COMM 210: Accounting and Finance – Taiyou CannaSask Inc. – Master Base Case Budget – Budget Project Assessment Answer

By
Responsive Centered Red Button

Need Help with this Question or something similar to this? We got you! Just fill out the order form (follow the link below), and your paper will be assigned to an expert to help you ASAP.

Order Form

COMM 210: Accounting Assessment Answer
Task:
Taiyou CannaSask Inc. has hired your employer to provide some professional consulting. Your group has been assigned to advise the management of Taiyou CannaSask on some alternative strategies for their coming fiscal year. A major portion of this consulting will include presenting Taiyou CannaSask’s management with a coming year budget if they continue with their current business model and to contrast this budget with alternative budgets if the company makes some changes to their future operations.
You must use an Excel workbook to complete this assignment. Within the workbook there must be separate spreadsheets presenting a budget for the current business model, any alternative business model you are requested to present management with, and any additional alternative business models you desire to present to management. Each of the spreadsheets should draw from a given data section using cell referencing, formulas, functions, and linking (i.e. aside from the given data amounts there should be no hard numbers in you budget). There may be hard numbers in any short-term borrowing and repayment cells if need be, but there is an additional up to five bonus marks for groups that are able to compute short-term borrowing and repayment using cell referencing.
By the due date each group must submit, by email to the instructor, one digital copy of the workbook and one digital copy of a written report to management. The workbook is to be in Excel format and the written report is to be in Word format. Please label both the workbook and written report with the last names and first initials of each group member separated by a hyphen. For example, if the group members are Amy Farrah Fowler, Sheldon Cooper, Leonard Hotstadter, and Howard Wolowitz, then the document would be labeled Farrah FowlerA-CooperS-HotstadterL-WolowitzH.
This assignment is due no later than 2:00PM on April 5, 2019. No late assignments will be accepted.
Project
Taiyou CannaSask Inc. (a Canadian company with facilities in Northern Saskatchewan) is a federally licensed grower of cannabis. Taiyou CannaSask has built a unique facility to take advantage of the abundant Saskatchewan sunshine available in the summer yet still able to grow product throughout the rest of the year. Taiyou CannaSask’s facility lowers the company’s lighting and climate control costs from March through September and does not have any impact on product quality throughout the year. Since the recreational cannabis industry is a new industry, the management at Taiyou CannaSask has hired your company to provide them with a detailed master budget plan for the coming year broken down into quarters. Along with this base budget, due to potential seasonality in demand Taiyou CannaSask’s management has asked that you also prepare an alternative budget where product demand is greater in Fall and Winter. For each of the budgets, you will present information for each quarter and for the year as a whole. Taiyou CannaSask’s fiscal year runs from February 1st to January 31st. The base budget for fiscal year 2019 will be based on Taiyou CannaSask’s current business model using the following information:

Expected sales, in kilograms, for the four quarters of fiscal 2019 and the first and second quarter of fiscal 2020 are as follows. Notice that there is no seasonality in demand.

Quarter One 2019

2,275

Quarter Two 2019

2,275

Quarter Three 2019

2,275

Quarter Four 2019

2,275

Quarter One 2020

2,275

Quarter Two 2020

2,275

Cannabis is sold for $5.00 per gram.
All sales are on account. Sixty-five percent of sales are collected in the quarter of sale, twenty-five percent of sales are collected in the quarter following the sale, and the final ten percent of sales are collected in second quarter after the sale. Assume that 70% of the current accounts receivable will be collected in the first quarter of fiscal 2019 and the remaining 30% will be collected in the second quarter of 2019. Assume that there are no bad debts incurred.

Taiyou CannaSask’s system for growing cannabis consists of 3 processes: growing; harvesting, trimming, and drying; and packaging. The growing process takes 16 weeks, the harvesting, trimming, and drying process takes 4 weeks, and the packaging process takes 2 weeks for each harvested crop. The company plans to package 13 harvests in fiscal 2019, each harvest is 700 kilograms.

For each crop harvest, the growing process uses the following amount of direct materials:

$105,000 for seeds/clones mixed with growing medium

The growing process requires well-trained and highly skilled employees, therefore employees in the growing process are paid $50 per hour.

70 labour hours are required to plant a single crop.

125 labour hours are required per week for each of the weeks that the plants are growing.

The harvesting, trimming, and dying process also requires well-trained and highly skilled employees, therefore these employees are paid $50 per hour. The entire harvesting, trimming, and drying process for each crop requires 2,800 direct labour hours.

