Northern Private University

business faculty
Administration and Marketing Career

Course : Costs and Budgets

Teacher : Mg.CPC Edgardo Martín Acosta Mantilla
Topic : Master Budget (Operating Budget and Financial Budget)

Practical Case

The Financial Manager of the Automotive Industrial Company "Baterías Perú SA", dedicated
to batteries for motor vehicles, is collecting information that will allow him to become a
Master for the Year 2018.
From the coordination meetings held with the Managers of the other areas of the em
Budget Committee, the following budgeted data for Year 20 was obtained

Raw material Unit cost

TO S/. 2.00
b S/. 3.00
MOD (Hours, man) S/. 2.50

Indirect manufacturing Applies based on MOD

costs Man Hours

Finished products Battery "A" Battery "B"

Raw Material A 10 Units 8 Units
Raw Material B 8 Units 6 Units
MOD (Hours, man) 16 hours 18 hours

The Statement of Financial Position provided the following information as of December

31, 2017

Batteries Peru SA
Balance Sheet as of December 31, 2017 (In Nuevos
Soles)

Current active Current Passive

Cash and Cash Equivalent 15,640.00 Accounts payable
Accounts Receivable 26,000.00 Taxes for payable
Stock: Total Corri
Raw Material (1) 22,500.00 Liabilities
Finished Products (2) 17,350.00
Total Current Assets 81,490.00 Heritage
Social capital
Non-Current Asset Additional capital
Property 52,810.00 Accumulated results
Machinery and equipment 400,000.00 Total Asset
Accumulated depreciation (60,000.00)
Total Non-Current Assets 392,810.00

Total Assets 474,300.00 Total Passive and Patri

(1) Raw Material Detail 9,000.00 (2) Product Details

Raw Material A: 4,500 Units x S/.2.00 = 13,500.00 Battery "A": 100 Units. x S
Raw Material B: 4,500 Units x S/.3.00 = 22,500.00 Battery "B": 50 Units. x

Additional Budgeted Data

Finished products Battery "A" Battery "B"
Units to sell 6,000 1,500
Unit Sales Value in Soles 120.00 150.00
Expected Final Inventory in Units 900 100
Initial Inventory in Units 100 50

Raw material TO b
Initial Inventory in Units 4,500 4,500
Expected Final Inventory in Units 5,500 500
There is no Initial or Final Inventory of Products in Process

The following Indirect Manufacturing Costs, Administration Expenses and G budgeted

production levels will be incurred:

Indirect manufacturing costs

Miscellaneous Supplies 35,000.00
Indirect labor 78,000.00
Social charges 30,000.00
Electric power 25,000.00
Machinery and Equipment Maintenance 35,000.00
Depreciation of Machinery and Equipment 35,000.00
Production Insurance 5,800.00
Repair of Machinery and Equipment 4,600.00
Production Plant Supervision 25,000.00
S/. 273,400.00
Administration Expenses
Administration Salaries 15,000.00
Office supplies 1,500.00
Other Office Expenses 1,800.00
S/. 18,300.00
Selling expenses
Sales Commissions 22,000.00
Advertising 3,500.00
Sales Salaries 10,000.00
Representation expenses 5,500.00
S/. 41,000.00

The Cash Budget presented below is prepared in quarterly periods that will be carried out
quarterly and an Increase in Share Capital in the 4th. Quarter commitments with suppliers,
taxes payable and an acquisition of Fixed Assets in

Quarter
Detail 1 2
Income
Collections for cash sales 160,000.00 180,000.00
Share Capital Increase
Expenses
Raw Material Payment 30,000.00 46,000.00
Payment of Manufacturing, Administration and Sales Expenses 32,000.00 31,000.00
Payment of Salaries 103,000.00 105,000.00
Payment of Taxes (Initial Balance) 6,000.00
Purchase of Air Compressor Machine

The Company wishes to maintain a Minimum Cash Balance at the end of each Quarter of S/.
15.00 financing, you can request a loan and repay it at the end. Interest of 8.06% per year
(Management's policy is to pay the loans in the short term) pays when the capital is repaid.
It is estimated that the Income Tax for the Year 201

Requested:

