SCU ACC00146: Sunny Days Management Accounting Budget Report

This report analyzes the management accounting for Sunny Days, a swimwear and beach accessories manufacturer, focusing on the 2019 budget. It provides an overview of expected sales, production units, and financial projections, including anticipated revenue and profit. The report delves into product analysis, examining contribution margins for each product line and identifying areas for improvement, particularly for beach umbrellas. It includes a cash budget analysis, detailing cash receipts and providing recommendations for improving cash flow. Furthermore, the report assesses the current market scenario, highlighting opportunities for growth and expansion. Finally, the report offers key recommendations to enhance contribution margins, improve cash positions, and capitalize on market opportunities, such as introducing new products and improving the sales of existing products. The report emphasizes the importance of cost control and efficient credit policies to ensure financial stability and profitability.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the Student:
Name of the University:
Author’s Note

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Table of Contents
Overview of Expected Results.........................................................................................................2
Product Analysis..............................................................................................................................3
Cash Position...................................................................................................................................5
Analysis of Current Market Scenario..............................................................................................7
Recommendations............................................................................................................................8
Reference.......................................................................................................................................10

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Overview of Expected Results
The management of the company is planning to make improvement in the overall
production and sales of the business. As per the expectation of the management of the company,
the overall sales of the company are anticipated to be around 12500 units considering all
products which are offered by the business. The sales of the business for the year 2019 is
anticipated to be $ 2,363,800. The sale of one-piece product is anticipated to be much than sales
of other stock products which is offered by the business and the sales is anticipated to be $
1,250,000. The anticipated sales for the month of January is anticipated to be maximum in
comparison to sales of other months. The anticipated cash collection for the year 2019 is
anticipated to be $ 2,399.450 and the cash collection for the month of January is shown to be
maximum as per the anticipation of the management of the company (Petrick and Simpson
2013). The production units which is shown in the annual report of the business which is
anticipated to be 7050 units for year in case of one piece. The total units that will be expected by
the management for all the products during the year 15870 units is to be produced (Elhamma,
and Zhang, 2013). The machine hours which are anticipated to be required for producing the
budgeted production units which is 14246 hours. The fixed costs of the business which is
anticipated by the business will comprise of utilities, insurance, factory supervisor’s salary, rent,
maintenance and depreciation and the fixed costs of the business is expected to be $ 138,800.
The operating expenses of the business for the year is anticipated $ 85,341. The operating
expenses of the business affect the sales of the business directly and therefore also affect the
profit generation ability of the business (Altay, Prasad and Tata 2013). The management
considering the expenses of the business which is anticipated and also the budgeted sales
anticipated by the business during the year, the profits of the business for the year is expected to

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be $ 817,502. The management therefore anticipates significant improvements in the operating
structure of the business and also increase in the revenue generating capacity of the business. The
management also expects a rise in the profits of the business along with increase in the expenses
of the business during the year 2019.
Product Analysis
One-piece Board Shorts Towels Beach Umbrellas
Selling Price
Per Unit
100 80 50 45
Less: Direct
Cost Per unit
62.25 55.25 42.70 77.50
Less: Variable
Overhead
3 2.25 1.20 6
Contribution
Margin
34.75 22.50 6.10 -38.50

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One-piece Board Shorts Towels Beach Umbrellas
-50
-40
-30
-20
-10
0
10
20
30
40 34.75
22.5
6.1
-38.5
Contributi on Margin
Figure 1: (Graph Showing Contribution Margin)
Source: (Created by the Author)
The contribution margin of the business is demonstrated in the graph which is shown
above. The four main products which are offered by the business during the year are one piece,
board shorts, towels and beach umbrellas. The contribution margin of beach umbrella is shown
to be in negative which means that the management anticipated that the business will not be able
to generate profits from the sale of the product. The contribution margin is shown to be 34.5%
for the product one piece which the business offers. The contribution margin which is computed
for the business are estimated considering the selling price, direct costs and other variable costs
of the business. The contribution margin is shown to be maximum for one-piece products which
also has the maximum selling price as a product. The contribution margin for beach umbrella is
shown to be in negative which shows that the management might be facing loses in case the
management continues to offer the product to the general public. The management of the
company needs to improve the contribution margin for Beach Umbrellas and thereby also

