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Antivi Ltd. is a small-scale contract producer of antiviral drugs. The master budget will detail each quarters activity and the activity for the year in total. Antivi will base its 2022 budget on the following information: 1. Expected sales, in units, for the four quarters of 2022 and the first two quarters of 2023 are as follows: 2022 Q1 4,100 2022 Q2 17,500 2022 Q3 28,500 2022 Q4 37,000 2023 Q1 48,000 2023 Q2 51,000 The selling price for 2022 has been set at $52.00 per unit. Antivis fiscal year ends on December 31. All sales are on account. 70% of sales on account are collected in the quarter of sale; 30% of sales on account are collected in the following quarter. Assume that all the balance in accounts receivable (as of 31st December, 2021) will be collected in the first quarter of 2022. Assume no bad debts are incurred. 2. Each component requires the following direct inputs: 5 milligrams (mg) of direct material available at a price of $1.60 per mg. 0.05 hours of direct labour at a rate of $45.00 per hour. Antivi has a policy of maintaining direct material ending inventory equal to 25% of direct materials needed for the next quarters production requirements. All raw materials are purchased on account. 50% of a quarters purchases are paid for in the quarter of purchase; the remaining in the following quarter. Antivi has a policy of keeping ending finished goods inventory equal to 30% of next quarters forecasted sales. There is no beginning or ending work-in-process inventory. Direct labourers are paid at the end of each month. 3. Total budgeted variable overhead costs for the 2022 year (at a level of sales estimated in Item 1 above) follow: Indirect materials $31,500 Indirect labour 67,000 Employee benefits 90,520 Testing 27,000 Utilities 51,000 Total $267,020

Variable overhead is applied to components using a predetermined overhead rate based on annual direct labour hours. All variable overhead items are paid for in the quarter incurred. 4. The annual budget for fixed manufacturing overhead items follows: Supervisory salaries $203,400 Property taxes 32,500 Insurance 31,000 Maintenance 48,000 Utilities 33,000 Engineering 47,000 Depreciation 86,000 Total $480,900 All fixed overheads are paid evenly each quarter except for property taxes which are paid for in the second quarter of the year. Fixed overhead is applied to production using a predetermined overhead rate based on the estimated annual number of units produced. 5. Variable selling and administration expenses include commissions and other administrative expenses. Commissions are budgeted at 5% of sales dollars for the quarter. 70% of these commissions are paid in the quarter they incurred, while 30% are paid in the following quarter. Other variable administration costs are $2.00 per unit. These costs are paid for in the quarter they incurred. Annual fixed selling and administration expenses are as follows: Sales salaries $178,000 Administration salaries 112,000 Telecommunications 19,000 Insurance 5,500 Utilities 3,400 Depreciation 15,000 Other 2,700 Total $335,600 Fixed selling and administration expenses are paid evenly over the four quarters of the year. 6. Antivi makes quarterly income tax installments based on the projected taxable income for the year. The company is subject to a 32% tax rate. For the master budget, Antivi assumes tax expenses incurring for the year 2022 are paid in cash evenly over the four quarters of the year 2022. 7. Antivi plans the following financing and investing activities for the coming year: The company is planning to buy a trademark, costing $80,000, in the last quarter of 2022. This trademark will be held until such time that the company is ready to sell products directly to retailers. The company will pay cash for the trademark and will finance any resulting cash shortfall by drawing on its operating line of credit.

The company has an operating line of credit established with its bank. This allows the company to borrow to cover any cash shortfalls. All borrowing is assumed to occur at the beginning of the quarter in which the funds are required and all repayment is assumed to be made at the end of the quarter in which funds are available for repayment. Simple interest at the rate of 9% per annum is paid on a quarterly basis on all outstanding short-term loans.

The company currently has $250,000 in an outstanding long-term loan with an annual interest rate of 7% and makes quarterly interest only payments at the end of each quarter. The loan is due in 2034.

The company outsources some of the manufacturing for $650,000. The company will pay the outsourcing fee in cash at the end of the first quarter of year 2022. 8. The companys simplified balance sheet as of December 31, 2021 is as follows: Cash $55,000 Accounts Payable (1) $10,000 Accounts Receivable 7,000 Commissions Payable 5,000 Raw Material Inventory 0 Long-term Debt 250,000 Finished Goods Inventory 0 Capital Stock 1,842,000 Buildings and Equipment 2,100,000 Retained Earnings (Deficit) (250,000) Accumulated Depreciation (305,000) Total Assets $1,857,000 Total Liabilities and Shareholders Equity $1,857,000 These balance sheet figures must be taken as given. That is, these specific December 31,2021 balance sheet amounts override any expectations based on 2021 sales and purchase amounts. Negative balances are shown in parentheses. (1) Only used for direct materials Required (these are what I need!!!) 1. Prepare a master budget for Antivi for each quarter of 2022 and for the year in total. The following component budgets must be included: a. Beginning balance sheet (classified as in Item 8, Project) b. Sales budget c. Schedule of receipts d. Production budget e. Direct materials purchases budget f. Schedule of disbursements for materials g. Direct labour budget h. Overhead budget (be sure to show disbursements for variable and fixed overheads, in addition to applied variable and fixed overhead expenses). i. Selling and administrative budget (be sure to show disbursements for selling and administrative expenses). j. Cash budget Prepare the following for the year, 2022, in total. k. Cost of goods manufactured budget l. Cost of goods sold budget m. Budgeted income statement (using absorption costing) n. Budgeted classified balance sheet Cash budget and budgeted income statement are completed at the same time when you build a formula to account for tax expenses, and a set of formulas to account for cash outflow in the cash budget. The budgeted classified balance sheet is completed last. 2. The current price of $52.00 per unit is set during the last years trial stage production. Antivi plans to scale up the production to meet the growing demand. The resulting economies of scale allow the company to consider strategic pricing and compensation. Re-evaluate the current price, using the master budget that you built for part 1. Strategically, updated pricing should satisfy the following criteria: The price should be less than $52.00 per unit to beat other small-scale producers in price competition. The company must achieve profit margins (= Operating income/Sales) between 5% and 10% The company also needs to increase employee benefits and compensation by $100,000 to retain skilled manufacturing workers and production engineers. Provide a single or range of values for the unit price. 3. Within your written report, provide support for your strategic pricing and compensation. You may do this either based on (i) Antivi as a contract producer of antiviral drugs or (ii) Antivi operating in another industry or business of your choice (e.g., services, media, luxury goods, retail, software engineering, manufacturing, real estate development and investment, bio-tech, fin-tech, advertisement, higher education, mining, oil and gas, agriculture, social work, professional services, etc). It is important to consider the applicable business, industry, and regulatory environment in your analysis. Provide quantitative and qualitative support for your strategic plan, explaining how you the firm may gain competitive advantage given the information provided. Ensure to address profit maximization/growth, employee compensation, and risk.

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