Prepare the Master Budget for the Year 2018, which contains the following:
I. Operating Budget
1. Sales Budget
2. Production Budget
3. Additional Budgets:
3.1 Consumption and Purchase of Direct Materials
3.2 Direct Labor Cost
3.3 Indirect manufacturing costs
3.4 Final Inventory of Raw Materials and Finished Products
3.5 Table of Unit Costs of Finished Products
4. Finished Goods Cost of Sales Budget
5. Administrative Expenses and Sales Expenses Budget
6. Projected Profit and Loss Statement as of December 31, 2018
II. Financial budget
1. Income budgets
1.1 Initial Cash Balance
1.2 Cash Income: collections from cash sales, etc.
2. Expenses budget
2.1 Purchasing of materials
2.2 Direct Labor and other salary disbursements
2.3 Other Disbursements: purchase of Fixed Assets, payment of taxes
2.4 Other Costs and Expenses
3. Financing Needs
4. Final Cash Balance
5. Projected Balance Sheet as of December 31, 2018
 to manufacture and sale of
work the Budget

dam, members of the 18:

8,000.00
6,000.00
entit 14,000.00
y

400,000.00
6,300.00
54,000.00

io 460,300.00
monio 474,300.00

s Finished
/. 116.00 = 11,600.00
/. 115.00 = 5,750.00
17,350.00

Sales assets for

 es and considers the re charges, and in turn, considers the 4th. Quarter:

It's 2018
3 4

310,000.00
250,000.00
30,000.00

51,000.00 70,000.00
35,000.00 28,000.00
120,000.00 135,000.00

75,000.00

0.00 and if necessary a 3rd Quarter with a . The interest is calculated and 8 would be S/.
11,000.00
 SALES BUDGET
Product Vta value Totals of
Units to sell Unitary S/. Sales S/.
Battery "A" 6,000 120.00 720,000.00
Battery "B" 1,500 150.00 225,000.00
7,500 945,000.00

PRODUCTION BUDGET IN UNITS

Product Battery "A" Battery "B"
Budgeted sales 6,000 1,500
(+) Expected final inventory 900 100
Total units required 6,900 1,600
(-) Initial inventory (100) (50)
Total units to produce 6,800 1,550

RAW MATERIAL CONSUMPTION BUDGET

Product Battery "A" Battery "B" Total units Unit cost
Units to Produce 6,800 1,550 to consume S/.
Raw Material A 68,000 12,400 80,400 2.00
Raw Material B 54,400 9,300 63,700 3.00

RAW MATERIAL PURCHASE BUDGET

Concept
Raw Material A Raw Material B Total Cost S/.
Consumption 80,400 63,700
Inv. Expected ending (-) 5,500 500
Inv. Initial (4,500) (4,500)
Units to Purchase Unit 81,400 59,700
Cost 2.00 3.00
Shopping in Soles 162,800 179,100 341,900

DIRECT LABOR BUDGET

Product Units to Hours/Man per Unit cost
Produce Unit Total Man/Hours MOD H/HS/.
Battery "A" 6,800 16 108,800 2.50
Battery "B" 1,550 18 27,900 2.50
 136,700[

BUDGET OF INDIRECT MANUFACTURING COSTS

Indirect Manufacturing Costs Total S/. 273,400.00
Hours 136,700
CIF H/H Unit Cost S/. 2.00

FINAL INVENTORY BUDGET FOR RAW MATERIALS AND FINISHED GOODS

Raw material Units Unit cost Sub-Total S/. Total S/.
TO 5,500 2.00 11,000.00
b 500 3.00 1,500.00 12,500.00
Finished product Units Unit cost Sub-Total S/. Total S/.
Battery "A" 900 116.00 104,400.00
Battery "B" 100 115.00 11,500.00 115,900.00

TABLE OF UNIT COSTS OF FINISHED PRODUCTS

Costs of Finished products
Production Battery "A" Batte
Unit Cost S/. Base C.U. S/. Base ry
Raw Material A 2.00 10 20.00 8
Raw Material B 3.00 8 24.00 6
MOD 2.50 16 40.00 18
CIF 2.00 16 32.00 18
116.00

FINISHED GOODS COST OF SALES BUDGET

Detail Fountain
Raw Material Consumed MP Consumption Budget
Direct Labor M,O,D budget,
Indirect manufacturing costs C,I,F budget,
Total Production Cost
(+) Initial Inventory of Finished Products Statement of Financial Situation 2017
(-) Final Inventory of Finished Products Inv. Presup. End of Prod.Term.
Cost of Finished Products Sold

