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(solution) In Part II of the final project, you will use the worksheets and


In Part II of the final project, you will use the worksheets and budget variance report you created in Part I to prepare a budget analysis communicating key findings to internal parties and suggesting potential changes to improve your organization?s performance.   This assessment addresses the following course outcomes:  (Part 1 has been completed).


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Overview To be successful, all businesses must perform periodic assessments to determine the efficiency

 

of operations. Whether you are an owner, a manager, or a frontline employee, at some time you will be

 

affected by a budget.

 

Preparing a budget and analyzing the results of operations in relation to the budget will help you

 

understand how to use financial information to evaluate the effectiveness of an organization?s

 

operations. The process will also help you determine the reasons operations do not always go as planned

 

and make decisions on changes that might need to be made to make the organization, or just your own

 

department, more efficient.

 

In Part I of the final project, you will use course-provided information to prepare an operating budget

 

and compare actual operational results to the budgets, discussing potential reasons for any variances

 

and areas to explore further. This variance analysis will allow you to make suggestions in Part II of the

 

final project about potential changes to make your organization more efficient.

 

You will have three deliverables for Part I of the assessment: a student worksheet, a budget variance

 

worksheet, and a budget variance report. First, you will prepare a beginning operating budget for your

 

company, using the student worksheet provided. Your budget will include different products with

 

different costing methods, labor, and sales projections based on a desired profit margin. You will then

 

compare your budget to actual results to determine and analyze variances. You will calculate and record

 

the variances on the budget variance worksheet provided. Finally, you will provide a brief written

 

analysis of the variances and discuss additional information needed to determine their cause.

 

This assessment addresses the following course outcomes: Communicate budget planning to internal stakeholders for strategic planning Apply costing methods

 

to production for supporting budget planning and decision making

 

Prompt You are a manager for Peyton Approved, a pet supplies manufacturer. This responsibility requires

 

you to create budgets, make pricing decisions, and analyze the results of operations to determine if

 

changes need to be made to make the company more efficient.

 

You will be preparing a budget for the quarter July through September 2014. You are provided the

 

following information. The budgeted balance sheet on June 30, 2014, is: Peyton Approved Budgeted Balance Sheet 30-Jun-15 ASSETS Cash $42,000 Accounts receivable

 

259,900

 

Raw materials inventory

 

35,650 Finished goods inventory 241,080

 

Total current assets 578,630 Equipment $720,000

 

Less accumulated depreciation 240,000 480,000

 

Total assets $1,058,630 LIABILITIES AND EQUITY Accounts payable $63,400 Short-term notes payable 24,000

 

Taxes payable 10,000 Total current liabilities 97,400 Long-term note payable 300,000

 

liabilities 397,400 Common stock $600,000 Retained earnings 61,230 Total Total stockholders? equity 661,230 Total liabilities and equity $1,058,630

 

1. Sales were 20,000 units in June 2015. Forecasted sales in units are as follows: July, 18,000; August,

 

22,000; September, 20,000; October, 24,000. The product?s selling price is $18.00 per unit and its total

 

product cost is $14.35 per unit. 2. The June 30 finished goods inventory is 16,800 units. 3. Going forward,

 

company policy calls for a given month?s ending finished goods inventory to equal 70% of the next

 

month?s expected unit sales. 4. The June 30 raw materials inventory is 4,600 units. The budgeted

 

September 30 raw materials inventory is 1,980 units. Raw materials cost $7.75 per unit. Each finished

 

unit requires 0.50 units of raw materials. Company policy calls for a given month?s ending raw materials

 

inventory to equal 20% of the next month?s materials requirements. 5. Each finished unit requires 0.50

 

hours of direct labor at a rate of $16 per hour. 6. Overhead is allocated based on direct labor hours. The

 

predetermined variable overhead rate is $1.35 per unit produced. Depreciation of $20,000 per month is

 

treated as fixed factory overhead. 7. Monthly general and administrative expenses include $12,000

 

administrative salaries and 0.9% monthly interest on the long-term note payable. 8. Sales

 

representatives? commissions are 12% of sales and are paid in the month of the sales. The sales

 

manager?s monthly salary is $3,750 per month.

