Sales budget, number of products

High-end Producers Chair Sum

Veneered shelf 3,000 110,000 113,000
Mahogny shelf 60,000 25,000 85,000
Sum 63,000 135,000 198,000

Budgeted, average, prices/product

High-end Producers Chair*
Veneered shelf 130 117
Mahogny shelf 200 180

* As Chair takes care of marketing activities, an owner directive regulates their prices to be 10% lower than to High-end Producers

Total revenue budget

High-end Producers Chair Sum
Veneered shelf £390,000 £12,870,000 £13,260,000
Mahogny shelf £12,000,000 £4,500,000 £16,500,000
Sum £12,390,000 £17,370,000 £29,760,000
n to High-end Producers
Indirect costs Production Department

Fixed costs, excluding

depreciation and Cost of
Variable costs Capital
Procurement £300,000 £600,000
Production Planning Team £1,200,000
Manufacturing Team £800,000 £1,600,000
Quality Team £400,000 £700,000
Joint Production Department costs £900,000
Total £1,500,000 £4,100,000

Machinery

Accumulated de-
Investment, gross value preciation, year X-1
Procurement £600,000 £360,000
Production Planning Team £1,200,000 £720,000
Manufacturing Team £11,000,000 £6,600,000
Quality Team £200,000 £120,000
Sum Machinery value/cost £13,000,000 £7,800,000

Cost of Capital (internal) 20%

The company uses straight line
depreciation over five years: 20%
Average days accounts payable 30

Direct costs Production department

Direct material
-Veneered Chipboard £672,375
- Mahogny £3,724,688
- Wooden board £1,461,250
- Other materials (glue, metal details) £779,333

Direct labour
- Labour cost £7,306,250

Total Direct cost £13,943,896

Raw Material Inventory

Inventory year X-1 Cost year X

Veneer £120,000 £672,375
Mahogny £250,000 £3,724,688
Wooden Board £89,000 £1,461,250
Other materials (glue, metal details ) £36,000 £779,333
Total material value/cost £495,000 £6,637,646

Accounts payables
Year X-1 Year X Cost of Capital
£650,000 £534,935 -£118,493
 Calculated Cost
Depreciation of Capital Total fixed cost Total indirect costs Allocation base
£120,000 -£5,337 £714,663 £1,014,663 Raw material cost
£240,000 £72,000 £1,512,000 £1,512,000 Products
£2,200,000 £660,000 £4,460,000 £5,260,000 Direct labour cost
£40,000 £12,000 £752,000 £1,152,000 Products
£0 £900,000 £900,000 Product manufacturing costs
£2,600,000 £738,663 £8,338,663 £9,838,663

Depreciation Calculated Cost of

Investment year X year X Value, year X Capital year X
£0 £120,000 £120,000 £36,000
£0 £240,000 £240,000 £72,000
£0 £2,200,000 £2,200,000 £660,000
£0 £40,000 £40,000 £12,000
£0 £2,600,000 £2,600,000 £780,000

Procurement Calculated Cost of

Inventory year X year X Capital year X
£28,016 £580,391 £14,802
£155,195 £3,629,883 £40,520
£60,885 £1,433,135 £14,989
£32,472 £775,806 £6,847
£276,569 £6,419,214 £77,157
Overhead rate Overhead rate
- variable cost - fixed cost
5% 11%
£7.76
11% 61%
£2.05 £3.86
3.93%
 OH rate &
Team Resource Cost/unit Units

Procurement Team
- Allocated fixed costs 11%
- Allocated variable costs 5%

Production Planning Team

- Allocated fixed costs £7.76

Manufacturing Team
- Direct material costs Veneered Chipboard £20.00 0.3
Wooden board £7.50 1
Other materials (glue, metal details) £4.00 1
- Direct labour costs Labour £25.00 1.5
- Allocated fixed costs 61%
- Allocated variable costs 11%

Quality Team
- Allocated variable costs £2.05 1
- Allocated fixed costs £3.86 1

Product manufacturing cost

Joint Production Department costs

- Allocated fixed costs 4%

Cost of product
 Variable
Unit Total cost cost Fixed costs

£1.88 £1.88
£0.79 £0.79

£7.76 £7.76

sheet £6.00 £6.00

kg £7.50 £7.50
product £4.00 £4.00
Hours £37.50 £37.50
£22.89 £22.89
£4.11 £4.11

product 2.05 £2.05

product 3.86 £3.86

£98.35 £61.95 £36.40

£3.87 £3.87
£102.21 £61.95 £40.26
 OH rate &
Team Resource Cost/unit Units

Procurement Team
- Allocated fixed costs 11%
- Allocated variable costs 5%

Production Planning Team

- Allocated fixed costs £ 7.76

Manufacturing Team
- Direct material costs Mahogny £ 5.00 9
Wooden board £ 7.50 1
Other materials (glue, metal details) £ 4.00 1
- Direct labour costs Labour £ 25.00 1.5
- Allocated fixed costs 61%
- Allocated variable costs 11%

