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Acc Case

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ACC 312 – Spring 2016
Comprehensive Budget Problem

Tom and Linda own Hercules Condiment Company (HCC). Their unique condiment is sold by the gallon to fast food restaurants all over the Midwest. The sales price is currently $5.00 per gallon and they sold 50,000 gallons in Q4 of 2011. Sales are expected to grow 15% each quarter in 2012.
Reluctantly they have given us the formula for their final product ½ gallon of Thousand Island dressing plus ½ gallon of mustard makes 1 gallon of “Secret Condiment 100” in one container.
They have asked us to create a master budget and summary cash budget for the next two financial quarters (2012 Q1 and 2012 Q2). Please use the Excel template posted on Canvas under the Assignments section.

Additional Information: A. Thousand Island costs $1 per gallon while Mustard costs $1.50 B. The plastic container for the product has a cost of 25 cents. C. Employees that make the sauce make $12 per hour. They can make 30 gallons (units) per hour. D. Variable manufacturing overhead is charged: $2.10 per labor hour E. Fixed manufacturing overhead is $5,000 per quarter (it was $4,000 in Q4 of last year). F. Variable Marketing/Admin is $1.25 per gallon. G. Fixed Marketing/Admin is $25,000 per quarter ($5,000 of this represents depreciation) H. Calculate Q1 sales based on Q4 sales times 15% I. Ending inventory (of finished goods) must equal 20% of the next quarter’s projected sales

Page 2 J. $20,000 cash was spent in 2012 Q1 on a new piece of equipment needed to make the product. $15,000 cash was paid in 2012 Q2 to Goliath Bank of the Midwest as a loan repayment (none of this was interest). K. HCC has cash collections of 75% of revenue in the quarter the product was sold. The remaining 25% the following quarter. L. Due to the lack of credit, HCC must pay all bills in the quarter used/purchased. Fixed overhead is the only exception. For expenditures that are for fixed overhead, HCC pays 40% of them in cash in the quarter of purchase and 60% the following quarter. M. HCC had a beginning cash balance of $75,000. N. Ignore Income Taxes O. HCC had the following beg & ending balances for their raw materials. Since quantities do not change for Thousand Island and Mustard, the purchases will equal the amount used. This is not so for containers.

| Thousand Island | Mustard | Containers | Beg Q1 | 3,000 | 4,000 | 6,000 | Ending Q1 | 3,000 | 4,000 | 7,000 | Beg Q2 | 3,000 | 4,000 | 7,000 | Ending Q2 | 3,000 | 4,000 | 9,000 |…...

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