Submitting Coursework
The Report should be submitted via canvas by midnight on Sunday 24th April 2022
Super Speed Ltd
You are the recently appointed accountant at Super Speed Ltd is a new company, which will be incorporated on 1st April 2021. Initially the company will manufacture and sell a single electronic product used in the production of drones. The following details relate to the company’s first financial year:
Selling price £275 per unit.
Direct materials cost £75 per unit
Direct labour is 5 hours per unit for the first 2 months, reducing to 4 hours per unit thereafter.
Direct labour cost £12 per hour
Sales targets for the forthcoming financial year are as follows:
| Units | |
| April 2021 | 1,200 |
| May | 1,400 |
| June | 1,500 |
| July | 1,900 |
| August | 2,000 |
| September | 2,000 |
| October | 2,100 |
| November | 2,200 |
| December | 2,000 |
| January 2022 | 1,800 |
| February | 1,800 |
| March | 1,900 |
90% of sales will be on credit terms, with customers paying two months later. The remaining sales are paid for immediately. Closing inventory is planned to be 10% of the following month’s sales target. Sales for April 2022 are expected to be 1,700 units.
Direct materials will be purchased during the month they are required for production and paid for during the following month. An overhead absorption rate of £12 per direct labour hour has been calculated for the variable production overheads. Variable distribution costs of £8 per unit sold will also be incurred.
Total fixed production overheads of £115,000 and total fixed administration and distribution overheads of £73,000 for the year will be incurred on an even basis throughout the year. All overheads and the direct labour costs will be paid for in the month in which they are incurred.
All production machinery will be leased; the costs of leasing the machinery are included in the above figures. Super Speed Ltd will also buy equipment that will be used mainly in the I.T. department. They will purchase and pay for the equipment in June 2021. The equipment will cost £22,000 and will be depreciated by 25% per annum. Depreciation is not included in the overhead details given above.
Super Speed Ltd will issue 140,000 ordinary shares of £1 at par for cash on 1st April 2021 and the company is unwilling to issue any further shares at this stage.
The Board of Directors have little financial knowledge and currently does not include a Finance Director. In order to assist you have been asked to produce the following:
A report (created in Word) to the Board of Directors of Super Speed Ltd which includes
- An explanation as to why it is important to prepare budgets 10 marks
- Comments on the budgeted cash position 15 marks
- Suggestions of ways the monthly budgeted cash balances could be improved 15 marks
- An appendix (created as an Excel workbook) which shows :
- The following monthly budgets (on a single worksheet) for the 12 months ended 31st March 2022 in as much detail as the information given allows (you should also include a total column for the year):
- The Production Budget (in units)
- The Sales Budgets (in £)
- The Materials Purchases Budget (in £)
- The Direct Labour Budgets (in £)
- The Overheads Budgets (in £) 20 marks
- Monthly Cash Budget for the company for the 12 months ended 31st March 2022 in as much detail as the information given allows (you should also include a total column for the year) 20 marks
- A single forecast Income Statement (Profit and Loss Account) for the whole of the year 15 marks
- Presentation 5 marks