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    Master Budget Example MC Watters AIP8-13

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    Muhammed muhaba
    Eugene Brewing Company provided their beginning balance sheet and budget details for the upcoming year. They produce two types of beer - ale and porter - and provided production cost details. The budget includes estimated monthly sales, expenses, inventory preferences, and a new bottling machine purchase. The document asks to (1) estimate monthly cash flows, (2) determine if borrowing is needed, and (3) create a March-end balance sheet and income statement for the first three months.

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    Master Budget Example MC Watters AIP8-13

    Uploaded by

    Muhammed muhaba
    164 views2 pages
    Eugene Brewing Company provided their beginning balance sheet and budget details for the upcoming year. They produce two types of beer - ale and porter - and provided production cost details. The budget includes estimated monthly sales, expenses, inventory preferences, and a new bottling machine purchase. The document asks to (1) estimate monthly cash flows, (2) determine if borrowing is needed, and (3) create a March-end balance sheet and income statement for the first three months.

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    Eugene Brewing Company provided their beginning balance sheet and budget details for the upcoming year. They produce two types of beer - ale and porter - and provided production cost details. The budget includes estimated monthly sales, expenses, inventory preferences, and a new bottling machine purchase. The document asks to (1) estimate monthly cash flows, (2) determine if borrowing is needed, and (3) create a March-end balance sheet and income statement for the first three months.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    164 views2 pages

    Master Budget Example MC Watters AIP8-13

    Uploaded by

    Muhammed muhaba
    Eugene Brewing Company provided their beginning balance sheet and budget details for the upcoming year. They produce two types of beer - ale and porter - and provided production cost details. The budget includes estimated monthly sales, expenses, inventory preferences, and a new bottling machine purchase. The document asks to (1) estimate monthly cash flows, (2) determine if borrowing is needed, and (3) create a March-end balance sheet and income statement for the first three months.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
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    Master Budget Example Mc Watters, AIP 8.

    13

    Eugene Brewing Company is budgeting for the next year. The following is the company’s
    beginning balance sheet.

    Eugene Brewing Company Balance Sheet, January 1, 2001


    Assets Liabilities and Equities
    Cash $10.000 Accounts Payable $3.000
    Accounts Receivable 20.000 Long term debt 50.000
    Inventory 30.000
    Total current assets $60.000 Total liabilities $53.000
    Fixed Assets 200.000 Common stock at par $10.000
    Acc. Depreciation (90.000) Additional Paid in 20.000
    Retained Earnings 87.000
    Total assets $170.000 Total liab and equities $170.000

    The company expects to collect the beginning g balance of accounts receivable in January. In
    general, 30% of the company’s sales are on a cash basis. Of the credit sales, 40% are paid in
    the following month, and 60% are paid in the second month after the sale.

    The accounts payable at the beginning of the year must be paid January. All materials are
    purchased on credit and paid for in the following month.

    The long term debt has an annual interest rate of 12%. Interest payments of 1% of the
    principal are made each month. The long term debt is not due for another five years.

    Eugene brewing co. makes two different types of beer, an ale and a porter. The ale is a lighter
    beer that requires fewer ingredients than does the darker and heavier porter. The input
    requirements for a case of beer fore each type of beer follow:

    For making ale


    Material Quantity per case Cost
    Hops 5 pounds $0.30 /lb
    Yeast 1 oz. 0.10 /oz
    Sugar 0.5 lb. 0.40/lb
    Bottles 24 0.05 / bottle

    For making porter


    Material Quantity per case Cost
    Hops 10 pounds $0.30 /lb
    Yeast 1 oz. 0.10 /oz
    Sugar 0.8 lb. 0.40/lb
    Bottles 24 0.05 / bottle

    The labor to make a case of beer is the same for each type of beer, 0.20 hours at $10 per hour.
    Labor is paid in the month earned.

    Monthly overhead expenses are paid in the month incurred and expected to be as follows:
    Electricity $2.000
    Indirect labor 20.000
    Rent 5.000
    Depreciation 2.000

    Ale sells for $10 per case, and porter sells for $12 per case. Estimated sales (in cases) for
    Eugene Brewing follow:

    Ale Porter
    January 3.000 4.000
    February 3.000 5.000
    March 4.000 3.000
    April 2.000 2.000

    The beginning inventory includes 2.000 cases of ale and 3.000 cases of porter. The company
    prefers to have inventory at the end of each month equal to the expected sales in the next
    month. Eugene Brewing uses a first in first out method of costing inventory.
    The company must buy a new bottling machine fro $20.000 at the end of January.

    a. estimate cash flows in each of the months


    b. does the company need to borrow money in any of the months?
    c. make a balance sheet as of the end of March and an income statement fro the first theree
    months. Assume that the company borrows cash at interest rate of 1% per month; and that
    they borrow at the beginning of the month.

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