Business Economics(Budgetery Planning): 633984


To complete this assignment read chapter 9 of the book (Managerial Accounting: Tools for Business Decision Making’ by Kimmel, Weygandt & Kieso (2012).

Julia Schlussler is a second-year MEM student at Stenden University, who has decided to start up a new service in Leeuwarden called ‘photography at home’. The concept is rather simple: she comes to her client’s home, makes a photoshoot, she gets the photobook printed and delivers the book when it’s ready. She would launch the service on January 1st 2018and will run the business alongside her studies. She is planning to live off the profits. She will withdraw € 1,500 at the end of every quarter, unless she cannot afford it, the cash position should never be lower than € 250.

Her studio (post-production) will be in the student house where she is currently living. The municipality allows small-scale businesses to operate in the area. Income tax is 35%, however, annual earnings under € 7,500 are not liable for income tax.

She will need:

  • –  A scooter, worth €1,500
  • A photo camera, worth €2,500
  • –  A computer worth €1,600
  • –  Photo editing software worth € 800

Her parents will give her an interest-free loan to the amount of € 2,000, paid out January 1st, 2018, Julia invested some cash herself, partly to pay for the new equipment, and to have some cash at hand to start off. At January 1st, the cash position should be €600.

The scooter consumes one litre of fuel per 25 kms (fuel costs € 1.50 per litre). She will drive 3,000 kms a year for her service. The scooter’s insurance will cost € 260/year (pre-paid), plus road tax of € 120 (pre- paid) per year, to be renewed and paid at the end of the year. Halfway the year she expects to pay € 50 for maintenance costs. The scooter and photo camera must be depreciated over a period of five years, starting 2018. The software and computer over four years.

The orders will come in via her website at least 48 hours before the shoot. The maintenance cost of the website is € 75 a year, paid at the end of the year. She is expecting to spend about € 180 in total for advertisement, equally spread over the year. She will pay her parents back over a period of five years, at the end of every quarter an equal payment.

Julia estimates total sales of 200 photoshoots for 2018 at a standard price of € 50 per photobook, which the customers pay in cash the moment you deliver it. The books are not printed by yourself, you send a file (photographs) to the printshop, they print it for you. This costs you €14 per book, which you pay within 5 days after receiving the book.

She now has to compile a few budgets.

Homework week 2

  1. Find a nice name for the company and set up a balance sheet as on 1-1-2018
  2. Compile the sales budget with due consideration of special days, such as Mother’s Day, Father’s Day, Christmas day.
  3. Compile a production budget, a direct material budget and a manufacturing overhead budget.
  4. Complete the budgeted income statement
  1. Compile the cash budget including cash receipts, cash disbursements and financing.
  2. Set up the budgeted balance sheet as of 31-12-2018


Answer to question 4:

Budgeted Income Statement


In the Books of Julia Schlusser & Co
For the year ended 2018
Budgeted Income Statement
Particulars Amount (€) Particulars Amount (€)
To Advertisements 180 Sales Revenue 10000
To Fuel 180    
To Insurance 260    
To  Road Tax 120    
To Maintenance Cost 100    
To Website maintenance cost 75    
Loan repayment 400    
To Depreciation      
camera (2500/5) 500    
Scooter (1500/5) 300    
Computer (1600/4) 400    
Software (800/4) 200    
To Net Profit 7285    
Transferred to capital A/c      
  10000   10000


As evident from the above stated income statement it can be said that the net profit that has been transferred to capital account stood €7285.

Answer to question 5:

Cash Budget for the period 2018
Particulars Quarter 1 Quarter 2 Quarter 3 Quarter 4
Opening Balance 600 3533.75 5467.5 6401.25
Cash Receipts 3500 2500 1500 2500
Total 4100 6033 6967 8901
Overheads 275 275 275 275
Selling Expense 291.25 291.25 291.25 291.25
Total 566 566 566 566
Closing Balance 3533 5467 6401 8335


The closing amount of cash budget at the end of the fourth quarter stood €8335.

Answer to question 6:

Julia Schlussier & Co
Balance Sheet
January 31-12-2018
Assets Amount (€) Amount (€)
Current Assets    
Cash 8335  
Prepaid Insurance 260  
Prepaid Road Tax 120  
Total Current Assets   8715
Non-Current Assets    
Tangible Assets    
Scooter 1500  
Less: Depreciation 300 1200
Photo Camera 2500  
Less: Depreciation 500 2000
Computer 1600  
Less: Depreciation 400 1200
Intangible Assets    
Software 800  
Less: Depreciation 200 600
Total Non-current Assets   5000
Total Assets   13715
Liabilities and stockholder Equity    
Current Liabilities    
Current portion of Parents loan   400
Total Current Liability   400
Long-Term Liabilities    
Parents Loan 1600  
Less: Repayment 400 1200
Total Liabilities   2000
Stockholders’ Equity   3230
Net Profit (transferred from P/L A/c)   7285
Total Liabilities and Stockholders’ Equity   13715


As evident from the balance sheet, that Julia & Co has the equal balance of the total assets and total liabilities. The net profit has been transferred to balance sheet from the income statement with owners’ equity standing €3230.



