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.
ACC 202 Final Project Part I Guidelines and Rubric
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 259,900
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
Total liabilities 397,400
Common stock $600,000
Retained earnings 61,230
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.
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
(100%)
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 justification
(55%)
Does not identify what needs
to be investigated to determine
reason for variance
(0%)
12
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
(85%)
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
(0%)
4
Earned Total 100%