Sales and Production Budget Analysis: Q1 2009
Posted on Dec 22, 2024 in Mathematics
Sales Budget
The company projects a 7% growth in unit sales for the first quarter of 2009, based on FY2008 historical data. The net sales price will increase from $320 to $380.
| Month | Historical Units | Growth | Projected Units | Sale Price | Projected Sales Revenue |
|---|
| January | 3,500 | 7% | 3,745 | $380 | $1,423,100 |
| February | 2,200 | 7% | 2,354 | $380 | $894,520 |
| March | 1,800 | 7% | 1,926 | $380 | $731,880 |
| Total | 7,500 | | 8,025 | | $3,049,500 |
Finished Goods Production Budget
The inventory of finished goods (FG) for the quarter is as follows:
| Month | Day | Units |
|---|
| December | 31 | 2,100 |
| January | 31 | 1,900 |
| February | 28 | 2,200 |
| March | 31 | 1,700 |
Production is calculated as follows:
| Month | Sales | (-) Beginning Inventory | (+) Ending Inventory | (=) Production |
|---|
| January | 3,745 | (2,100) | 1,900 | 3,545 |
| February | 2,354 | (1,900) | 2,200 | 2,654 |
| March | 1,926 | (2,200) | 1,700 | 1,426 |
Raw Material “A” Purchase Budget
Each finished product requires 1.5 units of Raw Material “A”. The initial inventory is 3,300 units at an average cost of $120. The raw material inventory policy is to maintain 90% of the following month’s production needs. The raw material price is $150 in January, $160 in February, and $170 in March.
| Month | Production (Units of “A”) | (-) Beginning Inventory | (+) Ending Inventory | (=) Purchases (Units) | Purchase Price | Purchase Value |
|---|
| January | 5,318 | (3,300) | 2,970 | 4,988 | $150 | $748,200 |
| February | 3,981 | (2,970) | 2,970 | 3,981 | $160 | $636,960 |
| March | 2,139 | (2,970) | 2,970 | 2,139 | $170 | $363,630 |
Raw Material “A” Consumption and Average Price
| January | February | March |
|---|
| Beginning Inventory (Units) | 3,300 | 2,970 | 2,970 |
| Purchases (Units) | 4,988 | 3,981 | 2,139 |
| Total Units | 8,288 | 6,951 | 5,109 |
| Beginning Inventory (Value) | $396,000 | $445,500 | $475,200 |
| Purchases (Value) | $748,200 | $636,960 | $363,630 |
| Total Value | $1,144,200 | $1,082,460 | $838,830 |
| Average Price | $138.055 | $155.727 | $164.187 |
Raw Material Consumption Cost
| Month | Raw Material “A” | Total Raw Material |
|---|
| January | $734,176 | $734,176 |
| February | $619,949 | $619,949 |
| March | $351,196 | $351,196 |
Direct Labor (MOD) Budget
Each manufactured product requires 2 man-hours at a rate of $20 per hour.
| Month | Units Produced | Hours per Unit | Total Hours | Rate per Hour | Total MOD Cost |
|---|
| January | 3,545 | 2 | 7,090 | $20 | $141,800 |
| February | 2,654 | 2 | 5,308 | $20 | $106,160 |
| March | 1,426 | 2 | 2,852 | $20 | $57,040 |
Manufacturing Overhead (CIF) Budget
CIF is composed of fixed and variable costs. The variable portion is based on MOD hours.
| Concept | Fixed Cost | Variable Cost (per MOD hour) |
|---|
| Supervisor Salary | $6,500 | |
| Electricity and Water | $900 | $1.5 |
| Steam | $300 | $1.2 |
| Insurance | $500 | $0.50 |
| Depreciation | $1,800 | |
| Month | Fixed CIF | Variable CIF | Total CIF |
|---|
| January | $10,000 | $22,688 | $32,688 |
| February | $10,000 | $16,986 | $26,986 |
| March | $10,000 | $9,126 | $19,126 |
Cost of Production and Average Price
| Month | Raw Material | MOD | CIF | Total Production Cost | Units Produced | Average Production Cost per Unit |
|---|
| January | $734,176 | $141,800 | $32,688 | $908,664 | 3,545 | $256.323 |
| February | $619,949 | $106,160 | $26,986 | $753,095 | 2,654 | $283.758 |
| March | $351,196 | $57,040 | $19,126 | $427,362 | 1,426 | $299.693 |
Sales Expenses Budget
| Month | Fixed Expenses | Variable Expenses | Total Sales Expenses |
|---|
| January | $109,300 | $170,772 | $280,072 |
| February | $109,300 | $107,342 | $216,642 |
| March | $109,300 | $87,826 | $197,126 |
Sales Expenses Details
- Compensation: $62,500 (Fixed, 2% of Sales)
- Commissions: 3% of Sales
- Advertising: 4% of Sales
- Leases: $35,000 (Fixed, 2% of Sales)
- Maintenance: $9,500 (Fixed)
- Credit Cards: 1% of Sales
- Depreciation: $2,300 (Fixed)
Projected Income Statement
| Month | Units Sold | Net Sales | Cost of Goods Sold | Administration Expenses | Sales Expenses | Gross Margin | Operating Income |
|---|
| January | 3,745 | $1,423,100 | ($959,930) | $70,100 | $280,072 | $463,170 | $112,998 |
| February | 2,354 | $894,520 | ($667,966) | $70,100 | $216,642 | $226,554 | ($60,188) |
| March | 1,926 | $731,880 | ($577,209) | $70,100 | $197,126 | $154,671 | ($112,555) |
| Total | 8,025 | $3,049,500 | ($2,205,105) | $210,300 | $693,840 | $844,395 | ($59,745) |
Non-Operational Items
- Accrued Interest: $11,200
- Discounts Received: $1,100
- Leases Received: $5,000
- Loss on Fixed Asset Sale: $9,700
Administration Expenses
- Remunerations: $42,500
- Office Supplies: $12,200
- Mobilization: $10,100
- Depreciation: $5,300
