Term Paper

On
Master Budget: A study on Olympic Gold
Battery
Submitted to:

Shakila Halim
Assistant Professor
Department of Finance
Faculty of Business Studies
University of Dhaka

Course Title: Managerial Accounting

Course Code: F-619
Submitted by:
Name
Md. Nur Hossain Khan
Mohammad Abdullah-Al-Maruf
Khairunnahar
Shewty Talukdar
Ummey Habiba

ID
24007
25046
26079
27016
27069

Section-A; Department of Finance

Master of Business Administration (Evening)
Faculty of Business Studies
University of Dhaka

Date of Submission: Saturday, 13 August 2016

Letter of Transmittal
13 August 2016
Shakila Halim
Assistant Professor
Department of Finance
Faculty of Business Studies
University of Dhaka
Subject: Submission of term paper on master budget: A study on Olympic Gold Battery
Dear Madam,
We are pleased to submit the report you have assigned to us. The report paper aims at preparing the
term paper on the course named Managerial Accounting Course: F619, as a part of our
academic activities.
This study has given us the opportunity to learn the foundations of management accounting and
also given us the practical experience by going through a relative example. The master budget that
we have studied through this report will help us in our future, indeed.
We would like to convey our special thanks and gratitude to you for patronizing our effort & for
giving us proper guidance and valuable advice. We have tried our best to cover all the relevant
fields.
Please let us know if you want to suggest us something more to improve this report. We will be
glad to get your valuable advice. We have tried our best to make this report a fault free one and we
hope that you will take any unintentional mistake with kind consideration.

Sincerely yours,
Name
Md. Nur Hossain Khan
Mohammad Abdullah-Al-Maruf
Khairunnahar
Shewty Talukdar
Ummey Habiba

Term Paper on Master Budget

ID
24007
25046
26079
27016
27069

Page 1

Table of Content
Chapter
Chapter-1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
Chapter-2
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
2.11
2.12
2.13
2.14
2.15
Chapter-3
3.1
3.2
3.3
Chapter-4
4.1
4.2
4.3

Topic
Executive Summary
Introduction
About the company
Corporate Profile
Milestones
Membership
Production facilities
Sales and distribution network
Products/Brands
Master Budget
The Basic Framework of Budgeting
Advantages of Budgeting
The Master Budget: An Overview
Preparing the Master Budget
The Sales Budget
The Production Budget
Inventory PurchasesMerchandising Company
The Direct Materials Budget
The Direct Labor Budget
The Manufacturing Overhead Budget
The Ending Finished Goods Inventory Budget
The Selling and Administrative Expense Budget
The Cash Budget
The Budgeted Income Statement
The Budgeted Balance Sheet
Master Budget for Olympic Gold Battery
Olympic Gold
Data for Master Budget
Data Analysis and Interpretation
Conclusion
Summary
Data used
Limitations
Appendix

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Page
3
4-6
4
4
4-5
5
5
5
6
7-11
7
7
7-8
8
8
9
9
9
9-10
10
10
10
10-11
11
11
12-16
12
12
15-16
17
17
17
17

Executive Summary
Olympic Industries Limited is one of the longest running and most reputed manufacturing-based
companies in Bangladesh, with a heritage of over 50 years and group profile including interests in
Pharmaceuticals, Power, and Information Technology, among other FMCG. Olympic Industries
Limited has Biscuit Factory, Battery Factory, Ball Pen Factory, and Confectionery Factory. Our
assignment is preparing master budget and we chose the Olympic Gold Battery a profitable and
leading market product of the company. For the simplicity of the information and easy calculation
we have used only one product for the report. A budget is a quantitative plan for acquiring and
using resources over a specified time period. It has many advantages. The master budget consists of
a number of separate but interdependent budgets that formally lay out the companys sales,
production, and financial goals. The master budget culminates in a cash budget, a budgeted income
statement, and a budgeted balance sheet. We have prepared a master budget based on the estimated
sales of 1,100,000 units of battery at 12 taka per unit. Cost per unit is Tk. 4.30 under absorption
costing and Tk. 3.74 under variable costing. Sales pattern follow a seasonal movement higher in
summer and rainy season. Total cash collection is Tk. 13,028,760. Total manufacturing overhead
require Tk. 1,735,000, direct raw material Tk. 4,950,000, direct labor Tk. 3,300,000, budgeted
selling and administrative expenses of Tk. 1,457,000. Cost of goods sold under absorption costing
will be Tk. 10,239,152 and under variable costing Tk. 9,624,352. Total cash collection during the
year would be 13,228,760 and total cash disbursement would be Tk. 11,824,117 and resulting
ending cash balance would be Tk. 1,545,333. The master budget provides significant value addition
to the company. Though we have some data limitations, we believe this report can be basis for
understanding and learning scope for master budget.

