Case 123

Financial/Managerial Financial/Managerial Accounting for International Executive Case In this casea full set of budgets will be prepared and presented in appropriate format. Reports will be prepared to explain how budget numbers were determined.  The following following are general general requirements requirements for for this budget budget case. Specic requirements requirements are listed after the relevant case data. • • •

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Read the case and analyze the information. repare an operating budget in standard !income statement" format. repare a narrative report #or notes to the income statement$ addressing why%how quantitative quantitative items were were selected. The following following items must be explained& ' Sale Sales s (orec oreca ast ) urchas urchases es budget budget #raw materials materials** labor* labor* all all resour resources$ ces$ + ,per ,perat atin ing g -xp -xpen ense ses s repare a cash budget using any acceptable format. The following items must be explained or shown on the budget& ' The proc process ess by which which cash inows inows were were pro/ec pro/ected. ted. ) The proc process ess by which which cash outows outows were were pro/ec pro/ected. ted. + The process process by which which nanci nancing* ng* if applicab applicable* le* was was determi determined. ned. 0 1ow inter interest est and and other other nanc nancing ing char charges ges were were calcu calculated lated.. repare a capital budget using any acceptable format.

 2ou  2ou will be graded graded on your understanding understanding of the underlying underlying concepts concepts related related to determining budget amounts #for example* how purchases are determined$ as well as your ability to prepare and explain standard business reports. The rubric attached as the last page of this document will be used to grade the case.

Harvey’s Budget1 1arvey 3anufacturing manufactures and sells two industrial products& a self4 balancing screw driver and a self4balancing saw. 5oth products are manufactured in a single plant. 1arvey6s general manager* 3r. 7ipscomb* and president* 3r. ,wens* want a budget prepared for the scal year )8'+. They have as9ed various employees to gather information that they believe will be necessary for preparation of a budget. The information is presented below. :either 3r. 7ipscomb nor 3r. ,wens is s9illed in budget preparation. 5oth executives have used budgets and have participated to some degree in budget preparation in prior years* but neither has prepared a full budget.

Sales and selling price per unit  1istorical sales for )8') the two products are shown below.

1arvey6s sales typically pea9 in the summer months* beginning with 3ay. 1arvey6s general manager* 3r. 7ipscomb* recommends that the budget be prepared with the units sold in the high sales months of 3ay* ;une* and ;uly be used as the bases for determining the annual forecast. 3r. 7ipscomb6s recommendation is that annual sales be budgeted at