The document provides information for Friar Company to prepare partial master budgets for the second quarter including sales, cash receipts, production, raw materials, direct labor, manufacturing overhead, cost of goods sold, selling and administrative expenses, and cash budgets. Students are asked to create an input page in Excel to house all data and then separate tabs for each required budget using cell references. A flexible budget performance report is also to be created to evaluate actual results against the budget for the second quarter.

1. ACG 204 – Managerial Accounting Budgeting Project – Spring
2015
The following is a Comprehensive Budgeting Problem. You and
your team need to prepare a partial Master Budget and then
continue on to analyze your data. This is an Excel based project
where you will create formula driven worksheets.
Part 1:
Required:
Prepare the following elements of the master budget. Additional
information needed to prepare the budgets follows below.Use
the examples in your textbook as a guide.
1.
Sales budget
2.
Budgeted cash receipts
2. Production budget
3. Raw materials budget
4. Budgeted cash payments for raw material
5. Direct labor budget.
6. Manufacturing overhead budget
7. Cost of goods sold budget
8. Selling and administrative expense budget
9. Cash budget
10. Budgeted Income Statement
You must use Excel; and in particular use formulas and linked
cells. You are to create an input page that will house
ALL
your data. Your input page should be the only tab where you
actually manually input data. You are to create a separate tab

2. for each required budget. Use cell references to transfer
amounts from the input tab to the other respective tabs. You
must ensure that your budgets print properly and have a
professional appearance.
You must also include a written document where you discuss
each budget’s results.
Budgeting Information:
Friar Company is preparing budgets for the 2nd quarter, ( April,
May & June) which ends on June 30. Make sure you include a
“Total Q2” column.
•
Budgeted sales of the company’s only product for the next five
months are:
April
.........
2,400 units
May
...........
4,000 units
June
...........
3,500 units
July
...........
3,000 units
August
......
1,600 units
•
The selling price is $50 per unit.

3. •
All sales are on account.
•
The company collects 80% of these credit sales in the month of
the sale; 15% are collected in the month following sale; and the
remaining 5% are uncollectible.
•
The accounts receivable balance on March 31 was $22,500. All
of this balance was collectible.
•
The company desires to have inventory on hand at the end of
each month equal to 25% of the following month’s budgeted
unit sales.
•
On March 31, 600 units were on hand.
•
5 pounds of material are required per unit of product.
•
Management desires to have materials on hand at the end of
each month equal to 10% of the following month’s production
needs.
•
The beginning materials inventory was 1,400 pounds.
•
The material costs $0.25 per pound.
•
For June: 2,650 units to be produced in July
•
60% of a month’s raw material purchases are paid for in the
month of purchase; the other 40% is paid for in the following
month.
•
The accounts payable balance on March 31 was $10,000.
•
Each unit produced requires 0.75 hour of direct labor time.
•

4. Each hour of direct labor time costs the company $10.
•
Variable manufacturing overhead is $15 per direct labor hour.
•
Fixed manufacturing overhead is $35,000 per month. This
includes $15,000 in depreciation, which is not a cash outflow.
•
Manufacturing overhead is applied to units of product on the
basis of direct labor hours.
•
Variable selling and administrative expenses are $0.30 per unit
sold.
•
Fixed selling and administrative expenses are $40,000 per
month and include $8,000 in depreciation.
•
A line of credit is available at a local bank that allows the
company to borrow up to $50,000.
o
All borrowing occurs at the beginning of the month, and all
repayments occur at the end of the month.
o
The interest rate is 1.5% per month.
o
The company does not have to make any payments until the end
of the quarter but they are allowed to
•
Friar Company desires a cash balance of at least $50,000 at the
end of each month. The cash balance at the beginning of April
was $60,000.
•
Cash dividends of $40,000 are to be paid to stockholders in
April.
•
Equipment purchases of $30,000 are scheduled for June. This
equipment will be installed and tested during the second quarter

5. and will not become operational until July, when depreciation
charges will commence.
Part 2:
After the end of the second quarter, Friar Company wants to
evaluate their performance. In preparing their budgeted income
statement, Friar Company used the following formulas to
determine their budgeted operating income:
Revenue $50Q
Cost of Goods Sold $30.448Q
Selling & Administrative Expenses $0.30Q + $120,000
Interest Expense $1,301
During the quarter, Friar Company planned for 9,900 unit sales,
but actually sold 10,000 units. The company reported the
following actual results for the quarter ended on June 30
th
:
Sales $507,500
Cost of Goods Sold
$302,500
Gross Margin $205,000
Selling and Administrative Expenses
$125,000
Net Operating Income $80,000
Interest Expense
$1,500-
Net Income $78,500
Required:
Prepare the company's flexible budget performance report for
the second quarter. Label each variance as favorable (F) or
unfavorable (U). You are to create your performance report also
in Excel, as a separate tab. Include any relative data on your
input page and continue to use cell referencing.

6. You must also include a discussion of your performance report
within your written document.
DELIVERABLES:
Due Date: Tuesday, April 28, 2015
•
Cover sheet with all team members names
•
Hard copy of each tab in your Excel workbook
•
Written analysis