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Chapter-1: Introduction
1.1 About the company
Overview
Olympic Industries Limited is one of the longest running and most reputed manufacturing-based
companies in Bangladesh, with a heritage of over 50 years and group profile including interests in
Pharmaceuticals, Power, and Information Technology, among other FMCG. Starting with steel
production dating back to 1950, Olympic has steadily diversified over the years into various
consumer goods including biscuits, confectioneries, batteries, and ball pens, with over 40 brands
and 53 SKUs. The company has gotten to where it is today by staying true to its core beliefs, in
providing high quality, innovative products which its consumers can rely on.
Olympic Industries Limited is currently the market leader in the biscuit market and second in
position in the battery market in Bangladesh. It has been able to stride forward due to its continuous
vision for growth, its modern manufacturing facilities, and its extensive sales and distribution
network, and it has always yielded this influence to give back to the community.
Olympic Industries Limited is a public listed company and is trading on the Dhaka Stock Exchange
and Chittagong Stock Exchange.

1.2 Corporate Profile

Olympic Industries Limited began in June 1979 as Bengal Carbide Limited, starting battery
production in April 1982. The success of the battery unit, as well as the trust of its customers in its
goods led to the massive diversification of its product line. Today, Olympic's production line
includes three types of dry cell batteries (UM1, UM3 & UM4), a wide range of biscuits, two types
of handy ballpoint pens (Refill & Direct Filling) and even confectionery items.
The driving force behind all of Olympic Industries Limited's products is quality. Olympic is very
aware that when the customers buy its products, they expect to find a goods of a high caliber a
trait that compels them to buy Olympic's goods again. In turn, the company does its level best to
maintain and continuously improve the range of products to cater to the customer's tastes and
expectations. Olympic Industries Limited is a public limited company, trading on both the Dhaka
Stock Exchange and Chittagong Stock exchange.
Over the last 30 years, it has grown to be the one largest manufacturers, distributors and marketers
of fast moving consumer goods in Bangladesh. Its mission has always been to provide goods and
services that can compete with international standards, but more importantly, Olympic aims to
improve the quality of life for all of its customers & stakeholders.

1.3 Milestones

June 1979: Incorporation as Bengal Carbide Limited

April 1982: Commencement of UM-1 Battery Production

June 1984: Listing on Dhaka Stock Exchange Limited

September 1987: Commencement of Soyabean Oil & Vegetable Ghee Production

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September 1991: Addition of Palm Oil & Olein Capacity

August 1995: Expansion of Production Capacities to Produce UM-3 Batteries

June 1996: Name Change to Olympic Industries Limited

September 1996: Listing on Chittagong Stock Exchange Limited

December 1996: Commencement of Biscuit & Confectionery Production

January 1998: Commencement of Ballpoint Pen Production

November 1998: Commencement of Electric Bulb Production

July 2003: Olympic installs its Second Biscuit Production Line

July 2008: Olympic Install its Third Biscuit Production Line

August 2008: Completion of Amalgamation of Tripti Industries Limited with Olympic

Industries Limited

1.4 Membership
Listings
Dhaka Stock Exchange Limited (since 9/6/1984)
Chittagong Stock Exchange Limited (since 19/9/1996)
Leading brand in the country
Top Ten Awards from DSE
Award for the best ad of all time
Memberships
Bangladesh Association of Publicly Listed Companies (since 1/7/1999)
Metropolitan Chamber of Commerce and Industry
Bangladesh-Malaysia Chamber of Commerce and Industry
Bangladesh Auto Biscuits and Bread Manufacturers Association
Bangladesh Agro Processors Association

