ACC 302 Final Project

acc_302_prject final_topic_template_1.xls

Project Orientation and Overview

Every year at the state fair your parents have run a pretzel booth. Over the years you have experimented with new pretzel

recipes, and many have been successfully incorporated into the selection of pretzels now offered each year at the state

fair.

Your parents are ready to retire and turn the business over in your name. You want to capitalize on your parents’ success

and expand by offering pretzels at a store location. In order to expand, you will need to secure a bank loan to cover

expansion costs and overhead. To consider your proposal, the banker will want to see a business plan, specifically a

master budget.

Your task for this final project is to prepare and present all the necessary documents so that you can ask for that loan.

This task is broken down into four parts:

 Part 1: Mission Statement and Partial Business Plan, due at the end of Week Five

 Part 2: Budgets, Financial Statements, and Analysis, due at the end of Week Six

 Part 3: Complete Business Plan and Cover Letter, due at the end of Week Seven

 Part 3: Business Plan Presentation, due on Day 1 of Week Eight

Part 1 – Mission Statement and Partial Business Plan, due Week Five

 Review the following chapters:

o Chapter 18: The Changing Business Environment: A Manager’s Perspective

o Chapter 19: Cost Concepts and Cost Allocation

o Chapter 23: Cost Behavior Analysis

 Complete the Mission Statement Template Handout to record information about your pretzel company, its mission,

and its featured product.

 Use the tables and information in Exhibit 1 on the next page to calculate the costs of running your business and to

complete the short answer section of the Mission Statement Template Handout.

o Calculate total variable costs per dozen pretzels.

o Calculate sales price per dozen pretzels using 120% markup on variable costs.

o Calculate contribution margin per dozen pretzels.

o Calculate breakeven point for the quarter (three months) in dollars and units.

 Submit the completed Mission Statement Template Handout to “My Assignments” in My West.

Exhibit 1:

Cost of Goods

If your pretzel recipe has ingredients that are not included here, simply consider them part of your overhead expenses.

Direct Materials Unit Unit Cost

Flour (any kind) per cup $ 0.15

Sugar (any kind) per cup $ 0.15

Dry Yeast per cup $ 0.50

1 Stick of Butter, Shortening, Oil per 1/2 cup $ 1.00

Egg per cup $ 0.10

Salt per 1/2 cup $ 0.75

Specialty Ingredients (any kind, e.g., chocolate chips, cinnamon,

cheese, pepperoni, etc.)

per cup $ 2.00

Direct Labor

Information regarding direct labor cost is not maintained because your facility is highly automated. Direct labor is included

as part of manufacturing overhead.

Manufacturing Overhead and Operating Expenses

Manufacturing Overhead Variable

(per dozen)

Fixed

(per month)

Utilities $ 0.50

Other Indirect Materials and Labor $ 0.75

Maintenance $ 500.00

Depreciation $ 2,000.00

Supervision $ 2,500.00

Totals $ 1.25 $ 5,000.00

Operating Expenses Variable

(per dozen)Fixed(per month)

Sales Commission $ 0.50

Shipping Costs $ 1.00

Salaries $ 5,000.00

Depreciation $ 200.00

Other $ 1,800.00

Totals $ 1.50 $ 7,000.00 ACC 302 Final Project 3 01/30/12

Part 2 – Budgets, Financial Statements, and Analysis, due Week Six

 Review Chapter 24: The Budgeting Process.

 Use the tables and information presented in Exhibit 2 on the next page to determine production and financial budget

data.

 Create a spreadsheet that provides the following budgets:

o Sales budget/cash collections budget

o Direct materials purchases budget/cash disbursements budget

o Manufacturing overhead budget

o Operating expenses budget

 Create documents that show your projected income and your cash needs. More specifically, use the budgets and

other documentation that you have created for this project to create the following documents:

o Proforma (projected) variable income statement

o Proforma absorption income statement

o Proforma balance sheet

o Cash budget

 Respond to the following short answer questions using a word processing program:

Discuss the importance of beginning the master budget process with an accurate sales budget.

o What are some important factors that a manager should consider when developing a sales budget? State why

each is important.

o Distinguish between operating expenses and disbursements for operating expenses.

o What is the main difference between the variable and absorption income statements?

o What are the major benefits of budgeting?

 Submit the budgets, financial documents, and short answer questions to “My Assignments” in My West. ACC 302 Final Project 4 01/30/12

Exhibit 2:

Production Budget Information

It is a few months before your store is opening. You expect to open the doors of your pretzel company as of January 1.

You are starting fresh with no raw materials, no accounts receivable, and no accounts payable. You were able to secure

several contracts with local businesses (i.e., sales associates that are paid on commission); based off these contracts,

you were able to make projects for the first four months of the year.

