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ACCT 241 - 04:  Principles of Managerial Accounting

Fall 2014 Semester Project:  Dream Big, Inc. Budget  

 

Project Objectives: 

Students will prepare a Comprehensive Master Budget and a Budgeted Income Statement for Dream Big, Inc. for the second quarter ending June 30.  This includes:

·        Sales Budget;

·        Production Budget;

·        Raw Materials Purchases Budget;

·        Direct Labor Budget;

·        Manufacturing Overhead Cost Budget;

·        Budgeted Cost of Goods Sold;

·        Selling and Administrative Expenses Budget;

·        Cash Receipts Budget;

·        Cash Disbursements Budget;

·        Cash Budget; and

·        Budgeted Income Statement.

Students will also perform a CVP analysis to determine the break-even point and complete a sensitivity analysis to a sales price change and a change in the cost of materials and labor. 

Project Requirements:   

 

I. (30 points)   Complete the Dream Big, Inc.Case on an individual basis using the Excel template found in the Project Folder on Blackboard. Enter your answer in the Worksheet tab labeled “Part I Answer.”    Use formulas in the cells for calculations(i.e., do not type in a total that you have determined with your calculator.)

 

II. (10 points)  Based on the base case, perform a CVP Analysis to determine the break-even point in units and sales dollars, margin of safety, and operating leverage factorfor Dream Big, Inc. for the Quarter Ended June 30.   You must show all calculations.    Enter your response on the Project Excel file in theWorksheet tab  labeled “Part II Answer.”   

 

III.  ( 10 points)  Determine Sales Revenue & Net Income for the 3-month period ending June 30, and the ending Cash Balance as of  June 30 assuming the unit Sales Price is expected to increase (effective April 1) to $22, and the labor rate is expected to increase to $11 per hour (also effective April 1).  Reconcile the changes. 

To solve this, use the Worksheets provided in the Project Excel file (i.e., the worksheet tabs  titled “If SP = $22,”  “If DL = $11,”  “If SP =$22; and DL = $11”).    In each Worksheet, start with the “Base Case” data (what you entered as “Part I Answer”) and then change the budget and/or financial statement data affected by the change to the Sales Price and/or the change to the Direct Labor costs.  For example, changing the unit sale price will cause changes to the sales budget, cash receipts budget, and summary cash budget… this will lead to a new Net Income and a new June 30 ending Cash Balance.   With changes to Sales and/or Labor costs, items such as inventory values will also change.    Complete the chart found on the Project Excel filein theWorksheet labeled “Part III Answer.”  

 

Note:  If you have used formulas for all calculations in the Excel spreadsheet, answering this question will be straightforward.   When completing the Excel Worksheets, check your work and make sure that the data in your schedules foots (that is, adds up) and cross-foots (that is, adds across) in an accurate and meaningful way.   Points will be deducted if the numbers don’t add up.   

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