1.5 Production facilities

In 1982 Olympic Industries Limited was the first Industry to introduce the best modern technology
for producing the consumer goods. In 1996 Olympic launched Olympic Energy Biscuit which is
still the pioneer in biscuit category. The automated machine for biscuit was first introduced by
Olympic Industries Limited. On the other hand, Olympic Industries Limited first introduced the Pin
Point Ball Pen in this country as Olympic Fine Ball Pen. These were only possible because of the
best technology, league with multinationals, best team for operations, best team for maintenance
and strong quality control system in every step by which Olympic Industries Limited is still leading
the market and continuing the modifications in each and every step for coping up with the global
quality and even for providing the best quality products in world wild market.
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No. of factories:
1. Biscuit Factory
2. Battery Factory
3. Ball Pen Factory
4. Confectionery Factory

Area : 2,09,089 Square Feet

1.6 Sales and distribution network

Olympic Industries Limited has perhaps the most extensive sales and distribution network in
Bangladesh, with a field force of just under 1,000 people representing each and every region of the
country, boasting Olympics products in even the most far-reaching, remote corners of the nation.
The Sales Force uses over 300 distributors nationwide and sells products to a total of over 4,00,000
outlets across the country. Moreover, Olympics products are prominently displayed on the store
signs of over 1,00,000 stores nationwide. In addition, the Sales Force is equipped with the latest
mobile devices and technology to ensure their operations are as seamless and automated as
possible.

1.7 Products/Brands

Biscuits
o Energy Plus
o Crack Jack
o Tip
o Olympic G Orange
o Olympic G Elachi
o New Glucose
o Milk Plus
o Elachi Plus
o OlympicGS
o Marie Gold
o Milk Marie
o Choco Marie
o Coconut Plus
Confectionery
o Olympic Creamy Caramel
o Olympic Green Mango
o Olympic Choco Funn
o Olympic Tasty Milk

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Batteries
o Olympic Battery
o Olympic Digital
o Olympic Gold
o Olympic Laser
o Olympic Power
Ball Pens
o Olympic Fine Ball
o Olympic Hi Gel
o Olympic Soft Gel
o Olympic PP Gel
o Olympic Rainbow Gel
o Olympic Super Gel
o Olympic Clear

Term Paper on Master Budget

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Chapter-2: Master Budget

2.1 The Basic Framework of Budgeting
A budget is a quantitative plan for acquiring and using resources over a specified time period.
Individuals sometimes create household budgets that balance their income and expenditures for
food, clothing, housing, and so on while providing for some savings. Once the budget is
established, actual spending is compared to the budget to make sure the plan is being followed.
Companies use budgets in a similar way, although the amount of work and underlying details far
exceed a personal budget. Budgets are used for two distinct purposesplanning and control.
Planning involves developing goals and preparing various budgets to achieve those goals. Control
involves the steps taken by management to increase the likelihood that all parts of the organization
are working together to achieve the goals set down at the planning stage. To be effective, a good
budgeting system must provide for both planning and control. Good planning without effective
control is a waste of time and effort.

2.2 Advantages of Budgeting

Organizations realize many benefits from budgeting including:
Budgets communicate managements plans throughout the organization.
Budgets force managers to think about and plan for the future. In the absence of the necessity to
prepare a budget, many managers would spend all of their time dealing with day-to-day
emergencies.
The budgeting process provides a means of allocating resources to those parts of the
organization where they can be used most effectively.
The budgeting process can uncover potential bottlenecks before they occur.
Budgets coordinate the activities of the entire organization by integrating the plans of its
various parts. Budgeting helps to ensure that everyone in the organization is pulling in the same
direction.
Budgets define goals and objectives that can serve as benchmarks for evaluating subsequent
performance.

2.3 The Master Budget: An Overview

The master budget consists of a number of separate but interdependent budgets that formally lay
out the companys sales, production, and financial goals. The master budget culminates in a cash
budget, a budgeted income statement, and a budgeted balance sheet. Exhibit provides an overview
of the various parts of the master budget and how they are related.
The first step in the budgeting process is the preparation of the sales budget, which is a detailed
schedule showing the expected sales for the budget period. An accurate sales budget is the key to
the entire budgeting process. As illustrated in Exhibit, all other parts of the master budget depend
on the sales budget. If the sales budget is inaccurate, the rest of the budget will be inaccurate. The
sales budget is based on the companys sales forecast, which may require the use of sophisticated
mathematical models and statistical tools. We will not go into the details of how sales forecasts are
made. This is a subject that is most appropriately covered in marketing courses.
The sales budget helps determine how many units need to be produced. Thus, the
production budget is prepared after the sales budget. The production budget in turn is used to
determine the budgets for manufacturing costs including the direct materials budget, the
direct labor budget, and the manufacturing overhead budget. These budgets are then combined
with data from the sales budget and the selling and administrative expense budget to
determine the cash budget. A cash budget is a detailed plan showing how cash resources will be
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acquired and used. Observe from Exhibit that all of the operating budgets have an impact on the
cash budget. After the cash budget is prepared, the budgeted income statement and then the
budgeted balance sheet can be prepared