 Because your pretzels are made fresh daily, there is no work-in-process or finished goods inventory.

 You plan to maintain a raw direct material inventory of 10% of the next month production.

 Payment for raw direct materials is 25% in the month of purchase and 75% in the following months.

Your monthly sales projections are based off your last name, and sales are sold per dozen.

Collections on Sales

Cash sales collected in the current month: 40%

Credit sales are collected in the following month: 60%

Financial Budget Information

 Your initial investment in your business is $50,000, and you are looking to secure a bank loan for $50,000 with

additional line of credit. However, you must always have a minimum cash end-of-month balance of $10,000.

 If there is any cash over $10,000 available at the end of the month, you must repay your outstanding balance in

$1,000 increments.

 If the end-of-month cash balance falls below $10,000, you must make additional borrowing from the line of credit.

These borrowings are also in increments of $1,000.

 Your bank loan and line of credit has an annual interest rate of 12% which is paid monthly on the total outstanding

borrowings at the end of the prior month.

Additional Information:

 Fixed asset acquisition in January is $90,000.

 Your income taxes are paid each quarter on net income at a rate of 25%.

A-F G-L M-S T-Z

January 3750 2750 2000 1750

February 3750 3250 3500 3750

March 3750 4000 4500 3500

April 3750 5000 5000 6000ACC 302 Final Project 5 01/30/12

Part 3 – Complete Business Plan and Cover Letter, due Week Seven

 Write a cover letter to a banker explaining why the banker should approve your loan.

 Compile and complete your business plan, including all supporting documentation created for this project.

 Submit your complete business plan as one document to “My Assignments” via My West.

Part 4 – Business Plan Presentation, due in-class, Week Eight

 Create a 5–15 slide Microsoft® PowerPoint® presentation of your business plan. The slides will be evaluated for:

o Content

o Relevance

o Layout

o Readability

 Present your business plan in person (on campus) or via Adobe®

Acrobat®

ConnectTM during the online class

meeting. Your presentation must be 10–15 minutes long (including Q & A) and will be evaluated on:

o Delivery of the content

o Answers to follow-up questions from the class and instructor

For online students: If you are to be absent from class, your slides must include detailed speaker notes containing the

content that would have been delivered in the live session.

Note to instructor: Time devoted to final presentations may need to be adjusted to account for large class sizes. These

adjustments are at the discretion of the instructor.

ACC 302 Final Project 1 01/30/12

ACC 302 Final Project

Project Orientation and Overview

Every year at the state fair your parents have run a pretzel booth. Over the years you have experimented with new pretzel
recipes, and many have been successfully incorporated into the selection of pretzels now offered each year at the state
fair.

Your parents are ready to retire and turn the business over in your name. You want to capitalize on your parents’ success
and expand by offering pretzels at a store location. In order to expand, you will need to secure a bank loan to cover
expansion costs and overhead. To consider your proposal, the banker will want to see a business plan, specifically a
master budget.

Your task for this final project is to prepare and present all the necessary documents so that you can ask for that loan.
This task is broken down into four parts:

 Part 1: Mission Statement and Partial Business Plan, due at the end of Week Five

 Part 2: Budgets, Financial Statements, and Analysis, due at the end of Week Six

 Part 3: Complete Business Plan and Cover Letter, due at the end of Week Seven

 Part 3: Business Plan Presentation, due on Day 1 of Week Eight

Part 1 – Mission Statement and Partial Business Plan, due Week Five

 Review the following chapters:

o Chapter 18: The Changing Business Environment: A Manager’s Perspective
o Chapter 19: Cost Concepts and Cost Allocation
o Chapter 23: Cost Behavior Analysis

 Complete the Mission Statement Template Handout to record information about your pretzel company, its mission,

and its featured product.

 Use the tables and information in Exhibit 1 on the next page to calculate the costs of running your business and to
complete the short answer section of the Mission Statement Template Handout.

o Calculate total variable costs per dozen pretzels.
o Calculate sales price per dozen pretzels using 120% markup on variable costs.
o Calculate contribution margin per dozen pretzels.
o Calculate breakeven point for the quarter (three months) in dollars and units.

 Submit the completed Mission Statement Template Handout to “My Assignments” in My West.

ACC 302 Final Project 2 01/30/12

Exhibit 1:

Cost of Goods
If your pretzel recipe has ingredients that are not included here, simply consider them part of your overhead expenses.

Direct Materials Unit Unit Cost
Flour (any kind) per cup $ 0.15
Sugar (any kind) per cup $ 0.15
Dry Yeast per cup $ 0.50
1 Stick of Butter, Shortening, Oil per 1/2 cup $ 1.00
Egg per cup $ 0.10
Salt per 1/2 cup $ 0.75
Specialty Ingredients (any kind, e.g., chocolate chips, cinnamon,
cheese, pepperoni, etc.)

per cup $ 2.00

Direct Labor
Information regarding direct labor cost is not maintained because your facility is highly automated. Direct labor is included
as part of manufacturing overhead.

