of good sold, 60% of sales 264,000 210,000 240,000
Total needed 484,000 480,000 490,000
Beginning inventory 250,000 220,000 270,000
Purchases 250,000 180,000 234,000 260,000 220,000
Disbursements for purchases
this month's purchases 10% 23,400 26,000 22,000
1 month after purchases 80% 144,000 187,200 208,000
2 months after purchases 10% 25,000 18,000 23,400
192,400 231,200 253,400
EX 3
EX 3 (30 MINUTES)

1. Schedule of cash collections:

January February March
Collection of accounts receivable:
................................................................ $ 33,000
Current month sales :
................................................................ 270,000 $157,500
1 month after sales
................................................................ 333,000
Sale of equipment ......................................... _______ _______ 15,000
Total cash collections .............................. $303,000 $481,500 $537,000

2. Schedule of cash disbursements:

January February March

Payment of accounts payable $ 66,000

.....................................................................
Current month purchases
................................................................ 189,000 $ 81,000
1 month after purchases :
................................................................ 210,000 $ 90,000
Cash operating costs .................................... 93,000 72,000 135,000
Total cash disbursements........................ $348,000 $363,000 $519,000

3. Schedule of cash needs:

January February March

Beginning cash balance………………………. $ 60,000 $ 60,000 $132,900

Total receipts……………………………………. 303,000 481,500 537,000
Subtotal……………………………………… 363,000 541,500 669,900
.
Less: Total disbursements…………………… 348,000 363,000 519,000
Cash excess (deficiency) before financing… 15,000 178,500 150,900
Financing:
Borrowing to maintain $60,000 balance.. 45,000 -0-
Loan principal repaid……………………… (45,000) -0-
Loan interest paid………………………….. _______ (600)* __-0-__
_
Ending cash balance…………………………… $ $132,900 $150,900
60,000
Ex 3

1. Schedule of cash collections:

January February March
Collection of accounts receivable:
................................................................ $ 33,000
Current month sales :
................................................................ 270,000 $324,000 333,000
1 month after sales 157,500 189,000
................................................................
Sale of equipment ......................................... _______ _______ 15,000
Total cash collections .............................. $303,000 $481,500 $537,000

2. Schedule of cash disbursements:

January February March

Payment of accounts payable $ 66,000

.....................................................................
Current month purchases
................................................................ 189,000 $210,000 294,000
1 month after purchases :
................................................................ 81,000 $ 90,000
Cash operating costs .................................... 93,000 72,000 135,000
Total cash disbursements........................ $348,000 $363,000 $519,000

3. Schedule of cash needs:

January February March

Beginning cash balance………………………. $ 60,000 $ 60,000 $132,900

Total receipts……………………………………. 303,000 481,500 537,000
Subtotal……………………………………… 363,000 541,500 669,900
.
Less: Total disbursements…………………… 348,000 363,000 519,000
Cash excess (deficiency) before financing… 15,000 178,500 150,900
Financing:
Borrowing to maintain $60,000 balance.. 45,000 -0-
Loan principal repaid……………………… (45,000) -0-
Loan interest paid………………………….. _______ (600)* __-0-__
Ending cash balance…………………………… $ 60,000 $132,900 $150,900
QUESTION 1

The budget committee of High-tech Manufacturing Company have derived the forecast below
for 6 months ending December 31, 2021:

Sales Purchase Salaries Administration Purchase Issue of

Volume Costs & Wages Expenses of Capital Share
(less Assets Capital
Depreciation)
Units $ $ $ $ $

May 8,000 24,000 16,000 14,000

June 8,400 26,000 16,000 14,000
July 9,000 28,000 16,000 14,000
August 9,200 36,000 20,000 14,000
September 9,600 32,000 20,000 14,000 40,000
October 10,000 28,000 20,000 16,000
November 7,600 24,000 24,000 16,000 60,000
December 6,000 24,000 24,000 16,000

Additional information:

( i) The selling price in May 2021 was $6 per unit and this is to be increased to $8 per
unit in October. 50% of sales are for cash and 50% on credit to be paid two months
later.
(ii) Purchases are to be paid for two months after purchase.
(iii) Salaries and wages are to be paid 75% in the month incurred and 25% in the
following month.
(iv) Administration expenses are to be paid in the month after they are incurred.
(v) The capital assets are to be paid for in three equal instalments from the month following
they are purchased. Receipts from the share issue are budgeted to be received in the
month of issue.
(vi) Depreciation for the period is $17,000.
(vii) Inventory at July 1, 2021 was equal to the previous two months purchases.
Inventory at December 31, 2021 is expected to be equalled to last three months purchases.
(viii) Cash balance at July 31, 2021 is $6,000.

REQUIRED:

(a) Prepare a monthly cash budget for the 6 months ending December 31, 2021; and
ANSWER 1

(a)
High-tech Manufacturing Company
Cash Budget
for the 6 months ending December 31, 2021
Jul Aug Sep Oct Nov Dec Total
$ $ $ $ $ $ $

Beginning balance 6,000

Receipts
Sales - Cash
Credit
Issue of Shares

Total cash available 6,000 - - - - - -

Payments
Purchases
Salaries & wages
Administration expenses
Capital Assets - instalment

Cash payments - - - - - - -

Ending balance 6,000 - - - - - -

ANSWER 1

(a)
High-tech Manufacturing Company
Cash Budget
for the 6 months ending December 31, 2021
Jul Aug Sep Oct Nov Dec Total
$ $ $ $ $ $ $

Beginning balance 6,000 3,000 (3,200) 30,600 28,200 16,400 6,000

Receipts
Sales - Cash 27,000 27,600 28,800 40,000 30,400 24,000 177,800
Credit 24,000 25,200 27,000 27,600 28,800 40,000 172,600
Issue of Shares 40,000 40,000

Total cash available 57,000 55,800 92,600 98,200 87,400 80,400 396,400

Payments
Purchases 24,000 26,000 28,000 36,000 32,000 28,000 174,000
Salaries & wages 16,000 19,000 20,000 20,000 23,000 24,000 122,000
Administration expenses 14,000 14,000 14,000 14,000 16,000 16,000 88,000
Capital Assets - instalment 20,000 20,000

Cash payments 54,000 59,000 62,000 70,000 71,000 88,000 404,000

Ending balance 3,000 (3,200) 30,600 28,200 16,400 (7,600) (7,600)

QUESTION 2

New Canadian Factory specialises in manufacturing and selling a single product.

The results for the year of 2016 are as follows:

$ $
Sales (1,000 units) 150,000

Materials (VC) 30,000

Labour (VC) 20,000
Administrative expenses (FC) 40,000
90,000

Net income 60,000

Information available for preparing the budget 2016:

(I) Selling price will be reduced by 5% and sales level will increase by 40%

(ii) Cost of materials is expected to increase by 5%.

(iii) There will be a 5% increase in the hourly wage rate.

(iv) The administrative cost inflation is expected to be 6% in 2016.

REQUIRED:

Prepare a budgeted income statement for the year 2016

ANSWER 2

Budgeted Income Statement

$

Sales 199,500
($150,000 x 95% x 140%)

Less:
DM: 30,000 x 105% x 140% 44,100
DL: 20,000 x 105% x 140% 29,400
O/H: 40,000 x 106% 42,400
115,900

Net income 83,600