ACCT 241 - 04 Principles of Managerial AccountingFall 2014 S.docx

ACCT 241 - 04: Principles of Managerial Accounting
Fall 2014 Semester Project: Dream Big, Inc. Budget
Project Objectives:
Students will prepare a Comprehensive Master Budget and a
Budgeted Income Statement for Dream Big, Inc. for the second
quarter ending June 30. This includes:
· Sales Budget;
· Production Budget;
· Raw Materials Purchases Budget;
· Direct Labor Budget;
· Manufacturing Overhead Cost Budget;
· Budgeted Cost of Goods Sold;
· Selling and Administrative Expenses Budget;
· Cash Receipts Budget;
· Cash Disbursements Budget;
· Cash Budget; and
· Budgeted Income Statement.
Students will also perform a CVP analysis to determine the
break-even point and complete a sensitivity analysis to a sales
price change and a change in the cost of materials and labor.
Project Requirements:
I. (30 points) Complete the Dream Big, Inc. Case on an
individual basis using the Excel template found in the Project
Folder on Blackboard. Enter your answer in the Worksheet tab
labeled “Part I Answer.” Use formulas in the cells for
calculations (i.e., do not type in a total that you have
determined with your calculator.)
II. (10 points) Based on the base case, perform a CVP Analysis
to determine the break-even point in units and sales dollars,
margin of safety, and operating leverage factor for Dream Big,

Inc. for the Quarter Ended June 30. You must show all
calculations. Enter your response on the Project Excel file in
theWorksheet tab labeled “Part II Answer.”
III. ( 10 points) Determine Sales Revenue & Net Income for
the 3-month period ending June 30, and the ending Cash
Balance as of June 30 assuming the unit Sales Price is expected
to increase (effective April 1) to $22, and the labor rate is
expected to increase to $11 per hour (also effective April 1).
Reconcile the changes.
To solve this, use the Worksheets provided in the Project Excel
file (i.e., the worksheet tabs titled “If SP = $22,” “If DL =
$11,” “If SP =$22; and DL = $11”). In each Worksheet, start
with the “Base Case” data (what you entered as “Part I
Answer”) and then change the budget and/or financial statement
data affected by the change to the Sales Price and/or the change
to the Direct Labor costs. For example, changing the unit sale
price will cause changes to the sales budget, cash receipts
budget, and summary cash budget… this will lead to a new Net
Income and a new June 30 ending Cash Balance. With changes
to Sales and/or Labor costs, items such as inventory values will
also change. Complete the chart found on the Project Excel
filein theWorksheet labeled “Part III Answer.”
Note: If you have used formulas for all calculations in the
Excel spreadsheet, answering this question will be
straightforward. When completing the Excel Worksheets,
check your work and make sure that the data in your schedules
foots (that is, adds up) and cross-foots (that is, adds across) in
an accurate and meaningful way. Points will be deducted if the
numbers don’t add up.
ACCT 241-04: Principles of Managerial Accounting
Fall 2014 Semester Project: Dream Big, Inc. Case
You have just been hired as a new management trainee by
Dream Big, Inc. a small company that manufactures and sells

frames made from bamboo. Bamboo is viewed as a sustainable
wood and you are excited to have the opportunity to work for a
firm which makes “green” products. In the past, the company
has done very little in the way of budgeting and at certain times
of the year has experienced a shortage of cash. Because you
have been well trained in budgeting through your coursework in
Managerial Accounting at Kogod School of Business, the
management of Dream Big is very pleased that you are on
board! You have been asked to prepare a comprehensive budget
for the upcoming second quarter in order to show management
the benefits that can be gained from an integrated budgeting
program. To this end, you have worked with accounting and
other areas to gather the information assembled below. You
will also be preparing some analyses of the budget data,
including Break-Even Analysis and some “What if” Scenarios to
help the Dream Big management team better understand their
costs so that they are positioned to make better decisions for the
company.
Dream Big, Inc. manufactures several styles of bamboo picture
frames, but all are sold for the same price -- $20 each. Each
frame requires 4 linear feet of bamboo, which costs $1.50 per
foot. Each frame takes approximately 30 minutes to build, and
the labor rate averages $10.00 per hour.
Dream Big has the following inventory policies:
Ending finished goods inventory should be 40 percent of the
next month's sales.
Ending raw materials inventory should be 30 percent of the next
month's production.
Expected unit sales (frames) for the upcoming months follow:
March

275
April
250
May
300
June
400
July
375
August
425
Variable manufacturing overhead is incurred at a rate of $0.25
per unit produced. Annual fixed manufacturing overhead is
estimated to be $7,200 ($600 per month) for an expected
production of 4,000 units for the year. Selling and
administrative expenses are estimated at $650 per month plus
$0.60 per unit sold.
Dream Big, Inc., had $9,800 cash on hand at April 1. Of its
sales, 70 percent is in cash. Of the credit sales, 40 percent is
collected during the month of the sale, and 60 percent is
collected during the month following the sale.