2.4 Preparing the Master Budget

The following list of documents that would be a part of the master budget:
1. A sales budget, including a schedule of expected cash collections.
2. A production budget (a merchandise purchases budget would be used in a merchandising
company).
3. A direct materials budget, including a schedule of expected cash disbursements for
purchases of materials.
4. A direct labor budget.
5. A manufacturing overhead budget.
6. An ending finished goods inventory budget.
7. A selling and administrative expense budget.
8. A cash budget.
9. A budgeted income statement.
10. A budgeted balance sheet.

2.5 The Sales Budget

The sales budget is the starting point in preparing the master budget. As shown earlier in Exhibit,
all other items in the master budget, including production, purchases, inventories, and expenses,
depend on it. The sales budget is constructed by multiplying budgeted unit sales by the selling
price. A schedule of expected cash collections is prepared after the sales budget. This schedule will
be needed later to prepare the cash budget. Cash collections consist of collections on credit sales
made to customers in prior periods plus collections on sales made in the current budget period.
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2.6 The Production Budget

The production budget is prepared after the sales budget. The production budget lists the number
of units that must be produced to satisfy sales needs and to provide for the desired ending
inventory. Production needs can be determined as follows:
Budgeted unit sales ............................. XXXX
Add desired ending inventory .............. XXXX
Total needs .......................................... XXXX
Less beginning inventory ..................... XXXX
Required production ............................ XXXX
Note that production requirements are influenced by the desired level of the ending inventory.
Inventories should be carefully planned. Excessive inventories tie up funds and create storage
problems. Insufficient inventories can lead to lost sales or last-minute, high-cost production efforts.
From the standpoint of the entire year, the beginning finished goods inventory is the same as the
beginning finished goods inventory for the first quarterit is not the sum of the beginning finished
goods inventories for all quarters. Similarly, from the standpoint of the entire year, the ending
finished goods inventory is the same as the ending finished goods inventory for the fourth quarter
it is not the sum of the ending finished goods inventories for all four quarters. It is important to
pay attention to such distinctions in all of the schedules that follow.

2.7 Inventory PurchasesMerchandising Company

Hampton Freeze prepares a production budget because it is a manufacturing company. If it were a
merchandising company, instead it would prepare a merchandise purchases budget showing the
amount of goods to be purchased from suppliers during the period. The merchandise purchases
budget has the same basic format as the production budget, as shown below:
Budgeted sales .......................................................... XXXXX
Add desired ending merchandise inventory .............. XXXXX
Total needs ................................................................ XXXXX
Less beginning merchandise inventory ..................... XXXXX
Required purchases .................................................. XXXXX
A merchandising company would prepare a merchandise purchases budget
such as the one above for each item carried in stock. The merchandise
purchases budget can be expressed in terms of either units or the purchase
cost of those units.

2.8 The Direct Materials Budget

A direct materials budget is prepared after the production requirements have been computed. The
direct materials budget details the raw materials that must be purchased to fulfill the production
budget and to provide for adequate inventories. The required purchases of raw materials are
computed as follows:
Raw materials needed to meet the production schedule ............. XXXXX
Add desired ending inventory of raw materials ............................ XXXXX
Total raw materials needs ........................................................... XXXXX
Less beginning inventory of raw materials .................................. XXXXX
Raw materials to be purchased ................................................... XXXXX

2.9 The Direct Labor Budget

The direct labor budget shows the direct labor-hours required to satisfy the production budget. By
knowing in advance how much labor time will be needed throughout the budget year, the company
can develop plans to adjust the labor force as the situation requires. Companies that neglect to
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budget run the risk of facing labor shortages or having to hire and lay off workers at awkward
times. Erratic labor policies lead to insecurity, low morale, and inefficiency.

