ACT202: Master Budget of Thanda Garam

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 NORTH SOUTH UNIVERSITY

Master Budget of Thanda Gorom

GROUP PROJECT

Course: ACT202
Section: 03
Submitted to: Rubaiya Nadia Huda (RNH)
Date of Submission: 02/09/2019
Submitted By:

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 Table of Content
Content: Page Number:
Letter of Submission 4

Executive Summary 5

Sales Budget 6

Production Budget 7

Direct Material Budget 8

Direct Labor Budget 10

Manufacturing Overhead Budget 11

Selling & Administrative Budget 13

Cash Budget 14

Budgeted Income Statement 15

Budgeted Balance Sheet 16

Appendix 17

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Letter of Submission
2nd of September, 2019

To:
Rubaiya Nadia Huda (RNH)
Course Instructor
School of Business
North South University,
Bashundhara Residential Area, Dhaka-1213.

Subject: Submission of ACT 202 group project on master budget of ‘Thanda Gorom’.

Dear Ma’am,

This is to inform you that we have completed the group project you assigned us on
Master Budget for the course ACT202 in the Summer 2019 semester. We made our
report on ‘Thanda Gorom’ Gulshan Branch, for the year July 1, 2019 to June 30, 2020.
We were told to prepare a master budget using information collected through
conducting an interview with a local store. In writing this report, we tried our utmost
best as a group to include all requirements, using the techniques taught in class and
prepared it within the due date.
However, we will be glad to clarify discrepancies in the project.
Finally, we would like to express gratitude for your support and consideration in
completing this report.
Yours sincerely,

Executive Summary
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Thanda Garam is a family business which started its journey as chicken king. But due
to unsuccessful turnover, they shifted to being a juice bar. Its first branch was in Uttara.
Currently there are four branches in Dhaka city (Dhanmondi, Uttara, Gulshan and Baily
Road). There are currently 32 types of seasonal fruit juice sold all-year round. They
even provide free samples. Most quantity is sold during spring and summer due to hot
climate.
Green mango juice of 225ml is the bestseller and we would like to present our Master
Budget on that. For our interview, we went to the Gulshan branch and interviewed the
sales and marketing manager, Md. Riaz Mahmud.
The manufacturing process that Thanda Garam uses is it buys large amounts of
seasonal fruits partially on credit which are then juiced in the warehouse based on
following month’s sales budget. Since, the juices are preserved, the ending inventory is
a minimum of 5000tonnes a year.
It goes through various production processes from boiling the fruit, blending, sieving
the pulp, and containing with the help of machines and labor. When there is demand for
it, containers are sent to the stores where they are deep freezed.
In the stores, the juices are sold by pouring it out of slushers into plastics cups which
are sealed. The sales may be sold on credit or cash from the store or through Food
Panda and Uber Eats.
At the end of the interview, the marketing manager let us know that they keep a profit
equal to 50% of the sales. Using these information, we prepared our report.

Sales Budget

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Selling Price: ৳80

Budgeted Sales:
Quarter Sales
1 130 cups
2 180 cups
3 170 cups
4 110 cups

Sales Budget:
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year
Budgeted Sales in Units 15300 9900 11700 16200 53100
Selling Price Per Cup ৳80 ৳80 ৳80 ৳80 ৳80
Total Sales: ৳1224000 ৳792000 ৳936000 ৳1296000 ৳4248000

Expected Cash Collections

Cash Collection Pattern: 95% is collected on the month of sale

5% is collected the following quarter of sale (due by known customers or institutions nearby).

Sales of Quarter 4 last year was ৳729900. June 30th accounts receivable balance of ৳36495
will be collected in full.

Expected Cash Collections:

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year
Accounts Receivables ৳36495 ৳36495
June 30, 2019
Quarter 1 Sales
1224000*95% 1162800 1162800
1224000*5% 61200 61200
Quarter 2 Sales
792000*95% 752400 752400
792000*5% 39600 39600
Quarter 3 Sales
936000*95% 889200 889200
936000*5% 46800 46800
Quarter 4 Sales
1296000*95% 1231200 1231200
Total Cash Collections ৳1199295 ৳813600 ৳928800 ৳1278000 ৳4219695

Production Budget
Desired ending inventory is 33% of the following quarter’s budgeted sales in units.