Of direct material purchases, 80 percent is paid for during the
month purchased and 20 percent is paid in the following month.
Raw materials purchases for March 1 totaled $2,000. All other
operating costs are paid during the month incurred. Monthly
fixed manufacturing overhead includes $150 in depreciation.
Required Part I:
Use the Excel template found on Blackboard under Course
Documents, Project to prepare a master budget for the three-
month period ending June 30. Enter your response in the
Worksheet labeled “Part I Answer.” In this problem, income
taxes will be ignored. Also, variable product costs will
comprise Cost of Goods Sold (COGS) on the Income Statement
and Inventory on the Balance Sheet.
1. Prepare the following detailed budgeted for Dream Big, Inc.,
for the second quarter (April, May, and June):
a. Sales budget
b. Production budget
c. Raw Materials Purchases budget
d. Direct Labor budget
e. Manufacturing Overhead Cost budget
f. Budgeted Cost of Goods Sold
g. Selling and Administrative Expenses budget
2. Prepare a Budgeted Income Statement for the three-month
period ending June 30.
3. Prepare a Cash Budget. Include each month (April–June) as
well as quarter 2 totals:
a. Cash Receipts budget,
b. Cash Payments budget.

ID WBS Task Name Duration Start Finish Predecessors
Resource Names January Februar
2/1 2/2 1/2 1/9 1/16 1/23 1/30 2/6
1 1 Project Kick-off 1 day Mon 1/3/11 Mon
1/3/11
2 1.1 Book location for meeting 1 day Mon 1/3/11
Mon 1/3/11 Project Manager Project Manager
3 1.2 Invite stakeholders 1 day Mon 1/3/11 Mon
1/3/11 Project Manager Project Manager
4 1.3 Prepare presentation 1 day Mon 1/3/11 Mon
5 1.4 Conduct the meeting1 day Mon 1/3/11 Mon
1/3/11 Project Manager and A Project Manager and Attend
6 2 Project Documents 7 days Mon 1/3/11 Tue
1/11/11
7 2.1 Develop Charter/Scope 2 days Mon 1/3/11
Tue 1/4/11 Project Manager Project Manager
8 2.2 Develop WBS 7 days Mon 1/3/11 Tue 1/11/11
Project Manager and W Project Manager and
9 2.3 Develop Project Plan 2 days Mon 1/3/11
10 2.4 Develop Communication Plan 2 days Mon 1/3/11
11 3 Status Reports/Meetings 1 day Mon 1/3/11
Mon 1/3/11

12 3.1 Develop Status Report 1 day Mon 1/3/11
13 3.2 Set schedule for team meetings 1 day Mon
1/3/11 Mon 1/3/11 Project Manager Project Manager
14 3.3 Set schedule for stakeholder meetings 1 day
Mon 1/3/11 Mon 1/3/11 Project Manager Project
Manager
15 4 Initial Planning Meetings with Vendors 1 day
Mon 1/3/11 Mon 1/3/11
16 4.1 Meet with Framing/Drywall 1 day Mon 1/3/11
Mon 1/3/11 Project Manager and E Project Manager
and East S
17 4.2 Meet with Electrical 1 day Mon 1/3/11 Mon
1/3/11 Project Manager and S Project Manager and Spark
18 4.3 Meet with Plumbing 1 day Mon 1/3/11 Mon
1/3/11 Project Manager and W Project Manager and Water
19 4.4 Meet with Finish Work 1 day Mon 1/3/11
Mon 1/3/11 Project Manager and W Project Manager
and Wood
20 4.5 Meet with Student Workers 1 day Mon 1/3/11
Mon 1/3/11 Project Manager and S Project Manager
and Stude
21 5 Electrical Permits 10 days Mon 1/3/11 Fri
1/14/11
22 5.1 Obtain Electrical Permits 10 days Mon 1/3/11
Fri 1/14/11 Sparks Electrical PM Sparks Electrical
P
23 6 Plumbing Permits 10 days Mon 1/3/11 Fri
1/14/11
24 6.1 Obtain Plumbing Permits 10 days Mon 1/3/11
Fri 1/14/11 Waterworks Plumbing Waterworks
Plumbi
25 7 Building Permits 10 days Mon 1/3/11 Fri
1/14/11
26 7.1 Obtain Building Permits 10 days Mon 1/3/11
Fri 1/14/11 East Side Framing & D East Side