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improve the sales of the same in the business (Noreen, Brewer and Garrison 2014). Contribution
margin in a business shows the level of efficiency of the business in the operations of the
business and also the ability of the business to generate profits after meeting the variable
expenses of the business (Huynh, Gong and Nguyen 2013). In addition to this, contribution
margin in a business is used for estimating the breakeven point of the business which is very
important for the purpose of taking appropriate decisions regarding the operational activities of
the business. The recommendation which can be suggested to the management of the company
for making improvements in the contribution margin of the business are suggested below:
1. The management of the company needs to improve the variable costs of breach umbrellas
in order to increase the contribution margin of the product and thereby allow the business
to increase their profitability (Eappen et al. 2013). The management needs to follow cost
reduction strategies for Beach umbrellas as the contribution for the same is shown to be
in negative.
2. The business needs to improve the conversion rate for the products which are offered by
the business in order to improve the contribution margin of the business.
Cash Position
The cash position of the business is shown in the cash budget which is shown in the
assessment and shows different activities which are undertaken by the business relating to cash
inflows and cash outflow of the business during the year (Enow and Kamala 2016). The cash
budget is prepared for a similar purpose in order to demonstrate the different activities which are
undertaken by the business for the purpose of generating cash revenues of the business (Kaspina,
Khapugina and Zakirov 2014). As per the cash budget, the cash receipt which the business

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received from sales is anticipated to be $ 2,399,450 for the year. The maximum cash receipt
which the business anticipates to receive is from the month of $ 352,810 which shows that this is
the peak month.
January
February
March
April
May
June
July
August
September
October
November
December
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Cash Receipts
Figure 2: (Graph Showing cash Receipts of the Business)
Source: (Created by the Author)
The cash receipts of the business in terms of cash which is collected from sales revenue
of the business are shown in the above graph. The graph above is shown for a period of 12
months for the year 2019 and the same is shown to be on the basis of estimated cash receipt
which is forecasted by the management of the company. The cash receipts for the month of
January is shown to be maximum in case of the business. The cash receipts then fall and the
month of June and July is estimated to provide lowest cash receipts from sales which is
undertaken by the business. The cash receipts again from the month of September will increase
as per the anticipation of the management.

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The recommendation which can be suggested to the business for making improvements
in the cash position of the business are listed below in details:
 The cash flow of the business can be improved by formulating a strategy for improving
the cash sales of the business and also reducing the expenses which are undertaken by the
business during the period (Atieh 2014).
 The business sales a majority of the products of the business on credit basis and therefore
the management need to improve the credit policy of the business in order to ensure that
the debtor collection policy is appropriate and funds are not blocked (Ward 2016). This
will significantly improve the cash position of the business significantly.
 The management also needs to reduce the expenses of the business which will in turn
reduce the cash outflow of the business.
Analysis of Current Market Scenario
In the new era of globalization and technological advancements, the industry of
manufacturing is in its growing phase. The technological advancements and effects of
globalization has brought about new process and techniques which can be applied by businesses
in order to improve the operational structure of the business. As per the estimates which are
received from Australian Bureau of Statistics, around 2,238,299 actively trading businesses are
operating in the market while some others are already being set up for starting a new business in
Australia. The increase in the new businesses which are coming into the market for
manufacturing industries are about 3.1% which suggest that there is tremendous opportunities in
the market to develop and achieve growth (Abs.gov.au. 2018). The bureau further provides
evidence as to the rapid development which is achieved by manufacturing businesses between

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the period of 2016 to 2017. Therefore, the market conditions which is currently in place in the
Australian economy is favorable for establishing of new businesses as well for achieving growth
for the already established businesses.
As per the analysis of the market conditions, the management of the company should
target growth and increase in the scale of operations of the business. The estimates of the
management which is provided in the different budgets which are prepared by the management,
suggest that the business can anticipate growth in the operations of the business (Hamza, Mutala
and Antwi 2015). The management has also developed a plan to increase the sales of the
business and thereby also expand the business entering new areas of operations. The budgets also
show that the management wants to improve the cash position of the business in order to have
better liquidity position which can ensure that the management can undertake any project
without being concerned about the funds. The management also has the options to further better
the products and services which are offered in order to derive a competitive edge in the market to
face the new competitors which are coming up in the industry. The management also the
prospect to introduce new products in the market in order to attract more customers to the
business and thereby improve the revenue generating capacity of the business. Therefore, there
are wide variety of options for the business in future which the management needs to select
appropriately.
Recommendations
The recommendation which can be suggested to the management of the company for
improving the contribution margin and also the cash position of the business. The management
needs to follow the following recommendations are listed below:

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1. The towel products which is offered by the business can also be improved by in terms of
sales of the business. The management needs to attract new customers and appropriately
promote the product which is offered by the business.
2. The management of the company needs to improve the costs of the business in order to
ensure that the profits of the business are appropriate.
3. The management can also introduce new products in the market in order to ensure that
the sales and profitability of the business has increased.

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Reference
Abs.gov.au. 2018. 8165.0 - Counts of Australian Businesses, including Entries and Exits, Jun
2013 to Jun 2017. [online] Available at: http://www.abs.gov.au/ausstats/abs@.nsf/mf/8165.0
[Accessed 13 Sep. 2018].
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