2.10 The Manufacturing Overhead Budget

The manufacturing overhead budget lists all costs of production other than direct materials and
direct labor. Because the variable component of manufacturing overhead depends on direct labor,
the first line in the manufacturing overhead budget consists of the budgeted direct labor-hours from
the direct labor budget. The budgeted direct labor-hours in each quarter are multiplied by the
variable rate to determine the variable component of manufacturing overhead. A few words about
fixed costs and the budgeting process are in order. In most cases, fixed costs are the costs of
supplying capacity to make products, process purchase orders, handle customer calls, and so on.
The amount of capacity that will be required depends on the expected level of activity for the
period. If the expected level of activity is greater than the companys current capacity, then fixed
costs may have to be increased. Or, if the expected level is appreciably below the companys
current capacity, then it may be desirable to decrease fixed costs if possible. However, once the
level of the fixed costs has been determined in the budget, the costs really are fixed. The time to
adjust fixed costs is during the budgeting process. An activity-based costing system can help to
determine the appropriate level of fixed costs at budget time by answering questions like, How
many clerks will we need to process the anticipated number of purchase orders next year?

2.11 The Ending Finished Goods Inventory Budget

After completing Schedules 15, had all of the data he needed to compute unit product costs. This
computation was needed for two reasons: first, to determine cost of goods sold on the budgeted
income statement; and second, to value ending inventories. The cost of unsold units is computed on
the ending finished goods inventory budget.

2.12 The Selling and Administrative Expense Budget

The selling and administrative expense budget lists the budgeted expenses for areas other than
manufacturing. In large organizations, this budget would be a compilation of many smaller,
individual budgets submitted by department heads and other persons responsible for selling and
administrative expenses. For example, the marketing manager would submit a budget detailing the
advertising expenses for each budget period.

2.13 The Cash Budget

The cash budget combines much of the data developed in the preceding steps. The cash budget is
composed of four major sections:
1. The receipts section.
2. The disbursements section
3. The cash excess or deficiency section.
4. The financing section.
The receipts section lists all of the cash inflows, except from financing, expected during the budget
period. Generally, the major source of receipts is from sales. The disbursements section summarizes
all cash payments that are planned for the budget period. These payments include raw materials
purchases, direct labor payments, manufacturing overhead costs, and so on, as contained in their
respective budgets. In addition, other cash disbursements such as equipment purchases and
dividends are listed. The cash excess or deficiency section is computed as follows:
Cash balance, beginning ................................................................... XXXX
Add receipts ....................................................................................... XXXX
Total cash available ........................................................................... XXXX
Less disbursements ........................................................................... XXXX
Excess (deficiency) of cash available over disbursements ................ XXXX
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If a cash deficiency exists during any budget period, the company will need to borrow funds. If
there is a cash excess during any budget period, funds borrowed in previous periods can be repaid
or the excess funds can be invested. The financing section details the borrowings and repayments
projected to take place during the budget period. It also lists interest payments that will be due on
money borrowed. The cash balances at both the beginning and end of the year may be adequate
even though a serious cash deficit occurs at some point during the year. Consequently, the cash
budget should be broken down into time periods that are short enough to capture major fluctuations
in cash balances. While a monthly cash budget is most common, some organizations budget cash
on a weekly or even daily basis.

2.14 The Budgeted Income Statement

A budgeted income statement can be prepared from the data developed. The budgeted income
statement is one of the key schedules in the budget process. It shows the companys planned profit
and serves as a benchmark against which subsequent company performance can be measured.

2.15 The Budgeted Balance Sheet

The budgeted balance sheet is developed using data from the balance sheet
from the beginning of the budget period and data contained in the various
schedules.

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Chapter-3: Master Budget for Olympic Gold Battery

3.1 Olympic Gold
Description
OLYMPIC GOLD comes in two sizes: AA and D. They deliver a dependable and powerful
performance that does not fail. These power packed batteries are assured to provide long life for
everyday devices.
Details
Brand Name
: Olympic Gold
Launching Date
: April 30, 2010
Product Type
: PVC Tube
Packaging
UM3 R6 (size AA)
Weight per piece
: 33.33g
Number of strip per carton : 48
Weight per carton
: 16kg
Carton size
: 48 strips
Carton per metric ton
: 62
UM1 R20 (size D)
Weight per piece
: 96g
Number of batteries per pack : 12
Number of batteries per case : 576
Weight per case
: 56kg
Case size
: 48 packs of 12 batteries
Carton per MT
: 18