Quality Team
- Allocated variable costs £ 2.05 1
- Allocated fixed costs £ 3.86 1
Product manufacturing cost

Joint Production Department

costs
- Allocated fixed costs 4%
Cost of product
 Variable
Unit Total cost cost Fixed costs

£6.08 £6.08
£2.55 £2.55

£7.76 £7.76

feet £45.00 £45.00

kg £7.50 £7.50
product £4.00 £4.00
Hours £37.50 £37.50
£22.89 £22.89
£4.11 £4.11

product 2.05 £2.05

product 3.86 £3.86
£143.31 £102.71 £40.59

£5.64 £5.64
£148.94 £102.71 £46.23
S&L Department Budget
Personell costs £1,800,000
Advertising & PR costs £800,000
Logistics costs £850,000
Cost of Capital, receivables £468,000
Cost of Capital, finished goods £296,764
Sum S&L Department costs £4,214,764

Inventory, finished products (units)

Inventory year
X-1 Sold year X
Veneered shelf 8000 113,000
Mahogny shelf 4000 85,000

Inventory, finished products

Inventory year
X-1 Produced year X
Veneered shelf £782,000 £11,454,341
Mahogny shelf £1,200,000 £12,328,219
Total value/cost £1,982,000 £23,782,559

Inventory level, finished goods

Veneered shelf 3
Mahogny shelf 1

Target for average days before payments from customers

Accounts receivables
Year X-1 Year X Cost of Capital
£2,200,000 £2,480,000 £468,000
 Inventory year X Produced year X
7063 112063
1771 82771

Cost of capital,
Inventory year X year X
£721,885 £150,389
£263,755 £146,375
£985,640 £296,764

weeks
week

30
Administrative budget
Resources Costs (fixed)

Salaries £1,250,000
Rent £220,000
External services £95,000
IT-costs £110,000
Office supplies £30,000
Other HR costs £35,000

Sum administrative costs £1,740,000

Financing budget
Year X-1 Interest rate Planned amortization
Loan A £3,320,000 3.50% £80,000
Loan B £2,800,000 4.25% £50,000

Sums £6,120,000 £130,000

New loans Year X Interest
£3,240,000 £114,800
£2,750,000 £117,938
£0 £0
£0 £5,990,000 £232,738
Results Budget
Year X
Revenue
Veneered shelf £13,260,000
Mahogny shelf £16,500,000
Total revenues £29,760,000

Costs
Cost of sales
Production cost -£23,782,559
Adjustment of inventory change -£996,360
Adjustment of internal capital cost £821,417
Gross profit £5,802,498

Sales and Logistics costs -£4,214,764

Administration costs -£1,740,000
Adjustment of internal capital cost £764,764
Operating profit £612,498

Interest income
Interest expense -£232,738
Profit after financial items £379,761

Tax (19%) -£72,155

Profit £307,606
Budgeted Balance Sheet

Assets Year X Year X-1

Non-Current assets
Machinery £2,600,000 £5,200,000
Total non-current assets £2,600,000 £5,200,000

Current assets
Inventory, finished goods
Inventory, materials
Receivables
Cash and cash equivalents
Total current assets
£985,640 £1,982,000
£276,569 £495,000
£2,480,000 £2,200,000
£3,902,332 £305,000
£7,644,541 £4,982,000

Total assets £10,244,541 £10,182,000

Equity and liabilities

Year X Year X-1
Equity
Share capital £1,000,000 £1,000,000
Retained earnings £2,412,000 £2,100,612
Results of year £307,606 £311,388
Total equity £3,719,606 £3,412,000

Long term liabilities

Bank loan £5,990,000 £6,120,000

Current liabilities
Accounts payable £534,935 £650,000
Total liabilities £6,524,935 £6,770,000

Total equity and liabilities £10,244,541 £10,182,000

£0
Cash Flow Budget

Operating activities
Profit after financial items
Adjustment for non-cash items
Depreciation

Taxes paid
Cash flow from operational activities before changes in working capital

Changes in working capital

Receivables
Inventory raw material
Inventory finished products
Liabilities
Cash flow from operating activities

Investing activities
Equipment sold
Equipment bought
Cash flow from investing activities

Financing activities
New loans
Amortization
Dividends
Cash flow from financing activites

Cash flow for the year

 Year X

£379,761

£2,600,000

-£72,155
£2,907,606

-£280,000
£218,431
£996,360
-£115,065
£3,727,332

£0
£0

£0
-£130,000
£0
-£130,000

£3,597,332
 14
Budget Demand
Return on Capital employed 6.37% 20%
Return on Equity 10.65%
Return of Assets 6.00%

Solvency 36.31% 20%

Liquidity 7.29 1.5

Operating margin 2.06%

Asset turnover ratio 2.91