You have just been hired by Graphic Design as their new President. The company has multiple product lines including a profitable T shirt design business. As the President, one of your first tasks is to review some budgets that were given to you by the Vice President of the T shirt line. Your understanding of this business is limited but your background in accounting has you very interested in reviewing a critical part of the business. You need to complete the following tasks:
You will review and make any changes for missing information on the 2016 budgets that were given to you. Hint- the blocked off cells need to be completed. I would also recommend that you spend some time understanding each budget and the relationship to the other budgets.
A Traditional Income Statement for the year only needs to be completed. For the Cost of Goods sold, please use the cost of the T shirts, labor and MOH for the calculation. Please link all areas appropriately.
A Cost Volume Analysis (CVP) Income Statement also needs to be completed for just the year. Please link all areas appropriately
Calculate a flexible budget for the Sales and Administration and MOH budgets using increments of 1,000 units for quarter 1. So currently, you are selling 8,000 units for the first quarter so you want to prepare a schedule that will also include 6,000, 7,000 and 9,000 units sold. (similar to page 1014 exhibit 23-17)
In addition assume, the company actually sells 6,500 units, prepare an actual to budget comparison for both the Sales and Administration and MOH budgets using the actuals for the first quarter found on the spreadsheets attached.
After reviewing the revised budgets, flexible budgets for the Sales and Administrative and MOH budgets and budget to actual comparison, please discuss in a word document (memo format) about some of the following issues:
The owner asks you to explain flexible budgets and their impact on budgeting. Please explain the concept and the importance of this type of budgets.
What caused the budget to actual variances? Please explain and discuss the implications to the company if these trends continue.
Evaluate the budgets for any areas that you might be able to recommend some changes like cost reductions, or price changes. Identify two areas for these recommended changes. For example, review the sales commissions currently paid. What is the % and should it be changed? DO NOT use this example in your paper. How do your changes impact the company? Support your conclusions with any calculations that are necessary. (A revised CVP income statement is always a great tool).
Your final submission will include the excel worksheets and a word document(about 3 pages)