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Our budgeted net income is Tk. 375,860 for the period.5 | P a g e
IntroductionA master budget is a comprehensive estimation of how a business will perform in the next accounting period. It comprises of interconnected budgets of sales, production, costs and cash flow. Budgeted income statement and balance sheet are also prepared as a part of the master budget. To the management, a master budget is crucial as it is a major control planning tool. It aids in decision making and can also be used to evaluate a business’ performance after the end of the accounting period.For this project we have chosen the coffee vending business of Md Ashraful Haque. Md Ashraf has a number of coffee stalls in various places of the city. One such stall is at the 4thfloor of Jamuna Future Park shopping mall. It is very small sole proprietorship business that sells only one product, the coffee. It employs only one employee. Nevertheless it generates considerable amount of profit in comparison to the capital invested.Md Ashraf has acquired dealership from a distributor of Nescafe in Dhaka. The distributor was paid Tk. 500,000 for the dealership license, and it is non refundable. Md Ashraf also paid an additional Tk 50,000 for the coffee booth and Tk 35,000 for the coffee machine. These will be bought back by Nescafe at the end of the contract at their book values. All raw materials (i.e. instant coffee mix) must be bought from Nescafe, and each cup of coffee must be sold at the price fixed by Nescafe. Additionally Nescafe will receive Tk 1.5 of royalty per cup of coffee sold. The business was started 2 years ago and has been running successfully ever since.6 | P a g e
Sales Budget:Sales pattern of the previous years’ shows that coffee sells well during the first quarter of a year, due to the weather. Sales drop in the second quarter, as the summer begins. This year sales in thisquarter will be even lower as the month of Ramadan starts in this quarter. Although sales can be expected to improve in the 3rdquarter, it will only peak in the last quarter, during winter. Selling price is Tk. 20 per cup.Sales for the previous year’s (2015) last quarter: 17,400 cupsAshraf Coffee ShopSales BudgetFor the Year Ended December 31, 2016Quarter1234TotalBudgetedunit sales(incups)15,0009,00012,00018,00054,000(*)Sellingprice per unit2020202020SalesRevenue300,000180,000240,000360,0001,080,000Expected Cash Collection:The majority of the customers of the business are the shoppers visiting Jamuna Future Park. Coffee is almost never sold to these people on credit. However 25% of the customer base 7 | P a g e
comprise of the people working on shops in the mall. Shops buy coffee for their employees and customers on a regular basis. This segment of consumers is offered one month’s credit. Thereforeone third of each quarter’s credit sales are collected in the following quarter.