TACC 507 Managerial Accounting: 1st Quarter Budget Analysis Report

This report presents a comprehensive analysis of the 1st quarter budget for Universal Electric Company, focusing on the next financial year. It includes detailed calculations for the sales budget, cash receipts budget, purchases budget, cash payments budget, summary cash budget, short-term financial needs, income statement, statement of retained earnings, and budgeted balance sheet. The analysis utilizes the provided case study data to project the company's financial activities, aiming to determine the appropriate activity levels for the upcoming quarter. The report highlights the projected income and expenses, indicating a profit for the next quarter, and addresses capital requirements, including short-term loans. The overall calculations are designed to ensure long-term income generation and maximize productivity for Universal Electric Company. The report concludes with a bibliography of relevant academic sources.

Master of Professional Accounting
TACC 507 MANAGERIAL ACCOUNTING

Introduction
The main aim is to analyse the 1st quarter budget for Universal Electric Company,
which would be continued in Next year. The calculations are conducted, where all
the relevant information such as sales budget, cash receipt budget, Purchases
budget, Cash payments budget, summary cash budget, short-term financial needs,
income statement, statement of retained earnings and budgeted balance sheet. The
information presented in the case study of Universal Electric Company has been
used for preparing all the relevant budgets, which might help in determining the
appropriate level of activates in the next financial quarter. Hence, the projected
income and expenses depicted it the case study has been used for preparing the
budget.

Sales Budget
Sales budget
Current Next year
December January February March 1st quarter
Total sales 400,000 440,000 484,000 532,400 1,456,400
Cash sales 100,000 110,000 121,000 133,100 364,100
Credit sales 300,000 330,000 363,000 399,300 1,092,300

Cash Receipts Budget
Cash receipts budget
Cash receipts budget
January February March 1st quarter
Cash sales 110,000 121,000 133,100 364,100
Cash receipts from
credit
sales made during
current month 33,000 36,300 39,930 109,230
Cash receipts from
credit
sales made during
preceding month 270,000 297,000 326,700 893,700
Total cash receipts 413,000 454,300 499,730 1,367,030

Purchases Budget
Purchases budget
Current year Next year
December January February March 1st quarter
Budgeted cost of
goods sold 280,000 308,000 338,800 372,680 1,019,480
Add Desired
ending inventory 154,000 169,400 186,340 186,340 542,080
Total goods
needed 434,000 477,400 525,140 559,020 1,561,560
Less Expected
beginning
inventory 140,000 154,000 169,400 186,340 509,740
Purchases 294,000 323,400 355,740 372,680 1,051,820

Cash Payments Budget
Cash payments budget
Cash payments budget
January February March 1st quarter
Inventory purchases
Cash payments for
purchases during the
current month* 129,360 142,296 149,072 420,728
Cash payments for
purchases during the
preceding month† 176,400 194,040 213,444 583,884
Total cash payments for
inventory purchases 305,760 336,336 362,516 1,004,612
Other expenses -
Sales salaries 18,000 18,000 18,000 54,000
Advertising and promotion 19,000 19,000 19,000 57,000
Administrative salaries 21,000 21,000 21,000 63,000
Interest on long-term loan‡ 15,000 15,000
Property taxes‡ - 5,400 - 5,400
Sales commissions 4,400 4,840 5,324 14,564
Total cash payments for
other expenses 77,400 68,240 63,324 208,964
Total cash payments 383,160 404,576 425,840 1,213,576

Summary Cash Budget
Summary cash budget
January February March 1st quarter
Cash receipts (from schedule 2) 413,000 454,300 499,730 1,367,030
Less Cash payments
(from schedule 4) 383,160 404,576 425,840 1,213,576
Change in cash balance during
quarter due to operations 29,840 49,724 73,890 153,454
Sale of marketable securities
(2 January) 15,000 - - 15,000
Proceeds from bank loan
(2 January) 100,000 - - 100,000
Purchase of equipment 125,000 - - 125,000
Repayment of bank loan
(31 March) - - 100,000 100,000
Interest on bank loan - - 2,500 2,500
Payment of dividends - - 50,000 50,000
Change in cash balance
during 1st quarter - - - (9,046)
Cash balance, 1 January - - - 35,000
Cash balance, 31 March - - - 25,954

Short-term Financial Needs
Short term finance needs
Particulars Amount
Cash balance, 1 January 35,000
Minimum cash balance (25,000)
Available cash for equipment purchase 10,000
Cash from marketable securities 15,000
Available cash 25,000
Cost of equipment (125,000)
Short-term borrowings required (100,000)

Income Statement for the First Quarter
Income Statement
Particulars Amount
Revenue 1,456,400
Cost of goods sold (1,019,480)
Gross profit 436,920
Other expenses
Sales salaries (54,000)
Sales commissions (14,564)
Advertising and promotion (57,000)
Administrative salaries (63,000)
Depreciation (75,000)
Interest on bonds (7,500)
Interest on long-term loan‡ (2,500)
Property taxes‡ (2,700)
Total cost (276,264)

Statement of Retained Earnings
Retained Earnings Statement
Particulars Amount
Retained earnings (Beginning) 107,500
Net profit 160,656
Dividend 50,000
Retained earnings (Closing) 218,156

Budgeted Balance Sheet as at 31 March
Balance Sheet Statement
Particulars Amount
Cash 25,954
Accounts receivable 359,370
Marketable securities
Inventory 186,340
Buildings and equipment (net of acc. depr.) 676,000
Total assets 1,247,664
Accounts payable 223,608
Long-term loan interest payable 5,000
Property taxes payable 900
Long-term loan payable (10% p.a.) 300,000
Share capital 500,000
Retained earnings 218,156
Total liabilities and shareholders’ equity 1,247,664

Conclusion
The calculations conducted in the above tables directly project all the
relevant activities that might be conducted by Universal Electric Company
in the next quarter. The budget would mainly help in detecting the level of
activities that would be conducted by the organisation in the next quarter.
Hence, the calculations have indicated that the company would generate a
profit for the next quarter. Furthermore, capital requirements are also seen
where short-term loans need to be taken into consideration. In addition, the
overall calculations would mainly ensure that the company would generate
high level of income in the long run, while maximising their productivity.