Glipta Pharmaceuticals

2014






Glipta Pharmaceuticals Limited Company
A Master Budget for Manufacturing Product

Final Assignment
Submitted to: Rakibul Hasan (RKB)
Course: ACT 202
Section: 14


Letter of Transmittal:

10
th
January 2014

Rakibul Hasan (RKB)
Course Instructor (ACT 202)
School of Business
North South University

Subject: Submission of report on A Master Budget for Manufacturing Product

Dear Sir,
Here is the report you asked us to prepare a report highlighting on A Master Budget for
Manufacturing Product. At the same time, it is a great pleasure for us to submit this
report paper.
We are delighted to inform you that we have thoroughly enjoyed working through this
term paper. It has enabled us to gain priceless knowledge and experience and has also
helped us in overcoming difficulties that would assist us in our knowledge advancement.

.
Sincerely yours,
Naseeful Islam Dastagir 1220350030
Tanvir Ahmed Niloy 1231071630
Mehruk Hasan 1231137030
Saif Rahman 1230756630
Masrufar Ahmed 1231181630

Executive Summary
The project A Master Budget for Manufacturing a product includes the Master Budget
for the year of 2014 for a Pharmaceutical company situated at at Shahid Tajuddin
Ahmed Sarani, Gazipur, Dhaka, Bangladesh.
Master Budget consists of a number of separate but independent budgets that formally lay
out the companys sales, production and financial goals. The master budget culminates
the cash budget, a budgeted income statement and a budgeted balance sheet.
The objective of learning managerial accounting is to analyze the performance, plan for
financial decisions in future, for managing and running the organization smoothly. The
inside users are the only users of managerial accounting.
The given project includes the master budget for Pharmaceutical Company owned by Mr.
Naseef Dastagir and run by himself. It was established in the year 1999. It provides
people globally with high quality health care products at affordable prices in order to
improve access to medicine and to provide employees an enabling environment that
facilitates realization of their full potential.










Contents
Overview of our product: ........................................................................................... 1
Master Budget: ........................................................................................................... 2
Sales Budget ............................................................................................................ 2
Direct Materials Budget: ........................................................................................ 3
Manufacturing Overhead: ...................................................................................... 4
Selling and Admin expense: .................................................................................... 5
Cash budget: ........................................................................................................... 6
Budgeted Income statement .................................................................................... 7
Budgeted Balance Sheet: ........................................................................................ 8
Costing Method .......................................................................................................... 9
Costs .........................................................................................................................10
Variable cost: ........................................................................................................10
Fixed cost: .............................................................................................................10
Direct cost: ............................................................................................................10
Indirect cost: ..........................................................................................................10
Conclusion ...............................................................................................................11
References ................................................................................................................12


1 Overview of our product: | Glipta Pharmaceuticals

Overview of our product:
Our company is Glipta Pharmaceuticals and our product is antacid (Esomeprazole Magnesium).
Our primary target is for the area near our location of our factory i.e. Gazipur. We have done
research and saw that the markets near Gazipur can easily be penetrated. Our competitors are
very few in terms of size of our industry, but at the same time there are some renowned name in
the pharmaceutical companies in Bangladesh so to enter in the market we will try to lower our
price. To name a few Incepta, Renata will give us fierce competition.



2 Master Budget: | Glipta Pharmaceuticals

Master Budget:
Sales Budget
The sales budget is the begining of the master budget. The sales budget is constructed by multiplying
budgeted unit sales by the selling price. A schedule of expected cash collections is prepared after the sales
budget. The sales budget is stated below:
The Sales Budget

Quarter 1 Quarter 2 Quarter 3 Year End
Budgeted Sales/Box
550 550 550 1650
Selling Price/Box
120 120 120 120
Total Sales
66,000 66,000 66,000 198,000



Percentage of Sales
collected in the month
of Sales

50%
Percentage of Sales
collected in the
following month of
Sales
50%



Schedule of Expected Cash Collection

Q1 Q2 Q3 Year End
Account Receivable
0

Sales In Q1
33,000 33,000

Sales in Q2
33,000 33,000

Sales in Q3
33,000

Total Cash
Collection
33,000 66,000 66,000 165,000




3 Master Budget: | Glipta Pharmaceuticals

Direct Materials Budget:
The direct materials required are as follows:
Ingredients for the medicine. Each delayed release tablet contains Esomeprazole Magnesium
Trihydrate BP equivalent to Esomeprazole 20 mg.
The are provided by the company themselves so there is no cost incurred.
Direct Materials Budget
Quarter 1 Quarter 2 Quarter 3 Year End
Estimated
Production/Box
550 550 550 1650
Cost of Production
96 96 96 96
Total Sales
52,800 52,800 52,800 158,400



Percentage of
Purchase paid In
the current
month.


90%
Percentage of
Purchase paid In
the following
month.

