Bob’s Bottling is a juice bottler. Bob’s produces bottled orange juice from fruit concentrate purchased from suppliers in Florida, Arizona, and California. The only ingredient in the juice is the concentrate provided by the supplier. The juice is processed, pasteurized, and bottled for sale in 16 ounce plastic bottles that are provided by each supplier with their own labels already attached.
Bob’s expects sales volume to be 250,000 units in the first quarter, with 25,000 unit increases in each succeeding quarter. Bob’s believes that sales will continue to increase in this nature into the first quarter of next year. Bob’s can sell each bottle of orange juice for $2.50 per bottle.
Bob’s believes it can meet future sales requirements by maintaining an ending inventory equal to 10% of the next quarter’s budgeted sales volume.
Bob’s Bottling must use concentrate in Corder to make its juice. Bob’s has determined that it takes one gallon of concentrate for every 5 bottles of finished product (1/5 of a gallon, or .20 of a gallon). Each supplier provides Bob’s with a gallon of concentrate and the 5 plastic bottles needed for each gallon at a total unit price of $2.00. Bob’s requires 10% of next quarter’s raw material needs to be on hand at the end of the budget period.
Bob’s Bottling is highly automated. A worker can process 100 bottles of orange juice in one hour (1/100). Bob’s factory worker costs per employee average of $40 per hour.
Bob’s has the following manufacturing overhead costs:
Total variable overhead costs per unit = $0.40, (40 cents).
Total fixed overhead costs per quarter = $72,500 per quarter.
Bob’s has both variable and fixed expenses in selling their juices consisting of:
Variable selling expenses are 5% of sales revenues
Fixed Administrative Expenses = $10,000
Bob’s cash sales make up 25% of Sales Revenues. The other 75% of revenues are Sales on Credit.
· 80% of credit sales are collected in the quarter of the sale.
· 20% of credit sales are collected in the quarter following the sale.
· 20% Accounts Receivable carried forward to quarter 1 from last year’s sales is $75,000.
Bob’s cash payments are forecast to include the following;
· 75% of Raw Materials are paid for in the quarter purchased.
· 25% of Raw Materials are paid for in the quarter following the purchase.
· 25% of Accounts Payable carried forward to quarter 1 from last year’s purchases = $23,000.
· Manufacturing overhead included $5, 000 Depreciation Expense per quarter.
· All other expenses are paid in cash during the quarter incurred.
· Management plans to invest in new equipment in the first quarter that has a total cost of $250,000. Bob’s will pay 80% of the purchase price in cash during the first quarter, and then the remaining 20% in the second quarter.
Bob’s cash management includes the following;
· Cash on hand at the beginning of quarter 1 was $200,000. The minimum cash balance must remain at or above $200,000.
· Bob’s has an agreement with the bank allowing it to make short term borrowing and repayments of cash in $5,000 increments. No interest is charged if the loans are repaid by the end of the next quarter.
· Bob did not have any outstanding loans at the beginning of the 1st quarter.
Bob’s had the following balances of note at the end of the year
· Property Plant and Equipment (Net) = 750,000
· Common Stock = $800,000
· Note that this is a corporation, so the equity section of the balance sheet should include common stock and retained earnings.
Prepare the following budgets for the year broken into quarters.
· Sales budget
· Production budget
· Raw Materials Purchases Budget
· Direct Labor budget
· Manufacturing Overhead budget
· Budgeted Manufacturing Cost Per Unit
· Cost of Goods Sold Budget
· Selling and Administrative expense budget
· Budgeted Income Statement
· Budgeted Cash receipts
· Budgeted Cash Payments
· Cash Budget
· Budgeted Balance Sheet for the end of the year
Additional Instructions:
· You must use Excel to do this project. All work must be in one Excel File. Multiple excel tabs may be used if the student desires, but only one file will be accepted.
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