CASE STUDY: FINANCIAL BUDGET

Cattle Drover Ltd is a company producing a standard short-sleeved T-Shirt with the Cattle Drover logo
screen printed on the back. The company has prepared a set of operating budget as follows:
Schedule
Cattle Drover Ltd
Sales budget for the year ended !" #une $""%
&uarter
'ear
$ ! (
)nits *""" $*""" *+"" *$"" +*,""
)nit Selling -rice . /$" . /$" . /$" . /$" . /$"
0udgeted Sales /$"*""" /("*""" /!"*""" /$(*""" /(*"""
Schedule $
Cattle Drover Ltd
-roduction budget for the year ended !" #une $""%
&uarter
'ear
$ ! (
Sales 1Schedule 2 *""" $*""" *+"" *$"" +*,""
Desired 3nding
4nventory
("" !"" $(" $"" $""
Total 5eeds *("" $*!"" *,(" *("" +*6""
Less: 0eginning
4nventory
1%"2 1(""2 1!""2 1$("2 1%"2
)nits to be
-roduced
*$$" *6"" *((" *7" +*,$"
Schedule !
Cattle Drover Ltd
Direct materials purchases budget for the year ended !" #une $""%
-lain T-Shirts
&uarter
'ear
$ ! (
)nits to be -roduced
1Schedule $2
*$$" *6"" *((" *7" +*,$"
Direct 8aterials per
)nit
. . . . .
-roduction 5eeds *$" *6"" *((" *7" +*,$"
Desired 3nding
4nventory
6" (( 7 "7 "7
Total 5eeds *(" $*"(( *++7 *$77 +*%$7
Less: 0eginning
4nventory
1+%2 16"2 1((2 172 1+%2
Direct 8aterials to be
-urchased
*!+$ *%+( *($ *+" +*,7%
Cost per -lain T-Shirt . /7 . /7 . /7 . /7 . /7
Total -urchase Cost of
-lain T-Shirts
/%*$ /*$( /%*(,$ /7*6"" /!(*7"%
Schedule ! continued
4nk
&uarter
'ear
$ ! (
)nits to be -roduced
1Schedule $2
*$$" *6"" *((" *7" +*,$"
Direct 8aterials per
)nit
. ".+ . ".+ . ".+ . ".+ . ".+
-roduction 5eeds %! $%+ $7 ,( %+%
Desired 3nding
4nventory
$6 $$ , + +
Total 5eeds $$ !", $!! %6 %,!
Less: 0eginning
4nventory
12 1$62 1$$2 1,2 12
Direct 8aterials to be
-urchased
$" $,% $ ,$ %7$
Cost per 9ilogram . /, . /, . /, . /, . /,
Total -urchase Cost of
4nk
/*(", /*6(7 /*(,, /*$"( /7*"!(
Total Direct 8aterials
-urchase Cost
/6*+6 /!*"," /6*6(6 /%*"( /("*7($
Schedule (
Cattle Drover Ltd
Direct labor budget for the year ended !" #une $""%
&uarter
'ear
$ ! (
)nits to be -roduced
1Schedule $2
*$$" *6"" *((" *7" +*,$"
Direct Labor Time
per )nit
. ".$ . ".$ . ".$ . ".$ . ".$
Total :ours 5eeded (7.( $$% ,$.% !6.$ 7%7.(
;verage <age
per :our
. /$" . /$" . /$" . /$" . /$"
Total Direct Labor
Cost
/$*6$% /(*+7" /!*(+7 /$*,%( /!*,$%
Schedule +
Cattle Drover Ltd
=verheads budget for the year ended !" #une $""%
&uarter
'ear
$ ! (
0udgeted Direct Labor
:ours 1Schedule (2
(7.( $$% ,$.% !6.$ 7%7.(
>ariable =verhead
?ate
. /+ . /+ . /+ . /+ . /+
0udgeted >ariable
=verheads
/@!$ /*(" /%7( /767 /!*(!$
0udgeted Ai.ed
=verheads
*7(+ *7(+ *7(+ *7(+ *7(+
Total =verheads /$*!,, /$*,%+ /$*+"6 /$*!( /"*"$
Schedule 7
Cattle Drover Ltd
3nding finished goods inventory budget for the year ended !" #une $""%
)nit-Cost Calculation:
Direct 8aterials 1/7 B /."+2 /,."+
Direct Labor 1".$ hours C /$"2 /$.("
=verheads:
>ariable 1".$ hours C /+2 /".7"
Ai.ed 1".$ hours C /6.+62 /.+
Total )nit Cost /.$"
Ainished Doods: Logo T-Shirts
1$"" units . /.$"2
/$*$("
Schedule ,
Cattle Drover Ltd
Cost of goods sold budget for the year ended !" #une $""%
Direct 8aterials )sed 1Schedule !2 /("*!$7
Direct Labor )sed 1Schedule (2 /!*,$%
=verheads 1Schedule +2 /"*"$
0udgeted 8anufacturing Costs /7(*"77
0eginning Ainished Doods /*6%"
Doods ;vailable for Sale /77*"(7
Less: 3nding Ainished Doods 1Schedule 72 1/$*$("2
0udgeted Cost of Doods Sold /7!*%"7
Schedule %
Cattle Drover Ltd
Selling and administrative e.penses budget for the year ended !" #une $""%
&uarter
'ear
$ ! (
-lanned Sales in )nits
1Schedule 2
*""" $*""" *+"" *$"" +*,""
>ariable Selling and
;dministrative
3.penses per )nit
. /"." . /"." . /"." . /"." . /"."