The actual harvest uses 20% of the labour hours and is completed in the 1st

A rough trim uses 30% of the labour hours and is completed at the end of the 2nd

A fine trim uses the remaining 50% of the labour hours and is spread evenly across the final two weeks of the drying time.

Taiyou CannaSask packages 367.5 kilograms of each harvest in 3.5 gram packages and the remaining 332.5 kilograms in 1 gram packages. The company pays $0.72 per package. The packaging process requires skilled employees who are paid $35 per hour. 2,000 total labour hours are required to package a single crop harvest. These hours are spread evenly across the 2 weeks it takes to package a harvest.
Current company policy is to maintain an ending seed/clone and growing medium mixture equal to 40% of a single crop planting. Taiyou CannaSask also has a policy of maintaining an ending package direct material inventory of 50% of a single crop harvest. All direct materials are purchased on account. The company pays for 70% of their purchases in the quarter incurred and the remaining 30% in the following quarter. All of the accounts payable on the balance sheet from Jan. 31, 2019 will be paid in the first quarter
Taiyou CannaSask uses a weighted average process costing system consisting of the 3 processes outlined above. The company also use weighted average to value inventory and cost of goods sold. The company is scheduled to produce 2,100 kilograms in the first quarter, 2,450 kilograms in the second quarter, 2,100 kilograms in the third quarter, and 2,450 kilograms in the fourth quarter.

Total estimated variable overhead costs for fiscal 2019 (for the amount of sales estimated in part 1 above) are as follows:

Indirect Materials

 $      1,506,900

Indirect Labor

         652,990

Employee Benefits

          251,150

Utilities

         2,511,500

Quality Inspections

            100,460

Total

 $     5,023,000

Variable overhead is allocated according to a predetermined overhead rate based on number of grams produced for the year. 50% of the variable overhead is allocated during the growing process. 20% of the variable overhead is allocated during the harvesting, trimming, and drying process. The remaining 30% of the variable overhead is allocated during the packaging process. All variable overhead is paid in the quarter incurred. Due to the unique design of Taiyou CannaSask’s facility cash payments for the variable utility overhead costs are not even between the quarters. The quarterly percentages for the actual usage of the variable overhead utility costs are as follows: the first quarter (February through April) accounts for 31.25%, the second quarter (May through July) accounts for 12.5%, the third quarter (August through October) accounts for 18.75%, the fourth quarter (November through January) accounts for 37.5%.

Total estimated fixed overhead costs of fiscal 2019 are as follows:

Insurance

 $        226,050

Package Design

150,700

Utilities

           376,750

Depreciation

         5,274,500

Property Taxes

           602,800

Genetic Research

           904,200

Total

 $      7,535,000

For budgeting purposes all fixed overhead costs are spread evenly across the four quarters of fiscal 2019. 45% of the fixed overhead is allocated during the growing process. 15% of the fixed overhead is allocated during the harvesting, trimming, and drying process. The remaining 40% of the fixed overhead is allocated during the packaging process. Aside from property taxes, fixed manufacturing overhead is paid for in the quarter that it is incurred. Property taxes are paid in full at the end of the first quarter. All fixed manufacturing overhead is allocated according to a predetermined overhead rate based on annual direct labor hours (for each process).

Variable selling and administrative expenses include shipping costs and other administration costs. It costs Taiyou CannaSask $25 to ship a kilogram. Variable administrative costs are $10 per kilogram. The variable selling and administrative costs are paid in the quarter incurred.

Estimated fixed selling and administrative expenses for fiscal 2019 are as follows:

Salaries

 $      2,724,800

Travel

         1,362,400

Depreciation

          1,703,000

Marketing

           340,600

Other

           681,200

Total

 $      6,812,000

Fixed selling and administrative expenses are spread evenly across the 4 quarters for budgeting purposes. Applicable fixed selling and administrative expenses are paid equally across the quarters.

Taiyou CannaSask makes quarterly income tax payments during the year based on projected yearly net income. The company is subject to a 25% income tax rate.

Taiyou CannaSask Inc. has the following financing related activities:

The company has a mortgage on their facilities. This mortgage requires monthly cash payments of $60,000. The principal portion of these payments for each month in the coming year are as follows:

February

 $      10,524

March

 $      10,577

April

 $      10,630

May

 $      10,683

June

 $      10,736

July

 $      10,790

August

 $      10,844

September

 $      10,898

October

 $      10,953

November

 $      11,008

December

 $      11,063

January

 $      11,118

For each month the balance of the $60,000 mortgage payment covers the interest due at the time of that payment.