3.2 Data for Master Budget

Fiscal year end
: 31 December 2015
Estimated Sales unit : 2016
1,000,000
2017
1,100,000
2018
1,210,000
Price per unit
BDT 12.00
Cost per unit previous year
BDT 4.30
Absorption Costing
Cost per unit previous year
BDT 3.74
Variable Costing
Sales pattern
Jan
5%
Feb
5%
Mar 7%
Apr 10%
May 14%
Jun
12%
Jul
12%
Aug 9%
Sep
6%
Oct
7%
Nov 6%
Dec 7%
100%
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Desired ending inventory (finished goods)

Rental cost--Admin & selling cost
Sep
Oct
Nov
Dec
Raw material:
Required for each unit of product
Cost per kilogram
Desired ending inventory (raw materials)
Accounts payable payment pattern:
Beginning Accounts Payable:
November Sales
December sales
Sales in units
Desired ending inventory
Total required
Less: beginning inventory
Production required
RM per unit
Total raw material needed
Desired ending inventory
Total required
Less: beginning inventory
RM to be purchased
Cost per unit
Cost of purchases
Nov paid
Dec paid
Jan
payable
Feb
payable
Time in production
Rate of pay

20%

of next month's sales

BDT 15,000
BDT 15,000
BDT 15,000
BDT 15,000

40%
20%
45%
35%

3 grams
BDT 1.50
next month's production needs
in the month of purchase
in the month following the purchase
in the 2nd month following the purchase

60,000
70,000

Nov
60,000
14,000
74,000
12,000
62,000

Dec
70,000
11,000
81,000
14,000
67,000

Jan
55,000
11,000
66,000
11,000
55,000

3
186,000
80,400
266,400
74,400
192,000
BDT 1.50
BDT 288,000
BDT 57,600
BDT 129,600
BDT 100,800

3
3
201,000
165,000
66,000
267,000
80,400
186,600
BDT 1.50
BDT 279,900

BDT 55,980
BDT 125,955
BDT 97,965
BDT 324,720
15
minutes or
0.25 hour
BDT 12
per hour

Per unit variable manufacturing:

Utilities
Indirect materials
Plant maintenance
Environmental fee
Other

Term Paper on Master Budget

BDT 0.45
BDT 0.15
BDT 0.35
BDT 0.15
BDT 0.20
BDT 1.30

Page 14

Feb
55,000

Fixed manufacturing:
Training & develop
Property/bus tax
Supervisors salary
Amortization
Insurance
Other
Less: one time pay

BDT 40,000
BDT 37,000
BDT 150,000
BDT 170,000
BDT 95,000
BDT 115,000
BDT 607,000
BDT 90,000
BDT 36,000

Prepaid (beg)
Purchased
Used
Ending Bal.

Insurance
70,000
89,800
95,000
64,800

Tax
25,000
39,600
37,000
27,600

insurance
Property tax

BDT 7,500
BDT 4,167

per month
per month from

BDT 3,300
BDT 170,000
BDT 347,000 or

per month from Jul to Dec

BDT 14,167 per month
BDT 28,917 per month

Jan to Jun
Cash disbursements

Selling and Admin

Lowest level of sales
350,000
Highest level of sales
850,000
Per unit
BDT 0.66
Fixed
BDT 539,000 or
Sales collection pattern
Current month
Following month
2 months after
Uncollectible

Nov
Dec
Jan
Feb

Total sales
collected
collected
receivable
receivable
Total receivable

total operating expenses

total operating expenses
BDT 44,917

per month

60.0%
30.0%
9.0%
1.0%
Nov
BDT 720,000
BDT 432,000
BDT 216,000
BDT 64,800

Dec
BDT 840,000
BDT 504,000
BDT 252,000
BDT 75,600
BDT 392,400

Monthly tax installments

BDT 8,000
Outstanding from previous year BDT 25,000 to be paid in April
Income tax rate
25%
Fixed asset purchase
BDT 205,000
Nov payment
40% BDT 82,000
Dec payment
60% BDT 123,000
Payment of dividends:
Mar
BDT 20,000
Jun
BDT 20,000
Sep
BDT 20,000
Dec
BDT 20,000
BDT 80,000
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BDT 770,000
BDT1,100,000

Minimum bank balance

Rate of interest
Borrowing blocks
Opening balance sheet
Cash
Accounts receivable
Inventory-raw materials
Inventory-finished goods
Prepaid insurance
Prepaid tax
Capital assets (net)
Total
Accounts payable
Income tax payable
Capital stock
Retained earnings

