Management Accounting (I WILL UPLOAD THE SUBJECT) Assignment

Management Accounting (I WILL UPLOAD THE SUBJECT) - Assignment Example Under the following sections, each of the budget and projected financial statements are briefly discussed along with the assumptions taken to complete these projections. Assumptions 1. There are two types of raw materials to produce the final product named as Kungfu and Jodu respectively. 2. As far as the labour is concerned, two types of labour, is used according to their level of skills namely as skilled and non-skilled labour. 3. The company has invested in two types of capital expenditures such as furniture and equipment. Other non-current assets are acquired on rentals by the company. 4. Two selling prices are set by the company for first and last six months of the year such that the selling price for first six months is set to be ?300 and for the last six months, it is set as ?320 per unit. 5. For material and labour prices, it is assumed that these prices will remain same in the whole year. 6. For overheads, it is assumed that they are going to be 60% of the labour cost. 7. Cl osing stock is estimated to be 15% of the sales volume of the upcoming month. 8. Collection for sales is to be completed in such a manner that around 70% of the sales are to be obtained in the month of sales whereas the remainder of the collection is going to be completed in the next month. 9. For purchases, the company has estimated that around 80% of the purchases are going to be made in their corresponding months whereas the remaining amount will be paid in the next month. 10. For other expenses like labour and overheads, the payments are to be made the moment they arise. 11. Around ?2,500 is going to be taken out in the form of drawings every month by the owners. 12. Income tax rate is going to be applied at 30% of the income before tax. 13. The rate of depreciation is set to be 30% with the straight-line method Discussion Unit Cost The unit cost of the product â€Å"Karate† consists of three basic ingredients such as direct material cost, direct labour cost and overheads (Kinney and Raiborn, 2009). The total unit cost of Karate is expected to be ?221. If this per unit cost is split in all three components, direct material consumes around ?165, direct labour consumes around ?35 and overheads constitutes around ?21. Budgets The product budgeting purpose is served with the preparation of six kinds of budgets namely as Fixed Expenditure, Sales, Purchases, Production, Direct Labour, and Cash Budget. Comprehensive figures are accounted for the preparation of these budgets such that each budget consists of, not only having the annual figures but also monthly figures. Since this is the first year of the operations of the business, therefore, it is assumed that the start-up capital of the business is ?50,000. The following discussion takes into account each budget briefly: The fixed expenditure budget consists of ?50,000 cumulatively such that the business has planned to spend ?45,000 at the start and ?5,000 after six months of the start of the business. Fo r furniture, ?10,000 amount is reserved and for equipment, ?40,000 will be used. As far as the sales budget is concerned, 300 units are anticipated for the sale purpose in the 1st three months, followed by 365 units in the next six months and in the last quarter, the sales unit are expected to be 400 units. The