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).
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
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
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
Does not identify what needs to be investigated to determine reason for variance
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
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
Earned Total 100%
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