Framing
27 8 Framing 15 days Mon 1/3/11 Fri 1/21/11
28 8.1 Framing-Order Supplies 3 days Mon 1/3/11
Wed 1/5/11 East Side Framing & D East Side
Framing & Dryw
29 8.2 Framing-Build 15 days Mon 1/3/11 Fri 1/21/11
East Side Framing & D East Side Fra
30 8.3 Framing-Inspect 10 days Mon 1/3/11 Fri
1/14/11 City & County City & County
31 8.4 Framing-Project Sign-off 1 day Mon 1/3/11
32 9 Electrical 10 days Mon 1/3/11 Fri 1/14/11
33 9.1 Electrical-Order Supplies 3 days Mon 1/3/11
Wed 1/5/11 Sparks Electrical PM Sparks Electrical
PM
34 9.2 Electrical-Install 10 days Mon 1/3/11 Fri
1/14/11 Sparks Electrical Sparks Electrical
35 9.3 Electrical-Inspect 10 days Mon 1/3/11 Fri
36 9.4 Electrical-Project Sign-off 1 day Mon 1/3/11
37 10 Plumbing 10 days Mon 1/3/11 Fri 1/14/11
38 10.1 Plumbing-Order Supplies 3 days Mon 1/3/11
Wed 1/5/11 Waterworks Plumbing Waterworks
Plumbing PM
39 10.2 Plumbing-Install 10 days Mon 1/3/11 Fri
1/14/11 Waterworks Plumbing Waterworks Plumbi
Project: District4Move.mpp
Date: Sat 1/8/11
Task Milestone External Tasks Split Summary External
Milestone Progress Project Summary Deadline
Page 1

ID WBS Task Name Duration Start Finish Predecessors
Resource Names January Februar
2/1 2/2 1/2 1/9 1/16 1/23 1/30 2/6
40 10.3 Plumbing-Inspect 10 days Mon 1/3/11 Fri
41 10.4 Plumbing-Project Sign-off 1 day Mon 1/3/11
42 11 Drywall 15 days Mon 1/3/11 Fri 1/21/11
43 11.1 Drywall-Order Supplies 3 days Mon 1/3/11
Wed 1/5/11 East Side Framing & D East Side
Framing & Dryw
44 11.2 Drywall-Install 15 days Mon 1/3/11 Fri 1/21/11
East Side Framing & D East Side Fra
45 11.3 Drywall-Inspect 10 days Mon 1/3/11 Fri
46 11.4 Drywall-Project Sign-off 1 day Mon 1/3/11
47 12 Finish Work 15 days Mon 1/3/11 Fri 1/21/11
48 12.1 Finish-Order Supplies 3 days Mon 1/3/11
Wed 1/5/11 Woodcraft Carpentry P Woodcraft
Carpentry PM
49 12.2 Finish-Install 15 days Mon 1/3/11 Fri 1/21/11

Woodcraft Carpentry Woodcraft Car
50 12.3 Finish-Inspect 10 days Mon 1/3/11 Fri 1/14/11
City & County City & County
51 12.4 Finish-Project Sign-off 1 day Mon 1/3/11
52 13 Workbenches 15 days Mon 1/3/11 Fri 1/21/11
53 13.1 Workbenches-Order Supplies 2 days Mon 1/3/11
Tue 1/4/11 Student Workers Mana Student Workers
Manager
54 13.2 Workbenches-Build 15 days Mon 1/3/11 Fri
1/21/11 Student Workers Student Worke
55 13.3 Workbenches-Quality inspection 2 days Mon
1/3/11 Tue 1/4/11 Project Manager Project Manager
56 13.4 Workbenches-Project Sign-off 1 day Mon 1/3/11
57 14 Equipment Packing 2 days Mon 1/3/11 Tue
1/4/11
58 14.1 Pack production equipment 2 days Mon 1/3/11
Tue 1/4/11 City Equipment Mover City Equipment
Movers PM
59 14.2 Pack non-production equipment 2 days Mon
1/3/11 Tue 1/4/11 City Equipment Mover City
Equipment Movers
60 14.3 Project Sign-off 1 day Mon 1/3/11 Mon
61 15 Move 3 days Mon 1/3/11 Wed 1/5/11
62 15.1 Move production equipment 3 days Mon 1/3/11
Wed 1/5/11 Express Moving Comp Express Moving
Company
63 15.2 Move non-production equipment 3 days Mon
1/3/11 Wed 1/5/11 Express Moving Comp Express
Moving Company
64 15.3 Project Sign-off 1 day Mon 1/3/11 Mon
65 16 Procurement Closure 3 days Mon 1/3/11
Wed 1/5/11