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On June 30th, 5049 units is in ending inventory (15300*33%).

The following year’s Quarter 1 sales are assumed to be 13500 units.

Production Budget:
Quarter Quarter Quarter Quarter Year
1 2 3 4
Budgeted Sales 15300 9900 11700 16200 53100
Add: Desired Ending Inventory 3267 3861 5346 4455 4455
Total Needs 18567 13761 17046 20655 57555
Less: Beginning Inventory 5049 3267 3861 5346 5046
Required Production 13518 10494 13185 15309 52509

Direct Material Budget

0.225 Litres of material are required per 225ml glass of juice.

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Desired ending inventory of materials is 66% of the following month’s production.

The ending inventory in Quarter 4 is in respect to 16700 units to be sold in Quarter 2 the
following year. (16700*33%=5511 units. So, 13500+5511-4455=14556*.225=3275*66%=
2162).

Beginning inventory is 2084 (3158*66%).

Material Cost is ৳20 per 0.225ml.

Direct Material Budget:

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year
Production 13518 10494 13185 15309 52509
Materials per unit (Litres) 0.225 0.225 0.225 0.225 0.225
Production needs 3042 2361 2967 3445 11815
Add: Desired Ending Inventory 1558 1958 2274 2162 2162
Total Needed 4600 4319 5241 5607 13977
Less: Beginning Inventory 2008 1558 1958 2274 2008
Materials to be Purchased 2592 2761 3283 3333 11969
Cost of Material Per Unit ৳20 ৳20 ৳20 ৳20 ৳20
Cost of Raw Material to be ৳51840 ৳55220 ৳65660 ৳66660 ৳239380
Purchased

Expected Cash Disbursement for

Materials
৳20 is paid per 0.225 Litre of material.

Although Thanda Gorom has plenty cash available, it likes to keep its liquidity high and pays
suppliers 16% the folleing quarter and 84% in the quarter.

The June 30, 2019 Accounts Payable are ৳7600.

Expected Cash Disbursement for Materials

Quarter 1 Quarter Quarter Quarter Year
2 3 4
Accounts Payable June ৳7600 ৳7600
30,2019
Quarter 1 Purchases
৳51840*84% 43546 43546
৳51840*16% 8294 8294
Quarter 2 Purchases

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৳55220*84% 46385 46385
৳55220*16% 8835 8835
Quarter 3 Purchases
৳65660*84% 55154 55154
৳65660*16% 10505 10505
Quarter 4 Purchases
৳66660*84% 55994 55994
Total Cash Disbursement ৳51146 ৳54679 ৳63989 ৳66499 ৳236313

Direct Labor Budget

Each unit of product requires 0.08 hours (5 minutes) of direct labor.

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Workers are paid at the rate of ৳10 per hour.

Direct Labor Budget

Quarter 1 Quarter Quarter 3 Quarter 4 Year
2
Units of Production 13518 10494 13185 15309 52509
Direct Labour Per Cup 0.08 0.08 0.08 0.08 0.08
Labour Hours Required 1081 840 1055 1225 4201
Hourly Wage Rate ৳28 ৳28 ৳28 ৳28 ৳28
Total Direct Labour ৳30268 ৳23520 ৳29540 ৳34300 ৳117628
Costs

Manufacturing Overhead Budget

Manufacturing overhead is applied on the basis of direct labour hours.

The variable manufacturing overhead rate is ৳8.9 (Electricity, Gas and Water Bill).
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The fixed manufacturing overhead is ৳248810 per quarter (Warehouse Rent and Supervisors
Salary).

Non-cash expense is ৳8810 per quarter (Boiler, Sieve and Mixer Machine which are to last
25 years with no resale value).

