Managerial Accounting Project

1. Master Budget Project
Earrings Ltd.

2. Earrings Ltd. Analysis
• Sales revenues inconsistent due to seasonal
fluctuations
• Cash borrowed to pay for these seasonal
changes

3. What-If Scenarios
1. Sublease unused warehouse space for
$4000/month
2. Change ending inventory to 60% of next
quarter to even out seasonal fluctuations
3. Change advertising to be a variable expense
of 20% of next month to increase ROI

4. Quarter 2 Impact
• Equity increases by $272,900 while Liabilities
remain constant:
$1,618,700
$1,891,600
$1,519,700
$1,792,600
$1,000,000
$1,100,000
$1,200,000
$1,300,000
$1,400,000
$1,500,000
$1,600,000
$1,700,000
$1,800,000
$1,900,000
$2,000,000
Baseline Combined Scenarios
What-If Scenario:
All Changes implemented
Assets
Equity

5. Master Budget Project
Hillyard Company

6. Hillyard Company Analysis
• Very weak bottom line numbers
• Office Supplies are not a growing market so
you must compete for market share

7. Scenario 1
• Go after B2B market
• Cut Advertising by $20,000/month ($52,000 to
$32,000
• Hire 2 full-time B2B salesmen at $4000/month
plus variable 5% sales commission
• Cut fixed costs while focusing on revenue
growth

8. Scenario 2
• Use Net 30 to entice early payments
• Revenue boost due to 1% collection fees on
Credit
• Estimated 50% pay cash and 50% pay Credit

9. Scenario 3
• Reduce borrowing costs by 50%
• Find bank/funding pool to give .5%/month
loans
• Fed rates are very low, and our budget
estimates show our default rate risk is very
low