The company has an operating line of credit established with its bank. The line of credit permits Taiyou CannaSask to borrow in increments of $5,000 to cover any cash shortfalls. Taiyou CannaSask has an internal operating policy of maintaining a minimum quarterly ending cash balance of $100,000. Assume that all borrowing occurs at the beginning of the quarter in which the funds are required, and all repayment occurs at the end of the quarter in which funds are available for repayment. Simple interest at the rate of 6% per annum must be paid at the end of each quarter on all outstanding short-term loans. All repayments must be in multiples of $1,000, and no repayments are permitted in a quarter in which any short-term borrowing occurs.

The company currently has $100,000,000 in an outstanding long-term loan with an annual interest rate of 9% and makes semi-annual interest only payments with the principle due at the end of the loan. The loan is due in 2038. Interest payments on this loan are made on January 1st and July 1st.

The company’s unclassified balance sheet for January 31, 2019 is expected to be:

Cash

 $      101,000

Accounts Receivable

      4,000,000

Raw Materials Inventory (1) (6)

         180,000

Works in Process Inventory (2) (6)

      2,389,931

Finished Goods Inventory (3) (6)

         770,000

Plant, Property, and Equipment

  165,000,000

Accumulated Depreciation

      4,335,000

Total Assets

$168,105,931

Accounts Payable (4)

 $      435,000

Short-Term Debt (5)

           20,000

Long-Term Debt

  109,895,128

Common Stock

    56,530,000

Retained Earnings

      1,225,803

Total Liabilities and Equity

$168,105,931

These balance sheet figures must be taken as given.
(1) $40,000 in seeds/clones and growing medium mix which equals 40% of the needs for a single crop, and $140,000 in 200,000 packages.
(2) Consists of:

$1,343,624 in the growing process. This total cost includes 4 crops currently growing. Grand total is an anticipated 2,800 kilograms of finished product, 700 kilograms per crop.

One crop is 1 week old and accounts for $186,164. Included in this amount are all of the direct material costs for the growing process, direct labour cost for 83.125 hours, 1/16 of the total variable overhead from the growing process, and 83.125 hours worth of fixed overhead.

Another crop is 5 weeks old and accounts for $285,992. Included in this amount are all of the direct material costs for the growing process, direct labour cost for 135.625 hours, 5/16 of the total variable overhead from the growing process, and 135.625 hours worth of fixed overhead.

The 3rd crop is 9 weeks old and accounts for $385,820. Included in this amount are all of the direct material costs for the growing process, direct labour cost for 188.125 hours, 9/16 of the total variable overhead from the growing process, and 188.125 hours worth of fixed overhead.

The 4th crop is 13 weeks old and accounts for $485,648. Included in this amount are all of the direct material costs for the growing process, direct labour cost for 240.625 hours, 13/16 of the total variable overhead from the growing process, and 240.625 hours worth of fixed overhead.

$625,288 in the harvesting, trimming, and drying process amount consists of transferred in costs, direct labour cost for the week of harvesting, fixed overhead for the direct labour hours from the week of harvesting, and one quarter of the variable overhead. Represents 700 kilograms of anticipated finished product (one crop harvest). Has been in the process for 1 week.

$421,019 in the packaging process, amount consists of transferred in costs only. Represents 350 kilograms, half of a crop harvest. To be packaged in 60,000 3.5 gram packages and 140,000 1 gram packages.

(3) 350 kilograms at a cost of $2.20 per gram. Represents half of a crop harvest. 45,000 packages of 3.5 grams and 192,500 packages of 1 gram.
(4) Used for direct material purchases only.
(5) From the company’s line of credit terms outlined above in #7 financing activities.
(6) Existing inventory will be used or sold in the 1st quarter of 2019.
Required

Begin by preparing a Base Case master budget (and label this Excel spreadsheet Base Case) for Taiyou CannaSask Inc. for each quarter of 2019 and for the year in total. The following component budgets must be included (also see the Marking Rubric):

Beginning balance sheet (classified).

Sales budget

Schedule of receipts (SATURDAY 16TH)

Production budget

Direct materials purchases budget

Schedule of disbursements for materials (MARCH 20TH)

Direct labour budget

Overhead budget (be sure to show disbursements for overhead).

Selling and administrative budget (be sure to show disbursements for selling and administrative expenses). (MARCH 23RD)

Cash budget

Prepare the following (in good form) for the year, 2019, in total (these do not need to be quarterly).

Cost of goods manufactured budget

Cost of goods sold budget

Pro forma income statement (using absorption costing)

Pro forma classified balance sheet

The management at Taiyou CannaSask understands that they are in a completely new business and are worried that there may be some amount of seasonality in demand rather than the equal demand across the 4 quarters of the year they anticipate. As of right now, management believes if there is some seasonality in demand the demand will be higher in the winter than in the summer. Based on this belief, Taiyou CannaSask’s management would like your firm to prepare another budget based on the following alternative anticipated sales.

