Dog Pound Golf: COMM 210 Winter 2020 Term 2 Budget Project Analysis

This report analyzes the budget for Dog Pound Golf, comparing its current business model with a proposed retail expansion. The assignment involves preparing master budgets, including sales, production, materials, labor, overhead, and cash budgets, along with financial statements for both scenarios. The analysis reveals that the retail expansion negatively impacts profitability, increases short-term borrowings, and strains the company's cash position. The student recommends against the expansion in the current period, emphasizing the need for improved cash management and expense reduction. The report provides detailed financial comparisons and highlights the adverse effects of the proposed expansion on key financial metrics, offering recommendations based on the analysis.

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COMM 210 Introduction to Managerial
Accounting

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Executive summary
The report has been prepared by using the budgeting and in that there has been
undertaking the master budget which is prepared for two scenarios of the business. There is
the use of all the elements in that and with the help of that, the overall evaluation has been
carried out. All the changes which will be taking place with the undertaking of retail
expansion have been incorporated and the impact which will be faced with that has also been
covered. The budgets have been revised with the new changes and then evaluation with the
change that is taking place has been made. It has been ascertained that there is a negative
influence and the profitability of the business has been affected in an adverse manner. The
undertaking of the proposal will bring various issues for the company such as the cash
shortage for which the short-term borrowings are required. This will raise another issue of
increasing interest thereby reducing the profits and that will also be inappropriate for the
business. By considering all the relevant aspects recommendation has been made to the
company to not undertake the proposal for now and skip the plan for expansion in the current
period.

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Table of Contents
Executive summary....................................................................................................................2
Introduction................................................................................................................................4
Importance of budgeting............................................................................................................4
Alternative..................................................................................................................................5
Decision criteria.........................................................................................................................6
Conclusion..................................................................................................................................8
Recommendations......................................................................................................................8
References..................................................................................................................................9
Appendix..................................................................................................................................10

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Introduction
In the business, there is a need for the proper budgeting by which all of the incomes
and expenditures will be planned. The budget is a plan in which all the activities of the
company are considered and for that predictions are made. In the given report the master
budget will be prepared in respect of two products which are made by the company. For that,
there will be consideration of two options that are available including the base case and the
retail outlets. The various budgets which are involved in the master budget will be prepared
and with the help of that, the company will be able to make the appropriate evaluation. This
will help in taking the most appropriate decision that will be beneficial for the company in the
long-run.
Importance of budgeting
The planning for the appropriate use of the funds is made under the process of
budgeting and that is highly important for any business. The budget is prepared to make the
proper use of funds that are available and they will be allocated in the required manner. There
will be the determination of the funds which will be required in the undertaking of the various
operations which are involved (PRIYA, 2020). This will help the company in planning the
manner in which appropriate management will be made possible. This will be ensuring that
business always has the required funds and there is no shortage which is faced. With the help
of a budget, the objectives and goals are set and they are worked upon. The budget acts as the
standard and that is required to be followed by all which gives directions and guidelines. This
ensures that all the members are making the use of funds in the manner it is specified in the
budget (Ezzamel et al., 2012). The best of the performance will be made with the use of this
and that will ensure that the most effective and efficient performance will be made which is
in the interest of the company.

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Alternative
In the given case of Dog pound golf, they are preparing two types of balls and are
currently providing them directly to the customers. In this process, the manufacturing is
undertaken and after that, the proper selling activities are performed. The company is
considering the new proposal of expansion in which there will be an incorporation of the sale
to retail outlets also. By this, there will be various changes that will be required to be made
and they will help in evaluating the proposal (Becker et al., 2016). It is necessary to identify
whether the expansion is for the benefit of the company or not. For this purpose, the master
budgets have been made for both the options and are presented in an appendix.
The budgets have been prepared and in that, all of the major aspects have been
covered. The sales are made and it can be noted form the appendix 1 sales budget and
appendix 2 sales budget that with the new proposal the sales of the company will be
increasing which good. The sale is increasing but then also the profitability of the business is
presenting the adverse impact. There are profits which are made in the base case and that can
be seen in the appendix 1 income statement but the situation changed with the expansion and
in that there are losses which are made. The profit of $129541turned to the loss of $197266
and this is because of an increase in the various expenses which are incurred.
The cash position of the business is very important and shall be maintained in the
business in proper manner and for the ascertainment of that cash budget has been prepared
and the one for the base case is presented in appendix 1 cash budget. The closing balance
which has been obtained from the same is $131406 which is a positive level and will be
efficient to manage the operations. There is no short-term borrowing which is made in this
case as there was no shortage and so the need did not arise. On the contrary to this with the
retail outlet's option, there was the balance of $51635 which was maintained and that is