BUDGET OF ADMINISTRATION EXPENSES AND SALES EXPENSES

Detail Fountain
Administration Expenses Admin Expense Budget
Selling expenses Sales Expense Budget
Total Operating
Expenses

PROJECTED PROFIT AND LOSS STATEMENT AS OF 12/31/2018

Sales revenue 945,000.00

(-) Sales cost (868,500.00)

Gross profit 76,500.00

(-) Operating expenses:

Administration Expenses (18,300.00)
Selling expenses (41,000.00)

Operating Profit 17,200.00

(-) Financial expenses

Profit before Income Tax 17,200.00

(-) Income tax

Net Income for the Year 17,200.00

Total cost
S/.
160,800.00
191,100.00
351,900.00

Total cost
S/.
272,000.00
69,750.00
341,750.00
to "B"
C.U. S/.
16.00
18.00
45.00
36.00
115.00

Amount S/.
351,900.00
341,750.00
273,400.00
967,050.00
17,350.00 (115,900.00)
868,500.00

Amount S/.
18,300.00
41,000.00
59,300.00
 FINANCIAL BUDGET
(Projected Cash Flow as of 12/31/2018)

Trime
Concepts 1 2
Income
Initial Cash Balance
Collections for cash sales
Share Capital Increase
0.00 0.00
Total income
Expenses
Raw Material Payment
Payment of Manufacturing, Administration and Sales Expenses
Payment of Salaries
Payment of Taxes (Initial Balance)
Purchase of Air Compressor Machine
Total expenses 0.00 0.00
Minimum Cash Balance
Total Cash Requirement 0.00 0.00
Cash Excess or Deficit 0.00 0.00
Financing Need
Bank Loan
Loan Amortization
Amortization of Interest (Annex 1)
Effect of Financing 0.00 0.00
Final Cash Balance 0.00 0.00

APPENDIX 1: CALCULATION OF LOAN INTEREST

Bank Loan at the beginning of the First Quarter
x = 0
12
x = 0

Bank Loan at the beginning of the Second Quarter

x = 0.00
12
x = 0.00

Total Interest 0.00

APPENDIX 2 : ACCOUNTS
RECEIVABLE
Sales
(-) Collected
To collect 0.00
(+) Initial Balance
Balance Receivable 0.00

ANNEX 3 : PROPERTY, MACHINERY AND EQUIPMENT

Initial Property Balance

Initial Balance Machinery and Equipment
Purchase of machinery
Total Property, Machinery and Equipment 0.00

ANNEX 4 : DEPRECIATION

Initial balance
(+) Depreciation
Total Depreciation
0.00

ANNEX 5 : ACCOUNTS PAYABLE

Initial balance
Raw Material Purchases
Direct Labor
Indirect manufacturing costs
Operating expenses
Total 0.00
(-) Payments:
Raw material
Direct Labor (Salaries)
Manufacturing, Administration and Sales Expenses
Balance Due 0.00

ANNEX 6 : TAXES PAYABLE

Initial balance
(+) Projected Annual Income Tax
(-) Payment of Taxes
Balance Due 0.00

ANNEX 7 : SHARE CAPITAL

Initial balance
Share Capital Increase
Total Share Capital 0.00

ANNEX 8 : ACCUMULATED RESULTS

Initial balance
Result of the excersice
Total Accumulated Results
0.00

Batteries Peru SA
Projected Balance Sheet as of December 31, 2018
(In Nuevos Soles)

Current active Current Passive

Cash and Cash Equivalent Accounts Payable (Annex
Accounts Receivable (Annex 2) Taxes to Pay (Annex
Inventories: Total Corri Liabilities
Raw material
Finished products
Total Current Assets Heritage
Non-Current Asset 0.00 Share Capital (Annex 7)
Property, Maq. and Equipment Additional Capital
(Annex 3) Accumulated Results (A
Accumulated Depreciation (Annex 4) Total Equity 0.00
Total Non-Current Assets

0.00 Total Passive and

Total Assets
Patri
stress
3 4 Total

0.00
0.00
0.00
0.00 0.00
0.00

0.00
0.00
0.00
0.00
0.00
0.00 0.00 0.00

0.00 0.00 0.00

0.00

0.00
0.00
0.00
0.00 0.00 0.00
0.00 0.00 0.00