Quarter One 2019

2,400

Quarter Two 2019

1,500

Quarter Three 2019

2,200

Quarter Four 2019

3,000

Quarter One 2020

2,400

Quarter Two 2020

1,500

Keep in mind that Taiyou CannaSask has a set production schedule that would not change to meet changes in demand. The company is scheduled to produce 2,100 kilograms in the first quarter, 2,450 kilograms in the second quarter, 2,100 kilograms in the third quarter, and 2,450 kilograms in the fourth quarter.

Management recognizes that without a master budget they are unable to fully understand how to plan and implement meeting their goal of becoming one of the largest and stable growers of cannabis. Being in a new and globally unique industry, management also recognizes that this first full year of operations offers a learning experience that can be invaluable to the company’s success going forward. With this in mind, management has requested your firm to provide insights into what areas Taiyou CannaSask should be paying special attention to when analyzing the coming year’s results with the budgeted numbers your team in providing.

The company’s plan for the coming year is to produce equal quantities of the two main types of cannabis, indica and sativa.

The company would also be able to package their product in 5 and 7 gram packages as well as the 3.5 and 1 gram packages they are currently producing. The company has priced out larger packaging and found that it would cost $1 per package for containers large enough for 5 and 7 grams.

The company currently specializes in flower only. To produce other finished products (oils, extracts, concentrates, etc.) would require investment in additional machinery and an expansion of their facility.

Your report can be no longer than six double-spaced pages, (not including title page, executive summary of maximum 200 words), table of contents, references, and appendices). All necessary budgets should be attached to your report as appendices & where necessary in the body of your written report you should refer to specific segments of your budgets. Do not simply say “see appendices;” instead you might say “see Appendix #3 – Sales Budget” and/or possibly even highlighting specific areas or numbers within your budget if you are trying to point your reader to a specific number or area.  Please use Times New Roman 12-point font, one-inch margins in order to maintain consistency.
You should begin by preparing the base budget (Requirement #1). You should then present your analysis for seasonal demand. You should have at least two spreadsheets in your workbook.
Lastly, you are required to provide the management of Taiyou CannaSask Inc. with recommendations based on the budgets and analysis you performed. You should report how the various scenarios will affect profitability, cash flow, short-term borrowing, and any other areas you feel are important/ necessary/ relevant. Your advice should provide both quantitative and qualitative aspects to respond to management’s concerns. Remember you are professional consultants providing a report to a company’s management, therefore it should be written in a professional manner and reflect a level of expertise and proficiency of the issues discussed.
Advice for preparing spreadsheets

Develop your entire master Base Case budget in one worksheet; i.e., start by entering all of your hard data (the information provided (e.g., expected sales, collection terms, payment terms, inventory terms, your beginning balance sheet etc.). All of the given information (hard data) should be entered at the top of your Base Case Budget worksheet, which will then be followed by the individual budgets required for your Base Case Master Budget (sales budget, production budget, etc.).

When you have finalized the Base Case master budget, start work on the analyses for Requirement 2. Copy the Base Case master budget onto a new spreadsheet (i.e., a new tab). Then make the necessary changes ON THAT SPREADSHEET. If you have fully programmed your base case worksheet, the majority of your results will be calculated for you, and only select parts (short-term borrowing, repayment and short-term interest) may require attention. Label your spreadsheet tab Seasonal Demand for the required analysis in requirement 2. Label any other spreadsheets you create according to the additional type of analysis performed on that sheet.

Keep in mind that part of your mark will depend on how well you utilize formulas and link different parts of your spreadsheets.

This COMM 210: Accounting Assignment has been solved by our Accounting experts at TVAssignmentHelp. Our Assignment Writing Experts are efficient to provide a fresh solution to this question. We are serving more than 10000+ Students in Australia, UK & US by helping them to score HD in their academics. Our Experts are well trained to follow all marking rubrics & referencing style.

Be it a used or new solution, the quality of the work submitted by our assignment experts remains unhampered. You may continue to expect the same or even better quality with the used and new assignment solution files respectively. There’s one thing to be noticed that you could choose one between the two and acquire an HD either way. You could choose a new assignment solution file to get yourself an exclusive, plagiarism (with free Turnitin file), expert quality assignment or order an old solution file that was considered worthy of the highest distinction.

How to create Testimonial Carousel using Bootstrap5

Clients' Reviews about Our Services