10%




Schedule of Expected Cash Disbursement for Direct Materials
Q1 Q2 Q3 Year End
Account Payable
Purchase In Q1
47,520 5,280

Purchase in Q2
47,520 5,280

Purchase in Q3
47,520

Total Sales
47,520 52,800 52,800 153,120





4 Master Budget: | Glipta Pharmaceuticals

Manufacturing Overhead:
The MOH budget lists all costs of production other than direct materials and direct labor. It
contains all the indirect costs. The MOH budget for the shop is below:
Manufacturing Overhead Budget

Quarter 1 Quarter 2 Quarter 3 Year End
Estimated Production/Box
550 550 550 1650
Variable Cost/ Box
7 7 7 7
Total Variable Cost
3,850 3,850 3,850 11,550
Fixed Manufacturing
Overhead Cost
9,750 9,750 9,750 9,750
Total Manufacturing
Overhead
13,600 13,600 13,600 40,800


5 Master Budget: | Glipta Pharmaceuticals

Selling and Admin expense:
Advertisement cost involves in the selling and administration expense. Salaries are paid to
employees hired by the owner. Depriciation of machines are also written off. Sales comission is
also paid to the local agents referring to increase the sales by using word of mouth.
Selling and Administrative Expense Budget

Quarter 1 Quarter 2 Quarter 3 Year End
Estimated Production/Piece
550 550 550 1650
Variable & Administrative
Expenses/Piece
10 10 10 10
Total Variable &
Administrative Expenses
5,500 5,500 5,500 16,500
Fixed Variable &
Administrative Expense
Advertisement
800 800 800 2,400
Salaries
3,600 3,600 3,600 10,800
Sales Commission
1,200 1,200 1,200 3,600
Depreciation
229 229 229 687
Total Fixed &
Administrative Expenses
5,829 5,829 5,829 17,487
Total Selling &
Administrative Expenses
11,329 11,329 11,329 33,987
Less Depriciation
229 229 229 687
Cash Disbursement for
selling and administrative
expense 11,100 11,100 11,100 33,300




6 Master Budget: | Glipta Pharmaceuticals

Cash budget:
The cash budget is the combination of all the budget schedules prepared in this master budget.
The cash inflow were enough to meet up the businesss liabilties so there were no need of
external borrowing of cash in this period.
The Cash Budget

Quarter 1 Quarter 2 Quarter 3 Year End
Cash Balance,
Beginning
120,000 80,180 58,355 258,535
Add Receipts:
Collections from
Customers
32,400 55,675 33,438 121,513
Total Cash
Available
152,400 135,855 91,793 380,048
Less Disbursement
Direct Materials
47,520 52,800 52,800 153,120
Manufacturing
Overhead
13,600 13,600 13,600 40,800
Selling &
Administrative
Expense
11,100 11,100 11,100 33,300
Total Disbursement
72,220 77,500 77,500 227,220

Excess(Deficiency)
of cash available over
disbursement
80,180 58,355 14,293 152,828






7 Master Budget: | Glipta Pharmaceuticals

Budgeted I ncome statement
The budgeted Income Statement can be prepared from the data on the previous cash schedules. It
is one of the key schedules in the budget process. It gives a summary of the companies
performance as reflected in the profitability (or lack of it) over a certain period. The Budgeted
Income Statement for the year 2014 is prepared as:
Budgeted Income Statement(for the Year End)

Sales
198,000

Less Cost of Goods Sold
158,400

Gross Margin
39,600

Less Selling & Administrative Expense
33,300

Net Profit
6,300



8 Master Budget: | Glipta Pharmaceuticals

Budgeted Balance Sheet:
The budgeted balance sheet is developed using the data from the fiscal statements from the
beginning of the budget period and data contained in the various schedules. The budgeted
Balance sheet is as follows
Budgeted Balance Sheet(for the Year)

Assets
Current Assets
Cash on Hand
8,000


Accounts Receivable


Total Current Assets
8,000
Fixed Assets

Combustor
75,000
Furniture
2,700
Other Equipments
10,000
Factory
65,000

Total Fixed Assets
152,700

Total Assets
160,700

Liabilities
Accounts Payable
12,000


12,000
Owners Equity
Retained Earnings
148,700


148,700

Total Liabilities & Owners Equity

160,700

9 Costing Method | Glipta Pharmaceuticals

Costing Method

Job order costing system will be used in Glipta Pharmaceuticals Company Limited. This is
because many different products are produced each period.
Our company produces many different types of medicines during a month. A particular order
might consist of 550 box of Antacid. This order is called a batch or job. In a job order costing
system, costs are traced and allocated to jobs and then costs of the jobs are divided by the
number of units in the job to arrive at an average cost per unit.
The record keeping and cost assignment problems are more complex when a company sells
many different products than when it has only a single product. Since products are different, the
costs are typically different. Consequently, cost records must be maintained for each distinct
product or job.


10 Costs | Glipta Pharmaceuticals

Costs

Variable cost: Estimated production per box is 550 every quarter, which is 1650 at the year
end and variable cost per box is 7. So the total variable cost is 11,550 at the year end.
Fixed cost: Fixed cost for the year end consists of the followings-
Ad cost-2400, salaries-10,800, sales commission-3600, depreciation cost-687
The total amount for fixed cost is: 17,487
Direct cost: Direct cost consist of salaries-10,800 and sales commission-3600
The total fixed cost is: 14,400
Indirect cost: Indirect cost consists of the costs included in Manufacturing Overhead.
Total indirect cost is: 40,800

11 Conclusion | Glipta Pharmaceuticals

Conclusion

At first we didnot expect we could do this project on pharmaceuticals but after our long and hard
work on the financial aspects of the industry and the master budget we came up with at the end
was very interesting and a diffrent practical experience for us. The financial condition of the
company is well enough, so the we might consider to expand business by investing more and
increasing its advertisement to raise its sales. As per our research we can say that our business is
going to do pretty good in the future years.

12 References | Glipta Pharmaceuticals

References
The data were collected by asking some of the basic questions to the experts in the industry. They
cooperated and provided us with the data as a daily basis. The calculations were done on the basis
of the approximated figures taken from different sources and budgets of the future months were based
on what we predicted and from the past records.