Manufacturing Overhead Budget

Quarter 1 Quarter Quarter 3 Quarter 4 Year
2
Budgeted Direct labour 7029 5457 6856 7961 27303
hours needed
Variable Manufacturing 8.9 8.9 8.9 8.9 8.9
Overhead Rate
Variable Manufacturing 62558 48567 61018 70853 242996
Overhead
Fixed Manufacturing 248810 248810 248810 248810 995240
Overhead
Total Manufacturing 311368 297377 309828 319663 1238236
Overhead
Less: Non Cash Costs 8810 8810 8810 8810 35240
Cash Disbursement for 302558 288567 301018 310853 1202996
Manufacturing Overhead

Ending Finished Goods Inventory

Budget
Production Costs Per Unit Quantity Cost Total
Direct Material 0.225 ৳20 ৳4.5

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 Litre
Direct Labour 0.08 ৳28 ৳2.2
Hours
Manufacturing Overhead (৳995240/27303) 0.08 ৳36 ৳2.9
Hours
৳9.6

Budgeted Finished Goods Inventory

Ending Inventory In Units 4455
Unit Product Cost ৳9.6
Ending Finished Goods Inventory ৳42768

Selling and Administrative Budget

Variable selling and administrative expenses are ৳16 per unit sold (Sales Commission).

Fixed selling and administrative expenses are ৳210000 per quarter (Store Rent, Salesmen
Salary, Advertising, Insurance, and Depreciation).

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The depreciation per year is ৳11140 (Deep Fridges, Slusher, and Sealer Machine would last
10 years and Van would last 25 years with no resale value).

Selling and Administrative Budget

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year
Budgeted sales in cups 15300 9900 11700 16200 53100
Variable Selling and ৳16 ৳16 ৳16 ৳16 ৳16
Administrative costs per
cup
Variable Selling and ৳244800 ৳158400 ৳187200 ৳259200 ৳849600
Administrative Expense
Total Fixed Selling and 210000 210000 210000 210000 840000
Administrative Expense
Total Selling and 454800 368400 397200 469200 1689600
Administrative Expenses
Less: Non-cash Expenses 2785 2785 2785 2785 11140
Cash Disbursement for ৳452015 ৳365615 ৳394415 ৳466415 ৳1678460
Selling and
Administrative Expenses

Cash Budget
Beginning Cash Balance was ৳50000. The minimum cash balance required is ৳40000.

Cash Budget
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year

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 Beginning Cash ৳50000 ৳413308 ৳494527 ৳634365 ৳50000
Balance
Add: Cash 1199295 813600 928800 1278000 4219695
Collections From
Customers
Total Cash 1249295 1226908 1423327 1912365 4269695
Available
Less: Cash
Disbursements
Materials 51146 54679 63989 66499 236313
Direct Labour 30268 23520 29540 34300 117628
Manufacturing 302558 288567 301018 310853 1202996
Overhead
Selling and 452015 365615 394415 466415 1678460
Administrative
Expenses
Total 835987 732381 788962 878067 3235397
Disbursements
Excess or 413308 494527 634365 1034298 1034298
(Deficiency)
Total Financing 0 0 0 0 0
Ending Cash ৳413308 ৳494527 ৳634365 ৳1034298 ৳1034298
Balance

The Budgeted Income Statement

Thanda Gorom

Budgeted Income Statement

Sales(53100*80) ৳4248000
Cost of goods sold(53100*9.6) (509760)

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 Gross margin 3738240
Selling & administrative expense (1678460)
Net income ৳2059780

For the year ended June 30, 2020

The Budgeted Balance Sheet

Estimates for the financial statement:

Retained Earnings Beginning Balance- ৳1107060

Non Current Assets stated are after reducing depreciation.

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 Thanda Gorom

Budgeted Balance Sheet

For the year ended June 30, 2020

Assets:
Cash ৳1034298
Accounts Receivable (৳1296000*5%) 64800
Raw Material Inventory (2162*৳20) 43240
Finished Goods Inventory (4455*৳9.6) 42768
Deep Fridges 40000
Slusher Machine 58800
Sealer Machine 12600
Boiler Machine 240000
Sieve Machine 200000
Van 500000
Mixer Machine 441000
Total asset ৳2677506

Liabilities and Owners Equity:

Accounts Payable (৳66660*16%) ৳10666
Retained Earnings (৳607060+৳2059780) 2666840
Total Liabilities and Owners Equity ৳2677506

Appendix

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