Manufacturing Overhead and Operating Expenses

Manufacturing Overhead Variable

(per dozen)
Fixed
(per month)

Utilities $ 0.50
Other Indirect Materials and Labor $ 0.75
Maintenance $ 500.00
Depreciation $ 2,000.00
Supervision $ 2,500.00
Totals $ 1.25 $ 5,000.00

Operating Expenses Variable

(per dozen)
Fixed
(per month)

Sales Commission $ 0.50
Shipping Costs $ 1.00
Salaries $ 5,000.00
Depreciation $ 200.00
Other $ 1,800.00
Totals $ 1.50 $ 7,000.00

ACC 302 Final Project 3 01/30/12

Part 2 – Budgets, Financial Statements, and Analysis, due Week Six

 Review Chapter 24: The Budgeting Process.

 Use the tables and information presented in Exhibit 2 on the next page to determine production and financial budget

data.

 Create a spreadsheet that provides the following budgets:

o Sales budget/cash collections budget
o Direct materials purchases budget/cash disbursements budget
o Manufacturing overhead budget
o Operating expenses budget

 Create documents that show your projected income and your cash needs. More specifically, use the budgets and

other documentation that you have created for this project to create the following documents:

o Proforma (projected) variable income statement
o Proforma absorption income statement
o Proforma balance sheet
o Cash budget

 Respond to the following short answer questions using a word processing program:

o Discuss the importance of beginning the master budget process with an accurate sales budget.
o What are some important factors that a manager should consider when developing a sales budget? State why

each is important.
o Distinguish between operating expenses and disbursements for operating expenses.
o What is the main difference between the variable and absorption income statements?
o What are the major benefits of budgeting?

 Submit the budgets, financial documents, and short answer questions to “My Assignments” in My West.

ACC 302 Final Project 4 01/30/12

Exhibit 2:

Production Budget Information
It is a few months before your store is opening. You expect to open the doors of your pretzel company as of January 1.
You are starting fresh with no raw materials, no accounts receivable, and no accounts payable. You were able to secure
several contracts with local businesses (i.e., sales associates that are paid on commission); based off these contracts,
you were able to make projects for the first four months of the year.

 Because your pretzels are made fresh daily, there is no work-in-process or finished goods inventory.

 You plan to maintain a raw direct material inventory of 10% of the next month production.

 Payment for raw direct materials is 25% in the month of purchase and 75% in the following months.

Your monthly sales projections are based off your last name, and sales are sold per dozen.

Collections on Sales
Cash sales collected in the current month: 40%
Credit sales are collected in the following month: 60%

Financial Budget Information

 Your initial investment in your business is $50,000, and you are looking to secure a bank loan for $50,000 with

additional line of credit. However, you must always have a minimum cash end-of-month balance of $10,000.

 If there is any cash over $10,000 available at the end of the month, you must repay your outstanding balance in
$1,000 increments.

 If the end-of-month cash balance falls below $10,000, you must make additional borrowing from the line of credit.
These borrowings are also in increments of $1,000.

 Your bank loan and line of credit has an annual interest rate of 12% which is paid monthly on the total outstanding
borrowings at the end of the prior month.

Additional Information:

 Fixed asset acquisition in January is $90,000.

 Your income taxes are paid each quarter on net income at a rate of 25%.

A-F G-L M-S T-Z
January 3750 2750 2000 1750
February 3750 3250 3500 3750
March 3750 4000 4500 3500
April 3750 5000 5000 6000

ACC 302 Final Project 5 01/30/12

Part 3 – Complete Business Plan and Cover Letter, due Week Seven

 Write a cover letter to a banker explaining why the banker should approve your loan.

 Compile and complete your business plan, including all supporting documentation created for this project.

 Submit your complete business plan as one document to “My Assignments” via My West.

Part 4 – Business Plan Presentation, due in-class, Week Eight

 Create a 5–15 slide Microsoft® PowerPoint® presentation of your business plan. The slides will be evaluated for:

o Content
o Relevance
o Layout
o Readability

 Present your business plan in person (on campus) or via Adobe® Acrobat® ConnectTM during the online class

meeting. Your presentation must be 10–15 minutes long (including Q & A) and will be evaluated on:

o Delivery of the content
o Answers to follow-up questions from the class and instructor

For online students: If you are to be absent from class, your slides must include detailed speaker notes containing the
content that would have been delivered in the live session.

Note to instructor: Time devoted to final presentations may need to be adjusted to account for large class sizes. These
adjustments are at the discretion of the instructor.

