ACCT4005: Budgeting Analysis for Royal Company (Managerial Accounting)

This managerial accounting assignment focuses on the budgeting process for Royal Company over a three-month period. The student analyzes the financial aspects of a single product, soft toys, purchased in bulk and repackaged for sale. The assignment includes creating a sales budget, direct material budget, direct labor budget, and analyzing overhead expenses. The student also prepares a budgeted income statement and balance sheet, providing a comprehensive financial overview of the company's operations. The analysis covers key elements such as material costs, labor hours, selling prices, and anticipated sales volumes, demonstrating an understanding of budgeting principles and financial statement preparation. The assignment concludes with a bibliography of relevant sources used in the analysis.

Running head: MANAGERIAL ACCOUNTING
Managerial Accounting
Name of the Student:
Name of the University:
Author’s Note:

1MANAGERIAL ACCOUNTING
Table of Contents
Introduction......................................................................................................................................2
Discussion and Analysis..................................................................................................................2
Product Analysis..........................................................................................................................2
Time Spent...................................................................................................................................3
Sales Budget................................................................................................................................3
Direct Material Budgets...............................................................................................................3
Direct Labour Budget..................................................................................................................3
Overhead Expenses......................................................................................................................3
Income Statement and Balance Sheet..........................................................................................3
Conclusion.......................................................................................................................................3
Bibliography....................................................................................................................................5

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Introduction
Budgeting is a simple process which is well done for the purpose of creating a spending
plan, now tis spending plan can be referred as budgeting. Creation of this spending plan would
be well allowing us to determine well in advance whether we would be having enough money or
not for doing certain level of activity that we want to do. Thus, budgeting in this sense is a
simple balance of expense of expenses with the income levels. The budgeted report has been
well created for a single product in which we have well created a detailed budgeted analysis for
the product that would be bought up in large quantity and would be sold at a small quantity in
order to earn profits. The financial analysis of the same has been well done with the help of data
that has been well based on the course of business activities we well plan to take ahead.
Discussion and Analysis
Product Analysis
The product that has been well considered for analysis purpose is Soft Toys which will be
relatively purchased at a larger quantity and then be sold accordingly at a relative smaller
quantity in cafes and small shops. The purchased products would be purchased in a larger
quantity and would be then sold in these places at a relatively smaller units by repackaging the
goods with paper boxes. The purchase cost or the material price would be around $2.50, On the
other hand, the size or quantity that we will be purchasing would be around 1250 Units in the
first month, 1850 in second and 1800 in the third month. The repackaged product would be sold
at $10 and the expected amount of units that we well achieve sell is around 500 units on a
monthly basis.

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Time Spent
The amount of time or labour hours that would be well spent for the purpose of making
the product repackaged will be around 180 hours in a month. The wage rate that would be paid
out to the labour at the same time would be around $2. The sales venue cost would be well
accounted in the form of non-cash cost and is expected to be around $55 in the first month.
Sales Budget
The sales budget for the company for a time period of three month is shown below:
April May June Quarter
Budgeted sales
(units) 500 700 900 2,100
Selling price per
unit
$
10.00
$
10.00
$
10.00
$
10
Total sales
$
5,000
$
7,000
$
9,000
$
21,000
Direct Material Budgets
The direct material budget that would be well prepared for the company for a time period of
three months is as follows:
April May June Quarter
500 720 950
2.5 2.5 2.5 2.5
1,250 1,800 2,375
175 225 350
1,425 2,025 2,025 5,475
175 175 225 225
1,250 1,850 1,800 4,900
Cost $0.40/pound 500$ 740$ 720$ 1,960$
Total needed
Less: beginning inventory
Materials to be purchased
Production in units
Materials per unit
Production needs
Add: desired ending inventory

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Direct Labour Budget
The direct labour budget that would be well prepared for the company for a time period of three
months is as follows:
April May June
Quarte
r
Production in units 500 720 950 2,170
Direct labor hours 0.40 0.40 0.40 0.40
Labor hours required 200 288 380 868
Guaranteed labor hours 180 240 260
Labor hours paid 180 288 260 728
Wage rate
$
2
$
2
$
2
$
2
total direct labor cost
$
360
$
576
$
520
$
1,456
Overhead Expenses
The overhead expenses that would be well prepared for the company for a time period of three
months is as follows:
April May June Quarter
Production in units 500 720 950 2,170
Variable mfg. OH rate 0.75$ 0.75$ 0.75$ 0.75$
Variable mfg. OH costs 375$ 540$ 713$ 1,628$
Fixed mfg. OH costs 125 125 125 375
Total mfg. OH costs 500$ 665$ 838$ 2,003$
Less: noncash costs 55 40 23 118
Cash disbursements for
manufacturing OH 445$ 625$ 815$ 1,885$

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Income Statement and Balance Sheet
Royal Company
Budgeted Income Statement
For the Three Months Ended June 30
Sales (21,000 units @ $10) $ 210,000
Cost of goods sold (21,000 @ $4.99) 126,000
Gross margin 84,000
Selling and administrative expenses 1,150
Operating income 82,850
Interest expense 4,500
Net income $ 78,350
Royal Company
Budgeted Balance Sheet
June 30
Current assets
Cash $ 7,350
Accounts receivable 1,960
Raw materials inventory 2,170
Finished goods inventory 18,000
Total current assets 29,480
Property and equipment
Land 20,000
Equipment 30,000
Total property and equipment 50,000
Total assets $ 79,480
Accounts payable $ 15,000
Common stock 55,000
Retained earnings 9,480
Total liabilities and equities $ 79,480
Conclusion
The financial budgeting process has been well followed for the Royal Company for a sum
of three months in which relevant business operations has been well captured with the help of the

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costing approach and process that has been followed. Important factors like labour budget,
material budget and overhead expenses of the company has been well encountered for analysis
purpose.

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Bibliography
Bathurst, T. and Schwartz, S., 2017, March. Costs in representative proceedings, costs budgeting
and fixed costs schemes. In Judicial Review: Selected Conference Papers: Journal of the
Judicial Commission of New South Wales, The (Vol. 13, No. 2, p. 203). Judicial Commission of
NSW.
Kuroki, M., Hirose, Y. and Motokawa, K., 2018. Efficient Participative Budgeting Using Service
Effort and Accomplishment Information: Survey Experiment for Local Governments. Available
at SSRN 3140590.
Meric, E. and Gersil, M., 2018. Usability of time driven activity based costing methods in the
budgeting process of SMEs. Business and Economics Research Journal, 9(4), pp.961-978.
Sokolov, A.Y., Elsukova, T.V. and Snetkova, T.A., 2018, August. Developing budgeting and
control in throughput accounting system. In International conference" Economy in the modern
world"(ICEMW 2018). Atlantis Press.
Sokolov, A.Y., Elsukova, T.V. and Snetkova, T.A., 2018, August. Developing budgeting and
control in throughput accounting system. In International conference" Economy in the modern
world"(ICEMW 2018). Atlantis Press.