Master Budget Report 2025: SBS Industrial Budgeting, Performance & Financial Analysis

Group Assignment Requirements

1) Assignment Requirements

a) Prepare a 3-to-5-page report (excluding the assignment cover, the assignment question, tables, and the reference page). The complete report should include as appendixes all tables, calculations, and graphs. Answers with verbatim quotations from references will not be accepted.

b) You can use Excel for your workings (calculation parts), but you need to copy and paste it initially in Microsoft Word. All assignments will need to be converted to PDF before submission.

c) Any font type will do, but make sure that the font size is 12 with 1.5 spacing.

d) The cover page should include:

• Assignment title
• Course code
• Course name
• Your name and matric number for every group member
• Members’ names should be arranged alphabetically.

e) Reference/s should be clearly spelled out (on ONE separate page at the end of your answer).

Assignment Question – May 2025

SBS, the maker of industrial liquidating agents, is preparing the budget for 2025. The sales department has indicated an annual sale of 55,000 units, and the selling price to be set at RM155 per unit. The selling price of the product in 2023 was RM100.

The sales department has estimated that the bulk of the sales will be in the 1st and 3rd quarters of the year.

• 1st quarter sales: 30% of the annual sales
• 2nd quarter sales forecast: 10%
• 3rd quarter sales: 40%
• Remaining sales (4th quarter): 20%

Sales Collection Policy:

• 1st Quarter: Customers pay 70% within the first quarter, and the balance (30%) will be collected in the 2nd quarter.
• 2nd & 3rd Quarters: 90% of sales are collected within the same quarter.
• 4th Quarter: Only 60% of sales are collected within the quarter.

Inventory Policy:

• The company intends to have an ending inventory of finished products of 5,000 units at the end of the budget year.
• Each quarter will also require an ending finished inventory (to avoid stockouts), which will be 8% of the next quarter’s unit sales.

Production Requirements:

• Each product requires:
• 4kg of raw materials (cost: RM12 per kg)
• 5 hours of labor time (wage rate: RM7 per hour)
• Raw Material Payments:
• 70% paid in the same quarter of purchase
• 30% paid in the next quarter
• In 2024, the cost of raw materials was RM10 per kg.
• The production department intends to have 1,500 kg of raw materials at the end of the budget year.
• Each quarter will require an ending inventory of raw materials (as a precaution against shortages), which will be 5% of the next quarter’s raw materials requirement.
• Overhead Costs:
• Variable Overheads: Predetermined rate of RM2.50 per direct labor hour.
• Annual Fixed Overhead Costs:
• Factory Rent: RM120,000
• Depreciation: RM30,000
• Maintenance and Cleaning: RM60,000
• Non-Manufacturing Expenses (Annual):
• Advertising: RM100,000
• Salaries: RM450,000
• Office Expenses: RM30,000
• Depreciation for office equipment: RM40,000
• Rent on the administration building: RM60,000

Additional Information:

• The company will pay the 2024 tax payable in the 1st Quarter of 2025.
• An equipment purchase will be made in the 4th Quarter at a cost of RM65,000.
• The company intends to take a long-term loan of RM50,000 to purchase the equipment.
• Principal repayment: RM12,500 every quarter.
• Interest payment: RM12,000 every quarter.
• Short-term loans:
• Interest rate: 8%
• Must be settled within the same year (any extension requires negotiation and will be treated as a long-term loan).
• Dividend: RM760,000 (to be paid in the 4th Quarter).
• Number of ordinary shares: 1 million units.
• 2024 average share price: RM1.20.
• Average industry P/E ratio: 6 times.
• Weighted Average Cost of Capital (WACC): 10%.

Required:

Prepare a complete Master Budget for 2025, including:

1. All Quarterly Budgets (Manufacturing Budget)
2. Quarterly Cash Budget
3. Annual Proforma Income Statement
4. Annual Proforma Balance Sheet

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