BDT 20,000
6%
or
BDT 1,000

0.50% per month

BDT 200,000
400,000
99,000
47,300
70,000
25,000
800,000
BDT 1,641,300
BDT 324,720
BDT 25,000
BDT 600,000
BDT 691,580
BDT 1,641,300

3.3 Data Analysis and Interpretation

3.3.1 Sales and Cash Collection
Total expected sales for the year 2016 is 1,100,000 units of battery which will generate a total of
Tk. 13,200,000 at the rate of Tk. 12 per battery. The demand for battery in the summer and rainy
season is higher than other months of the year. From April to July it counts 48% sales of the year.
Out of total sales just 1% will be uncollectable and cash collection per month will be at an average
of Tk. 1,085,730.
3.3.2 Production and Manufacturing Budget
Total production unit is 1,100,000 for the year 2016 which requires of total Tk. 1,735,000 as
manufacturing overhead. The variable overhead per unit is Tk. 1.30. Fixed manufacturing overhead
is Tk. 51,667 per month from January to June and Tk. 50,800 per month from July to December
due reduction of Property tax. Average cash disbursement will be Tk. 144,583 per month. The
overhead cost will incur much for Supervisors salary and amortization of equipment. Due to the
nature of industry the machine becomes obsolete within few years, so the amortization rate is
higher than other industry. The production requires continuous supervision and monitoring so
expert person is required to pay.
3.3.3 Direct Material Budget
Total raw materials required in the year 2016 for production of 1,100,000 units of battery is
3,300,000 grams at the rate of 3 grams per unit will cost of total Tk. 4,950,000 at Tk. 1.50 per
grams that will require to cash disburse of Tk. 412,500 at an average per month of production. The
raw materials are easily available in the market and the price will be remained fixed throughout the
year.
3.3.4 Direct Labor Budget
The time require to product one unit of battery is 15 minutes on 0.25 hour. So total time require for
production of 1,100,000 units of battery for the year 2016 will be 275,000 hours. The labor cost
will be Tk. 12.00 per hour so total direct labor cost for production will be Tk. 3,300,000. This cost
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is directly attributable for the production of the battery and require unskilled or semi-skilled labor
force which is ready to available.
3.3.5 Selling and Administrative Expense Budget
Total budgeted selling and administrative expenses are Tk. 1,457,000 out of which Tk. 726,000 is
variable cost at the rate of Tk. 0.66 per unit and remaining Tk. 731,000 is fixed cost. The average
cost per month is Tk. 121,417. Total non-cash expenditure is Tk. 132,000 is for bad debts of 1%
uncollectable sales. Fixed selling expenses include advertisement and salary on the other hand
variable cost incur for sales commission to meet the sales target.
3.3.6 End Finished Goods Inventory Budget
Under the absorption costing method total budgeted cost of goods sold for the year is Tk.
10,239,152 and under the variable costing method total budgeted cost of goods sold for the year is
Tk. 9,624,352.The variance under the two methods is for holding ending inventory.
3.3.7 Cash Budget
Total cash available for financing the whole year is Tk. 13,228,760 and total cash disbursement will
require Tk. 11,824,117 for whole year which will result surplus cash balance of Tk. 1,404,643.
3.3.8 Projected Financial Statements
According to our calculation the budgeted income statement shows a profit of Tk. 1,123,154 will be
available under the absorption costing which will earn a profit margin of 8.5%. The other
performance will be as followsROE
48%
ROA
36%
Gross profit margin 22%
The overall cash balance will be increased significantly which can be available for additional
expansion or investment for the investors.

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Chapter-4: Conclusion
4.1 Summary
The Olympic gold battery will add significant value to the company if the assumptions used are
remain constant and the management willingly follow the steps in the budgetary actions. The
battery will follow the seasonal movement and cost significantly changes by the equipment, selling
and administration cost. Due the competitive market and nature of usage of the product close
monitoring and changing action is needed to boost up the sales. Careful should require for cash
collection pattern and disbursement. The quality improvement and changes in product line will
require to analyze in further for continue the market share.

4.2 Data used

Data used in this report is based on secondary information and needed to assume in some instances
due to data accessibility.

4.3 Limitations
The report has many ways to improve the quality of information and assumptions used are to be
more practical senses. But from the learning perspective this report will surely provide a deep
insight of a master budget of a company.

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