66 16.1 Review contract work 3 days Mon 1/3/11
Wed 1/5/11 Project Manager Project Manager
67 16.2 Release contractors 1 day Mon 1/3/11 Mon
68 16.3 Pay contractors1 day Mon 1/3/11 Mon 1/3/11
Project Manager Project Manager
69 17 Project Closure3 days Mon 1/3/11 Wed 1/5/11
70 17.1 Final report 3 days Mon 1/3/11 Wed 1/5/11
Project Manager Project Manager
71 17.2 Archive documentation 3 days Mon 1/3/11
Wed 1/5/11 Project Manager Project Manager
72 17.3 Lessons Learned 1 day Mon 1/3/11 Mon
Project: District4Move.mpp
Date: Sat 1/8/11
Task Milestone External Tasks Split Summary External
Milestone Progress Project Summary Deadline
Page 2
Given Data for ProjectGiven Data for ACCT 241 Project - Fall
2014DREAM BIG, INC.General information:Selling price of
picture frames$ 20.00Linear feet of bamboo required per
frame4Cost of bamboo per foot$ 1.50Hours required to
build0.50Average hourly labor rate$ 10.00Additional
information:Ending finished goods inventory should be 40
percent of the next month's salesEnding raw materials inventory
should be 30 percent of the next month's productionVariable
manufacturing overhead rate per unit produced$ 0.25Estimated
annual fixed manufacturing overhead$ 7,200Expected units of
production4,000Estimated monthly selling and administrative
expenses:Fixed$ 650Per unit sold$ 0.60Expected number of
frames sold in following
months:March275April250May300June400July375August425Ca
sh on hand at April 1$ 9,800Percentage of sales in

cash70%Percentage of credit sales collected during month of
sale40%Percentage of credit sales collected in month following
sale60%Percentage of direct material purchases paid in month
purchased80%Percentage of direct material purchases paid in
following month20%March 1 raw materials purchases$
2,000Depreciation included in monthly fixed manufacturing
overhead$ 150
Part I AnswerACCT 241 FALL 2014 PROJECT - PART I
ANSWERStudent Name: Jeffrey YeungDREAM BIG, INC.1.a.:
Sales budgetAprilMayJune2nd QuarterBudgeted sales
(units)250300400950Unit sales price$ 20$ 20$
2060Budgeted sales revenue$ 5,000$ 6,000$ 8,000$
57,0001.b.: Production budgetAprilMayJune2nd
QuarterBudgeted sales (units)Ending finished goods
inventoryBeginning finished goods inventoryBudgeted
production1.c.: Raw materials purchases
budgetAprilMayJune2nd QuarterBudgeted productionMaterial
requirements per unitTotal material needed for
productionEnding raw materials inventoryBeginning raw
materials inventoryBudgeted raw materials purchasesMaterial
cost per footBudgeted cost of raw materials purchases1.d.:
Direct labor budgetAprilMayJune2nd QuarterBudgeted
productionDirect labor requirements per unitDirect labor hours
requiredDirect labor rateBudgeted direct labor cost1.e.:
Manufacturing overhead cost budgetAprilMayJune2nd
QuarterBudgeted productionVariable manufacturing overhead
rateBudgeted variable manufacturingFixed manufacturing
overheadBudgeted manufacturing overhead1.f.: Budgeted cost
of goods soldBudgeted Manufacturing CostsPer UnitDirect
materialsDirect laborVariable manufacturing overheadFixed
manufacturing overheadBudgeted manufacturing cost per
unitAprilMayJune2nd QuarterBudgeted sales (units)Budgeted
manufacturing cost per unitBudgeted cost of goods sold1.g.:
Selling and administrative expense budgetAprilMayJune2nd
QuarterBudgeted sales (units)Variable selling and
administrative rateBudgeted variable selling and administrative