Total >ariable
3.penses
/"" /$"" /+" /$" /+,"
Ai.ed Selling and
;dministrative
3.penses:
Salaries /7*""" /7*""" /7*""" /7*""" /$(*"""
-ower /+" /+" /+" /+" /$""
;dvertising /"" /$"" /!"" /+"" /*""
Depreciation /+" /+" /+" /+" /7""
4nsurance " " +"" " /+""
Total Ai.ed 3.penses /7*!"" /7*("" /,*""" /7*,"" /$7*(""
Total Selling and
;dministrative
3.penses
/7*("" /7*7"" /,*+" /7*%$" /$7*6,"
Schedule 6
Cattle Drover Ltd
0udgeted income statement for the year ended !" #une $""%
Sales 1Schedule 2 /(*"""
Less: Cost of Doods Sold 1Schedule ,2 1/7!*%"72
Dross 8argin /+"*6(
Less: Selling and ;dministrative 3.penses 1Schedule %2 1/$7*6,"2
=perating 4ncome /$!*$$(
Less: 4nterest 3.pense 1/%"2
4ncome 0efore 4ncome Ta. /$!*"((
Less: 4ncome Ta. 1/+*7""2
5et 4ncome /,*(((
Schedule "
Cattle Drover Ltd
0alance sheet as at !" #une $"",
;SS3TS
Current ;ssets:
Cash /+*$""
;ccounts ?eceivable /*!+"
8aterials 4nventory /($+
Ainished Doods 4nventory /*6%"
Total Current ;ssets /%*6++
-roperty* -lant* and 3Euipment:
Land /*""
0uilding and 3Euipment /!"*"""
;ccumulated Depreciation 1/+*"""2
Total -roperty* -lant* and 3Euipment /$7*""
Total ;ssets /!+*"++
L4;04L4T43S ;5D =<53?SF 3&)4T'
Current Liabilities:
;ccounts -ayable /*"""
=wnersF 3Euity:
?etained 3arnings /!(*"++
Total =wnersF 3Euity /!(*"++
Total Liabilities and =wnersF 3Euity /!+*"++
;dditional information:
a. ; minimum cash balance of /*""" is reEuired for the end of each Euarter. 8oney can be borrowed and
repaid in multiples of /*""". 4nterest is $G per year. 4nterest payments are made only for the amount of
the principal being repaid. ;ll borrowing takes place at the beginning of a Euarter and all repayment takes
place at the end of a Euarter.
b. =ne-Euarter of all sales are for cashH 6"G of credit sales are collected in the Euarter of sale and the
remaining "G are collected in the following Euarter. The sales for the fourth Euarter of $"", were
/%*""".
c. -urchases of direct materials are made on accountH %"G of purchases are paid for in the Euarter of
purchase. The remaining $"G are paid for in the following Euarter. The purchases for the fourth Euarter of
$"", were /+*""".
d. 0udgeted depreciation is /+(" per Euarter for overheads and /+" per Euarter for selling and
administrative e.penses 1see schedule + and %2.
e. The capital budget for $""% revealed plans to purchase additional screen-printing eEuipment. The cash
outlay for the eEuipment* /7*+"" will take place in the first Euarter. The company plans to finance the
acEuisition of the eEuipment with operating cash* supplementing it with short-term loans as necessary.
f. Corporate income ta. is appro.imately /+*7"" and will be paid at the end of the fourth Euarter 1Schedule
62.
g. The beginning cash balance eEuals /+*$"".
h. ;ll amounts in the budget are rounded to the nearest dollar.
i. The owners paid up their capital of /6"*""" for acEuiring land for company.
Required:
-repare cash budget for the year ended !" #une $""%* cash receipts pattern for $""%* and budgeted balance
sheet as at !" #une $""%I Show the calculationsI