 

Specifically, the following critical elements must be addressed:

 

1. Operating Budget Create an operating budget using the Final Project Part I Student Worksheet. a)

 

Prepare a sales budget. Ensure accuracy of data. b) Prepare a production budget. Ensure the accuracy of

 

your data. c) Prepare a manufacturing budget. Ensure the accuracy of your data. d) Prepare a selling

 

expense budget. Ensure the accuracy of your data. e) Prepare a general and administrative expense

 

budget using appropriate costing methods.

 

2. Budget Variance Analysis The actual quantity of material used was 31,000 with an actual cost of $7.75

 

per unit. The actual labor hours were 33,000 with an actual rate per hour of $15. a) Develop a variance

 

analysis including a budget variance performance report and appropriate variances for materials and

 

labor. Use the budget variance student worksheet provided. b) In your budget variance report, discuss each variance. What does the variance tell you? c) In addition, your budget variance report should cover

 

the following: What needs to be investigated to determine the reason for the variance? Why? Final Project Part I Rubric Guidelines for Submission: Complete the Final Project Part I Student

 

Worksheet and the Budget Variance Student Worksheet. Your budget variance report should be 1?3

 

pages, double-spaced, with one-inch margins, 12-point Times New Roman font, and APA format. Use the

 

Final Project Part I Budget Variance Report Template to complete the report.

 

Instructor Feedback: This activity uses an integrated rubric in Blackboard. Students can view instructor

 

feedback in the Grade Center. For more information, review these instructions.

 

Critical Elements Exemplary Proficient Needs Improvement Not Evident Value Operating Budget: Sales

 

Budget Prepares a sales budget, and data is accurate (100%) Prepares a sales budget, but it contains

 

some errors (55%) Does not prepare a sales budget (0%) 12 Operating Budget: Production Budget

 

Prepares a production budget, and data is accurate (100%) Prepares a production budget, but it contains

 

some errors (55%) Does not prepare a production budget (0%) 12 Operating Budget: Manufacturing

 

Budget Prepares a manufacturing budget, and data is accurate (100%) Prepares a manufacturing

 

budget, but it contains some errors (55%) Does not prepare a manufacturing budget (0%) 12 Operating

 

Budget: Selling Expense Budget Prepares a selling expense budget, and data is accurate (100%)

 

Prepares a selling expense budget, but it contains some errors (55%) Does not prepare a selling expense

 

budget (0%) 12 Operating Budget: General and Administrative Expense Budget Prepares a general and

 

administrative expense budget and utilizes appropriate costing methods (100%) Prepares a general and

 

administrative expense budget, but does not use appropriate costing methods (55%) Does not prepare a

 

general and administrative expense budget (0%) 12 Budget Variance Analysis: Variance Analysis

 

Develops a variance analysis that includes a budget variance performance report and appropriate

 

variances for materials and labor (100%) Develops a variance analysis that includes a budget variance

 

report, but variances for materials and labor are not appropriate (55%) Does not develop a variance

 

analysis (0%) 12 Budget Variance Analysis: Discuss Meets ?Proficient? criteria and demonstrates

 

awareness of the role of variances (100%) Discusses each variance and determines what variances

 

inform (85%) Discusses each variance, but does not determine what variances inform (55%) Does not

 

discuss each variance (0%) 12 Budget Variance Analysis: Investigation

 

Meets ?Proficient? criteria, and justification is well supported with examples

 

(100%)

 

Identifies what needs to be investigated to determine the reason for the variance and justifies response

 

(85%) Identifies what needs to be investigated to determine the reason for the variance, but response lacks

 

justification (55%)

 

Does not identify what needs to be investigated to determine reason for variance

 

(0%)

 

12

 

Articulation of Response

 

Submission is free of errors related to citations, grammar, spelling, syntax, and organization and is

 

presented in a professional and easy-toread format (100%)

 

Submission has no major errors related to citations, grammar, spelling, syntax, or organization

 

(85%)

 

Submission has major errors related to citations, grammar, spelling, syntax, or organization that

 

negatively impact readability and articulation of main ideas (55%)

 

Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent

 

understanding of ideas

 

(0%)

 

4

 

Earned Total 100%

 


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