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because of the account sales which is made in this option and also the expenses have
increased with the undertaking of additional equipment financing and that is adverse for
business.
The short term financing position of the business is also getting affected and it has
been identified that there was no shortage faced in the base care and due to that the borrowing
is not undertaken (Vaznonienė & Stončiuvienė, 2012). This can be noted from the appendix 1
cash budget whereas in the appendix 2 cash budget of retail outlets there is a high amount of
borrowings which are made. The cash shortage is faced and to deal with that there are
borrowings which have been made and on them, the interest is paid which increased the
expenses also. This shows the insufficiency of the cash to manage the business operations
which is not beneficial.
Decision criteria
The new proposal brought various changes to the values and by that, the decision will
be made. All the changes are represented below:
Particulars Base
case
retail case Change
Profit 129541 -197266 -326807
Cash 131406 51635 -79771
Short term borrowings 0 545000 545000

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All the major elements in which the changes are taking place are shown above in the
table. This shows that with the new retail proposal the business is not gaining any advantage
rather the situation is getting adverse. There are a high amount of losses that are being made
and that will affect the future operations and profitability of the company. The retained
income is made from the profits from adverse circumstances but due to the negative profits,
there will be no retained earning which will be left. This will be disadvantageous for the
business in the long run and the expansion will be made difficult (Kerler et al., 2012). With
the reducing cash balance, the situation will further get worse as that is the basic need to
manage the activities.
Without the appropriate level of cash, the short term obligations will not be met by the
company in an effective manner. The balance which is available in the retail case is also with
the help of the borrowings that have been made otherwise the cash shortage has been faced.
This has resulted in an increase in the borrowings and that is not beneficial. The situation will
have an additional negative impact on the business as the borrowing will lead to the payment
of the interest (Siyanbola, 2013). There will be an impact of the same on the profits also as
the interest will be rising the overall expenses and with that, the new equipment is also
purchased by which the other interests are also increasing. There is the installment that is paid
for the equipment and by that also the cash position is getting affected adversely. Overall
there are all the negative changes which are taking place and that is not good for the
company.

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Conclusion
The evaluation in the business for the available proposal has been made and in that,
there has been the preparation of the master budgets for both the available scenarios. In that,
there is the preparation of production budget, material budget, labor budget, overheads
budget, cash budget and all the financial statements. With the help of them, the evaluation is
made and the various aspects have been considered for the same. In that, the changes which
are taking place and the impact which will be made by them has been considered in the
report. With that, the positive and negative impact on the business with the undertaking of
expansion proposal has been accounted for. In that, there is the involvement of the proper
comparison among the values of the base case and the retail outlets and there is the negative
impact of the new proposal which has been identified in terms of the profitability, short-term
borrowings and cash position.
Recommendations
The evaluation is done and from that, the financial position and performance of the
business with both the base case and retail outlets have been accounted for. It has been noted
that there is a negative impact that is made on the business with the new expansion proposal
and that will be harmful. Due to this, it is recommended that the expansion to the retail
market shall not be undertaken in the current position as that will be harming the overall
performance of the company in the long run. The improvements are required to be made and
in that the cash position will be improved in the first place. There is a need for the company
to manage the cash in such a manner that it can be used for expansion. The business will be
required to undertake the appropriate actions by which the expenses which are not necessary
can be identified and the elimination of them will be made to make the situation positive.

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References
Becker, S. D., Mahlendorf, M. D., Schäffer, U., & Thaten, M. (2016). Budgeting in times of
economic crisis. Contemporary Accounting Research, 33(4), 1489-1517.
Ezzamel, M., Robson, K., & Stapleton, P. (2012). The logic of budgeting: Theorization and
practice variation in the educational field. Accounting, Organizations and
society, 37(5), 281-303.
Kerler, W. A., Allport, C. D., & Fleming, A. S. (2012). Impact of framed information and
project importance on capital budgeting decisions. Advances in Management
Accounting, 21, 1-24.
PRIYA, S. (2020). A STUDY ON THE IMPORTANCE OF BUDGETING IN AN
ORGANISATION. Studies in Indian Place Names, 40(46), 500-505.
Siyanbola, T. T. (2013). The impact of budgeting and budgetary control on the performance
of manufacturing company in Nigeria. Journal of Business Management & Social
Sciences Research, 2(12), 8-16.
Vaznonienė, M., & Stončiuvienė, N. (2012). The formation of company budgeting system:
importance, problems and solutions. Management theory and studies for rural
business and infrastructure development, 30(1).