*Note this assignment only focuses on a mission statement and the financial portion of a business plan.

Week 5

.15

.00

cup $0.15 $0.00

cup

$0.00

cup

$0.00

half cup

$0.00

cup

$0.00

variable costs per dozen

$0.00

price per dozen

$0.00

Break Even Analysis

Recipe: 1 dozen pretzels

Ingredient

Units

Unit cost

Usage

Cost

Flour

cup

Sugar

Yeast

$0.50

Oil

half cup

$1.00

Egg

$0.10

Salt

$0.75

Other

$2.00

Variable direct material costs per dozen

Variable overhead costs per dozen

Variable operating costs per dozen

Total

Mark-up

Sales

Contribution margin

Monthly fixed costs:

Manufacturing overhead

Operating expenses

Months

1st quarter fixed costs

Break even units

Break even sales

Week 6a

3750 3750 3750

Collections Budget

5000

3750 3500

January February March Total

$0 $0 $0 $0

Quarter Ending March 31, 2011
January February March Total April

$0 $0 $0 $0

Unit production in dozens
Raw material per dozen
Production needs 0
Add: Planned ending inventory
Total needs
Less: Beginning inventory
Raw materials to be purchased
Cost per unit used
Total cost of raw materials $0 $0 $0 $0

Units Unit cost Total

Flour
Sugar
Dry yeast
Oil
Eggs
Salt
Other

at March 31

$0 $0 $0 $0

Quarterly sales projections:

Name

January

February

March

April

A-F

3750

Sales and

Cash

G-L

2750

3250

4000

5000

Quarter Ending

March 31, 2011

M-S

2000

3500

4500

T-Z

1750

6000

Sales:

Unit sales in dozens

Selling price per dozen

Total sales

Total cash sales (40%)

Total credit sales (60%)

Cash collections:

Current month cash sales

Collection of credit sales

Total cash collections

Quarter end receivables

Direct Material Purchases

and Cash Disbursements Budget

Flour:

Unit production in dozens

Raw material per dozen

Production needs

Add: Planned ending inventory

Total needs

Less: Beginning inventory

Raw materials to be purchased

Cost per unit used

Total cost of raw materials

Sugar:

Dry yeast

Oil:

Eggs

Salt:

Other ingrediants:

Total raw material purchases

Less quarter end inventory

Raw materials inventory

Cost of goods sold

Budgeted cash disbursements:

25% of current month’s purchases

75% of prior month’s purchases

Quarter end accounts payable

Week 6b

Quarter Ending March 31, 2011
January February March Total
Unit production in dozens

$0 $0 $0 $0

Quarter Ending March 31, 2011
January February March Total
Unit production in dozens

$0 $0 $0 $0

Total budget $0 $0 $0 $0
Less: non-cash depreciation

$0 $0 $0 $0

Quarter Ending March 31, 2011
January February March Total

$0 $0 $0 $0

Manufacturing overhead
Operating expenses

$0 $0 $0 $0

(1% per month on outstanding balance)

Quarter Ending March 31, 2011

Sales

Direct materials
Manufacturing overhead
Operating expenses

Contribution margin

Manufacturing overhead
Operating expenses

Interest expense

Quarter Ending March 31, 2011
Sales

Direct materials
Manufacturing overhead

Operating expenses
Interest expense
Operating income (loss)
Income taxes
Net income (loss)

March 31, 2011
Cash
Raw materials inventory
Capital contribution

Manufacturing Overhead Budget
Variable manufacturing overhead per dozen
Budgeted manufacturing overhead
Budgeted fixed overhead
	Total budget
	Less: non-cash depreciation
Cash disbursements for manufacturing overhead
Operating Expense Budget
Variable operating expenses per dozen
Budgeted variable expense
Budgeted fixed operating expenses
Cash disbursements for operating expenses
Cash Budget
Receipts:
Cash, beginning balance
	Capital contribution
Collections from customers
Total cash available
Disbursements:
		Direct materials
Equipment purchases
Total disbursements
Excess (deficiency) of cash
Bank loan
Draws on line of credit
Repayments
Interest payments
Cash, ending balance
		Interest expense
Accrued interest at quarter end
Proforma Variable Income Statement
Variable costs:
Total variable costs
Fixed costs:
Total fixed costs
	Operating income (loss)
	Income taxes
	Net income (loss)
Proforma Absorption Income Statement
Cost of goods sold:
Total cost of goods sold
Gross margin
Proforma Balance Sheet
Current assets:
Accounts receivable
Total current assets
Fixed assets
Less accumulated depreciation
Net fixed assets
Total assets
Current liabilities:
Accounts payable
Accrued interest payable
Bank loan and line of credit
Total current liabilities
Owner’s equity:
Retained earnings
Total equity
Total liabilities and equity

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