La Trobe Business School ACC3MAC Assignment 1: Budgeting Project

This project focuses on creating a comprehensive budgeting plan for an organic farm producing citrus fruits. The student begins by outlining the vision, purpose, and goals of the business, emphasizing the demand for healthy produce and sustainable agricultural practices. The project then delves into estimating direct material and labor costs, detailing seed, irrigation, manure, and labor expenses for orange and lemon production. Standard variable and fixed overhead costs, including harvesting, depreciation, interest, and insurance, are also calculated. A master budget is prepared, encompassing sales, cost of sales, and profit and loss budgets for the first month of operation. The student reflects on the knowledge and skills gained, highlighting the practical approach to market analysis, cost understanding, and real-time production planning. The assignment demonstrates the application of budgeting principles to assess the costing of a new product and control potential expenses.

Budgeting
Name of the student-
[DATE]
Hewlett-Packard
[Company address]

Table of Contents
1. Create product or service your choice, and discuss the vision, purpose, and goal of your
activity...........................................................................................................................2
2. Estimate standard direct material and direct labour costs for your product or service.........3
3. Estimate standard variable overheads and fixed overheads for producing the product or
service............................................................................................................................6
4. Prepare master budget for your 1 month of operation (including sales, costs of sales, profit
and loss budgets).............................................................................................................9
5. Reflection on knowledge and skills.............................................................................12
References....................................................................................................................13

1. Create product or service your choice, and discuss the vision, purpose, and goal of
your activity.
 PRODUCT OR SERVICE: The product chosen for offering into the market is organic farm
products. The primary product shall be far produced fruits, mainly the citrus ones. The setting
proposed for the production shall be mainly traditional with the use of labour intensive
technique (Garibaldi, et. al 2017). The land chosen shall be feasibly tested initially to check
the suitability for the proposed production. The production month shall be based upon the
months suitable for each fruit type, in order to promote production function happening on a
continuous basis.
 REASON: the reason for the selected products is the ongoing demand in the market for the
healthy produce rather than chemically grown items. The opportunity to strike market share is
high in this category of product (Reganold, & Wachter, 2016).
 VISION: the vision of business is promotion of a system of agricultural supply that is safe
and sustainable. Promoting the health of the consumers along with environment protection
(Niggli, Willer, & Baker, 2016).
 PURPOSE: the purpose of business is provision of good quality, and full of nutrition fruits
for making it available for consumption to several regions of Australia. The main purpose is
attainment of sustainability (Barker, 2016).
 GOAL: the goal is to strike a balance with consumers to incentivise them to make purchase
decision that can improvise their health. Along with consumer health, the environment and
community care is also to be sought of. The target is expansion of use of practice of organic
farming and reduction of chemically grown food products. The sustainability of the
Australian agricultural system is aimed to be fostered (Crowder, & Reganold, 2015).

The futuristic goal is to bring an entire reform in the manner production is done and
materialised. Knowledge about the environmental and health benefits of the system of
organic farming is required to be spread in the local masses.
 LINKAGE OF DECISION: the decision to produce the organic fruits has been taken with
the view to exploit the growing demand in market for healthy produce. The company’s
vision, purpose and goal are linked with exploiting this opportunity. The company’s foremost
aim is creating a sustainable environment for the company’s production process. This
sustainability can be achieved by promoting organic production as well as the promotion of
the organic sales.
2. Estimate standard direct material and direct labour costs for your product or service.
The direct material costs required for the production of agricultural farm business shall relate
to seeds, and irrigation, with manure. The direct labour shall comprise of the labor costs. The
current production list comprises of oranges, and lemon. The process of cost estimation is
done as follows:
NOTE: the calculation of labor and material cost is done on an annual basis. Assumption
taken is that, both lemon and oranges shall be grown simultaneously on 200 acre land. The
production shall take 12 months for realise in sale. Hence, the master budget prepared shall
be for the month after the production is done (Gao, & Wong, 2017).
DETAILS
particulars

Orange seeds AU$ for 50 seeds 1.57
Lemon seeds AU$ for 10 seeds 1
Tree planting per acre of orange 84
per acre of lemon 81
Land acres 400
Manure
rate in AU$ for 30
litres 4.5
manure per
acre litre 20
Irrigation AU$ per acre 356
Labour people per acre 2
AU$ per day per
labour 20
STATEMENT OF DIRECT COST
particulars unit per unit total

cost AU$
direct material
seeds: orange 16800 0.0314 527.52
lemon 16200 0.1 1620
manure 8000 0.15 1200
irrigation 400 356 142400
total
145747.
5
direct labour
labour cost 800 7300 5840000
total direct
costs 5985748
These above given cost is the cost which is incurred by company directly to covert raw
material into finished goods. These labour and other expenses are directly made in the
process expenses.

3. Estimate standard variable overheads and fixed overheads for producing the product
or service.
The variable overheads include harvest picking cost. While the fixed cost include
depreciation, interest on investment and insurance. This standard variable overheads and
fixed overheads for producing the product or service both are interlinked to each other.
However, rate of interest of investment is considered to assess interlink between them
(Fraser, Bhaumik, & Wright, 2015).
Rate of interest on investment: 10%
Insurance rate: 5%
The rate of interest and insurance are taken as prevalent in Australian market and are
expected to stable over a period of 12 months. The costs computed are for a period of 12
months. It is expected that the produce shall be sold after 12 months, as it would take 12
months to grow. The entire 12 months’ cost shall be deducted from the sales proceeds at
once.
DEPRECIATION CHART
particulars current rate useful life
per acre
investment
per acre
depreciation
irrigation system 180000 10 450 45
tractor 150000 10 375 37.5

planter 15000 10 38 3.8
pickup 90000 10 225 22.5
total investment 435000 1088 108.8
INTEREST AND INSURANCE CHART
Particulars formula
per
acre
Interest on investment/acre
(Investment cost)/(2 X
No. of acres) * Annual
Interest Rate 54.38
insurance per acre
(investment cost)/(2 X
No. of acres) * Annual
insurance Rate 2.72
VARIABLE OVERHEAD
Particulars unit quantity price per harvestin

unit
g cost per
acre
harvest pick ton 12 40 350
cost of hauling, packing &
marketing ton 13 200 2600
total cost of harvesting 2950
statement of variable and fixed overhead
Particulars rate per acre total
variable overhead 2950 1180000
fixed overhead
Depreciation 108.8 43520
interest on investment 54.38 21750
Insurance 2.72 1087.5

total fixed overhead 66357.5
total overheads 1246357.5
4. Prepare master budget for your 1 month of operation (including sales, costs of sales,
profit and loss budgets).
chart of production and sale unit (Finance, & Yahoo ,
2019)
fruit per
tree
number of
trees
total
production
production
:
lemon 200 16200 3240000
orange 180 16800 3024000
normal
loss 5%
sales unit:

lemon 3078000
orange 2872800
sales budget
sales unit price per unit sales for 1st month
lemon 3078000 2 6156000
orange 2872800 1 2872800
9028800
COST OF SALE
BUDGET
direct
material 145747.52
direct labour 5840000

cost of sales 5985747.52
OVERHEAD BUDGET
variable
overhead 1180000
fixed overhead 66357.5
1246357.
5
profit & loss budget
sales
9028800.0
0
less:
cost of sales
5985747.5
2
operating profit 3043052.4