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Appendix
1. Base case
a) beginning balance sheet
Particulars Amount
Assets:
Non current assets:
Plant property and
equipment
4000000
Accumulated
depreciation
250000
Total non-current assets 3750000
Current assets:
Cash 65000
Raw material inventory 26790
Finished goods inventory 7340
Total current assets 99130
Total assets 3849130
Liabilities and equity:
Liabilities:
Long - term debt 2300000
Accounts payable 20500
Total liabilities 2320500
Equity:
Common stock 1500000
Retained earnings 28630
Total equity 1528630
Total equity and
liabilities
3849130
b) Sales budget
Particulars Quarter
1
Quarter 2 Quarter
3
Quarter
4
Total
Run dog 10000 12000 3000 4000 29000
Sit dog 7000 8000 2000 2500 19500
Selling price per dozen for
run dog
27 27 27 27
Selling price per dozen for sit
dog
48 48 48 48
Total sales for run dog 270000 324000 81000 108000 783000

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Total sales for sit dog 336000 384000 96000 120000 936000
c) Schedule of
receipts
Particulars Quarter
1
Quarter 2 Quarter
3
Quarter
4
Total
Total sales for run dog 270000 324000 81000 108000 783000
Total sales for sit dog 336000 384000 96000 120000 936000
Collection for run dog 270000 324000 81000 108000 783000
collection for sit dog 336000 384000 96000 120000 936000
d) Production budget
Particulars Quarter
1
Quarter 2 Quarter
3
Quarter
4
Total
Sales for run dog 10000 12000 3000 4000 29000
Sales for sit dog 7000 8000 2000 2500 19500
Add: Closing stock for run
dog
1200 300 400 1100 3000
Add: Closing stock for sit
dog
800 200 250 770 2020
Less: Opening stock for run
dog
100 1200 300 400 2000
Less: Opening stock for sit
dog
270 800 200 250 1520
Production of run dog (in
dozen)
11100 11100 3100 4700 30000
Production of sit dog 7530 7400 2050 3020 20000
e) Direct material purchase budget
Core material
Particlulars Quarter
1
Quarter 2 Quarter
3
Quarter
4
Total
Production of run dog 11100 11100 3100 4700 30000
Production of sit dog 7530 7400 2050 3020 20000
Material required for each run
dog
40 40 40 40
Material required for each sit
ball
30 30 30 30
Total material required for run
dog
5328000 5328000 1488000 2256000 14400000
Total material required for sit
dog
2710800 2664000 738000 1087200 7200000

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Add: Closing stock for run
dog
799200 223200 338400 806400 2167200
Add: Closing stock for sit dog 399600 110700 163080 425520 1098900
Less: Opening stock for run
dog
975000 799200 223200 338400 2335800
Less: Opening stock for sit
dog
0 399600 110700 163080 673380
Core material purchase for
rundog
5152200 4752000 1603200 2724000 14231400
Core material purchase for sit
dog
3110400 2375100 790380 1349640 7625520
Total material purchase 8262600 7127100 2393580 4073640 21856920
Cost per kg of core material 10 10 10 10
Total cost of material
purchased
82626 71271 23935.8 40736.4 218569.2
Cover material
Particlulars Quarter
1
Quarter 2 Quarter
3
Quarter
4
Total
Production of run dog 11100 11100 3100 4700 30000
Production of sit dog 7530 7400 2050 3020 20000
Materail required for each run
dog
5 5 5 5
Material required for each sit
ball
15 15 15 15
Total material required for run
dog
666000 666000 186000 282000 1800000
Total material required for sit
dog
1355400 1332000 369000 543600 3600000
Add: Closing stock for run dog 99900 27900 42300 100800 270900
Add: Closing stock for sit dog 199800 55350 81540 212760 549450
Less: Opening stock for run
dog
0 99900 27900 42300 170100
Less: Opening stock for sit
dog
300000 199800 55350 81540 636690
Cover material purchase for
rundog
765900 594000 200400 340500 1900800
Cover material purchase for sit
dog
1255200 1187550 395190 674820 3512760
Total material purchase 2021100 1781550 595590 1015320 5413560
Cost per kg of cover material 50 50 50 50
Total cost of material
purchased
101055 89077.5 29779.5 50766 270678