expensesBudgeted fixed selling and administrative
expensesTotal budgeted selling and administrative expenses2.:
Budgeted Income StatementAprilMayJune2nd QuarterBudgeted
sales revenueLess: Budgeted cost of goods soldBudgeted gross
marginLess: Budgeted selling and administrative
expensesBudgeted net income3.a.: Budget cash
receiptsAprilMayJune2nd QuarterBudgeted sales revenueCash
collectionsCredit collections (current month)Credit collections
(prior month)Budgeted cash receipts3.b.: Budget cash
disbursementsAprilMayJune2nd QuarterBudgeted raw materials
purchasesCash disbursementsRaw material purchases (current
month)Raw material purchases (prior month)
(*note)400.00Direct laborManufacturing overheadLess:
DepreciationSelling and administrative expensesTotal budgeted
cash disbursements*note: March purchases given at $2,000 x
20% = $4003.c.: Cash budget for Quarter 2AprilMayJune2nd
QuarterBeginning cash balanceBudget cash receiptsBudgeted
cash disbursementsEnding cash balance
If SP = $22IF SP = $22: USE TO DEVELOP AND SHOW
WORK FOR PART III ANSWERDREAM BIG, INC.1.a.: Sales
budgetAprilMayJune2nd QuarterBudgeted sales (units)Unit
sales priceBudgeted sales revenue1.b.: Production
budgetAprilMayJune2nd QuarterBudgeted sales (units)Ending
finished goods inventoryBeginning finished goods
inventoryBudgeted production1.c.: Raw materials purchases

month)Raw material purchases (prior month)Direct
laborManufacturing overheadLess: DepreciationSelling and
administrative expensesTotal budgeted cash disbursements3.c.:
Cash budget for Quarter 2AprilMayJune2nd QuarterBeginning
cash balanceBudget cash receiptsBudgeted cash
disbursementsEnding cash balance
If DL = $11IF DL = $11: USE TO DEVELOP AND SHOW
WORK FOR PART III ANSWERDREAM BIG, INC.1.a.: Sales

disbursementsEnding cash balanceBudget cash
receiptsAprilMayJune2nd QuarterBudgeted cash

If SP = $22 and DL = $11IF SP = $22 AND DL = $11: USE
TO DEVELOP AND SHOW WORK FOR PART III
ANSWERDREAM BIG, INC.1.a.: Sales

disbursementsEnding cash balanceBudget cash
receiptsAprilMayJune2nd QuarterBudgeted cash
Part II AnswerFALL 2014 - ACCT 241 Student
Name:SEMESTER PROJECT - PART II ANSWERFall 2014II.
Break-even Analysis using the "base case" dataa. Break-even
point in Units for the Quarter Ended June 30 (Show Work)b.
Break-even point in Sales Dollars for the Quarter Ended June 30
(Show Work)
Part III AnswerFALL 2014 - ACCT 241 Student
Name:SEMESTER PROJECT - PART III ANSWERFall 2014III.
What-if Analysis: Complete the following:Qtr Ended June
30Base CaseBudgeted Sales RevenueBudgeted Net
IncomeBudgeted Ending Cash Balance, at June 30What is the
financial impact if the unit sales price increases to $22.00?
(worksheet titled "If SP = $22")Budgeted Sales
RevenueBudgeted Net IncomeBudgeted Ending Cash Balance, at
June 30What is the financial impact if the direct labor rate
increases to $11.00? (worksheet titled "If DL = $11")Budgeted
Sales RevenueBudgeted Net IncomeBudgeted Ending Cash
Balance, at June 30What is the impact if the unit sales price
increases to $22.00 and the direct labor rate increases to
$11.00? (worksheet titled "If SP = $22 and DL = $11")Budgeted
Sales RevenueBudgeted Net IncomeBudgeted Ending Cash
Balance, at June 30When the unit sales price and the direct
labor rate both increase, is the impact on Budgeted Sales
Revenue the same as the change in Budgeted Net Income?
Please explain why and what items make up the difference in

these amounts (i.e., Reconcile the change in Sales Revenue and
the change in Net Income by item).Changes in Sales
Revenues:Budgeted Sales with Sales Price @ $22 and Direct
Labor Rate @$11Budgeted Sales with Sales Price - Base
CaseTotal Increase in RevenuesChanges in Expenses: Please
list:Total Change in ExpensesTotal Change in Net Income

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