1. Provide a brief description of a business (you can make it up), including the name of your business and the industry in which you operate. Be sure to identify and explain a product that you will manufacture. ( i do not need assistance with this part, I have chosen to be a table manufacturing company). (ie. 4 legs, flat top, made of wood).
2. Calculate the cost to manufacture this product on a per unit basis considering the cost factors of material, labor, and manufacturing overhead. This calculation will form the basis of the cost of goods sold amount.
3. Determine the expected selling price of this product based on market research or based on a required gross profit.
4. Determine the number of operating expenses, and selling and administrative expenses that will be required each month to operate your business. (These expenses could all be considered cash basis).
Section 2
1. Based on the information developed in Section 1 prepare a Sales Budget differentiating between cash and credit sales for each month of operations starting January 1, 2016, the first month of operation, to the end of the first quarter ended March 31, 2016. You should state the collection period for credit sales. Usually, a company's collection period is 30 days, however, you may wish to do some research on your industry to see what the average collection period is of similar companies.
2. Based on the forecasted sales budget in #1, prepare an Inventory Purchases Budget for each monthly period and set a target for the ending inventory at each month-end. You should state the payment period that is expected. Prepare a Cash Budget for each month based on the Sales and Inventory Budgets and the estimated operating expenses each month.
Section 3
1. Based on the Budgets prepared in Section 2 prepare a Pro Forma Income Statement, Pro Forma Balance Sheet, and Pro Forma Statement of Cash Flows for the quarter ended March 31, 2016.
2. Explain how your company would make use of these Pro Forma Financial Statements for business purposes and decision making.
1. Provide a brief description of a business (you can make it up), including the name of your business and the industry in which you operate. Be sure to identify and explain a product that you will manufacture. ( i do not need assistance with this part, I have chosen to be a table manufacturing company). (ie. 4 legs, flat top, made of wood).
2. Calculate the cost to manufacture this product on a per unit basis considering the cost factors of material, labor, and manufacturing overhead. This calculation will form the basis of the cost of goods sold amount.
3. Determine the expected selling price of this product based on market research or based on a required gross profit.
4. Determine the number of operating expenses, and selling and administrative expenses that will be required each month to operate your business. (These expenses could all be considered cash basis).
Section 2
1. Based on the information developed in Section 1 prepare a Sales Budget differentiating between cash and credit sales for each month of operations starting January 1, 2016, the first month of operation, to the end of the first quarter ended March 31, 2016. You should state the collection period for credit sales. Usually, a company's collection period is 30 days, however, you may wish to do some research on your industry to see what the average collection period is of similar companies.
2. Based on the forecasted sales budget in #1, prepare an Inventory Purchases Budget for each monthly period and set a target for the ending inventory at each month-end. You should state the payment period that is expected. Prepare a Cash Budget for each month based on the Sales and Inventory Budgets and the estimated operating expenses each month.
Section 3
1. Based on the Budgets prepared in Section 2 prepare a Pro Forma Income Statement, Pro Forma Balance Sheet, and Pro Forma Statement of Cash Flows for the quarter ended March 31, 2016.
2. Explain how your company would make use of these Pro Forma Financial Statements for business purposes and decision making.
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Related questions
PLEASE ANSWER ALL PARTS OF ALL QUESTIONS THOUROUGHLY (WILL GIVE GOOD RATING-THANKS)
A. Consider an entrepreneur who has decided to follow through on a business venture. He has quit his job where he was employed as a Medical Assistant earning $2,500 a month, and has decided to run this new business venture alone as the sole proprietor. He approaches a bank with his business idea and obtains a loan for the startup and purchases the equipment and machinery that he would need for the business including the purchase of a web address and design for his business, he also takes out a 2 year lease on a building and adjoining property, with paid utilities at an excellent location and contracts with suppliers to provide him with raw materials on a six month basis at discounted bulk purchase rates. His total fixed costs on a monthly basis for this venture, which includes his forgone earnings from his previous job, are $7,500.
He now needs to hire workers to operate the machines, handle orders etc. and he needs at least 5 workers to begin production. Having taking ECON 2020 while in college, he computes the total product function for his business, on a monthly basis, given the quantity of other resources he has, in the short run as follows:
|
Quantity of Labor (Number of workers) |
Total Product (Output) |
|
5 |
200 |
|
10 |
450 |
|
15 |
800 |
|
20 |
1100 |
|
25 |
1300 |
|
30 |
1400 |
1. First, assume no other information on the profitability of this venture, what is the implied 'profit' expected by the entrepreneur each month? Explain
2. Obtain the marginal physical product of this business, graph the function and provide an intuitive explanation for the shape of the function.
3. Now suppose each worker hired is paid $10/hr in wages and works 150 hours each month. Obtain the monthly total variable, total fixed and total cost functions for this business if it produces at the various output levels in the table above (i.e. fill out the table below, and show all necessary work below)
|
Output (Q) |
Total Fixed Cost |
Total Variable Cost |
Total Cost |
|
200 |
|||
|
450 |
|||
|
800 |
|||
|
1100 |
|||
|
1300 |
|||
|
1400 |
4. The entrepreneur knows that his business is producing in an environment of perfect competition and as a result the market determined price after his entry into the business is $37.50 for each unit of the product that he sells. Determine the firm's monthly profit maximizing (or loss minimizing) output level , using the profit maximizing rule
5. From (4), is this firm making any excess (economic) profits in the short run? Explain. Compute the firm's monthly profits (or losses) at the profit maximizing output level
6. What should we expect to happen in the long run in this industry as a result of the correct answers given in part (5)? Explain.