Deegan, C. (2013). Financial accounting theory. McGraw-Hill Education Australia.

Edwards, J. R. (2013). A History of Financial Accounting (RLE Accounting) (Vol. 29). Routledge.

Weil, R. L., Schipper, K., & Francis, J. (2013). Financial accounting: an introduction to concepts, methods and uses. Cengage Learning.

Williams, J. (2014). Financial accounting. McGraw-Hill Higher Education




The following assignment has been carefully written and evaluated for Julia Schlussler, a second-year Media and Entertainment student of Stenden University, Leeuwarden Netherlands. This assignment is to help Julia, start up her new service called ‘Photography at Home” in the Netherlands by calculating budgets as well as developing a personnel strategy for the year 2018. Therefore, the sales budget, production budget and balance sheet amongst others would have to be calculated for the above-mentioned year.


In addition to this, an attached excel sheet would be provided to showcase a detailed and clear overview of all calculations used and explained in this report and most especially, support Julia’s financial choices for the year 2018.

All, theories and formulas that would be used in this report would be taken from the book “Managerial Accounting: Tools for Business Decision Making” written by Kimmel, Weygandt & Kieso in the year 2012.


Balance Sheet

Julia Schlussler would be launching her Photography services on the 1st of January 2018. She made some financial purchases like acquisition of the business equipment’s, acquiring loans and making long term investments. In the balance sheet demonstrated below, it would showcase in detail a screenshot of Julia Schlussler’s company’s account at the year 2018 and, in it bearing the income and cash flow statement so that investors could have a useful gain/insight on the company’s financial operations.

As shown in the above table, Julia Schlussler & Co. Balance sheet for the year 2018 has an equal balance on both double-entry system. Thus, this equation confirms that Net Assets and Equity is maintained after every transaction for the year 2018.


Sales Budget

Julia Schlussler estimates a total sale of 200 Hundred units of photoshoots for the first of opening her business “Julia Schlusser & Co.” These photoshoots would go for a standard price of 50euros per unit. The sales budget would be computed with due considerations to special days like mother’s days, Father day’s and Christmas where sales might not be booming/ or up to expectations of high sales. In the sales budget, it would be demonstrated what the unit sales would be for each month of 2018. Also, the sales per month would be calculated using the following formula:

Total Sales Per Year= Expected Unit Sales * Unit Selling Price

Total Sales per year = 200 * € 50

Total Sales Per Year = € 10,000

As show in the excel sheet above, in order to reach an estimated amount of 200 units of photoshoots in the year 2018, with consideration to special events like Mother’s Day, Father’s Day and Christmas. Each quarter of the year sales units would differ in estimation of being sold as well as produced. In the first quarter of the year the estimated sales unit will be the highest, reasoned by Mother’s Day. The second quarter includes Father’s Day, which results in an average expectation of sales units.  The third quarter of the year is estimated to be the lowest since there is no special occasion. Following, in the fourth and last quarter Christmas is taking place which supports the thought of higher sales unit expectations, as well.

 b. Production Budget

As stated in the sales budget calculated above, the estimated unit sales for the year 2018 is 200. The beginning and ending finished goods wouldn’t be desired.

Budgeted Income Statement

The Budgeted income statement includes different and numerous financial aspects. Based on the outcome of these calculations a company’s, in this case ‘Julia Schlussler & Co’, performance would be evaluated.

c. Direct Material Budget

From the Sales budget, it is estimated that expected units to be produced is 200, with a direct material cost of €50 per unit. To calculate the cost of direct materials budget, Number of production units would be multiplied with direct cost per units. So therefore,

Total Cost of direct materials = Units to be produced * Direct labor Cost per unit

Total Cost of direct materials = 200 * €14

Total Cost of direct materials = € 2,800






d. Manufacturing Overhead Budget


The manufacturing overhead budget provides an insight into a company’s operations. Manufacturing overhead Budget is an indirect cost that includes the costs that were incurred in the factory aside from the cost of direct materials and direct labor. Manufacturing Overhead costs are considered the costs of products for the valuing of inventory and determining the cost of goods sold. Expenses outside of the business such as buying and selling aren’t labelled as manufacturing overhead but rather as expenses, Manufacturing overhead on the other hand rents, depreciation, depreciation on equipment etc. in the module book it does mention that the equipment Julia Schlussler would acquire some equipment like a photo camera, scooter, a computer and a photo editing software. The scooter and Photo camera would be depreciated over a period of 5 years while the software and computer would be depreciated over 4 years. Therefore,

Photo camera = €2,500 ÷ 5 years = €500

Computer = €1600 ÷ 4 = 400

Photo editing software = €800 ÷ 4 = 200

Total Manufacturing Overhead Budget= €1,100

The scooter wouldn’t be depreciated because it has nothing to do with the product it is only used as a repayment scheme. Depreciation isn’t paid with cash so it doesn’t have an effect on cash position.

e. Selling and Administrative Expense Budget

Selling and administrative budget involves fixed costs, such as promotions, getting administrative tasks done.