13-19: Estimate Sales Revenues





Market size and our share of market

Our forecast = share x (total forecasted market)
Market size last year?

30%(total market) = 45,000 units;
 total market = 150,000 units
Market size next year = 110% x 150,000 units =
165,000 units
Company share = 25% x 165,000 units = 41,250 units
Sales revenue = 41,250 units x $11 per unit =
$453,750

13-19: Estimate Sales Revenues

Stated otherwise:


(25/30) x 110% x 45,000 = 41, 250 units
I.e., we receive 25/30 of what we would have received when the market increased 10%

13-24: Estimate Production and Materials
Requirements




Expected sales .................................... 160,000 Add:
Desired EI of FG.............................. 5,000
Total needs ......................................... 165,000
Less: BI of FG…..................................... 20,000
=Units to produce .............................. 145,000

Our material needs will follow from this.

13-24: Materials Requirements

13-24: Alternate Viewpoint
Production:
BB + Production = Sales + EB
20,000 + P = 160,000 + 5,000
Production = 145,000 units
Materials Requirements:
BB + Purchases = Usage + EB
60,000 + P = (6 x 145,000) + (2 / 12) x 160,000 x
6 oz.
Purchases = 970,000 oz.

13-26: Estimate Purchases And Cash
Disbursements
Note: 10,000 in March @$45 = $450,000;
60% x $450,000 = $270,000 was paid in March
40% x $450,000 = $180,000 will be paid in April

Current month, etc.

13-39: Sensitivity Analysis

13-39: Sensitivity Analysis
Ctrl ~ discloses formulas in Excel
Or:
=45000+5*MAX(0,B11-4500)

Pr. 13-44: Production Budget
CHANDER, INC.
Bag production cost data:
Direct materials per bag:
Yards of cotton
Cost of cotton per yard
Yards of canvas finish
Cost of canvas per yard
Direct labor per bag:
Number of hours
Cost per hour
Overhead per bag:
Indirect labor
Indirect materials
Power
Equipment costs
Building occupancy
Total overhead per bag
Additional Information:
Normal annual production in units
Annual plant capacity in units
Percentage increase in cost of cotton
Expected sales in coming budget period
Current finished goods inventory in units
Targeted finished goods inventory in units
1.000
$ 3.00
0.200
$ 10.00
0.500
$ 16.00
$ 0.50
$ 0.15
$ 0.30
$ 1.25
$ 0.80
$ 3.00
300,000
375,000
20%
270,000
60,000
105,000
Chander, Inc.
Production Budget
Coming Year
Expected sales
Add: Desired ending inventory of finished goods
Total needs
Less: beginning inventory of finished goods
Units to be produced
270,000
105,000
375,000
60,000
315,000 units units units units units
Estimate of costs:
Direct materials:
Cotton
Canvas
Total direct materials
Direct labor
Overhead:
Indirect labor
Indirect materials
Power
Equipment costs
Building occupancy
Total overhead
Total budgeted production costs
$1,134,000
630,000
1,764,000
$2,520,000
$ 157,500
$ 47,250
$ 94,500
$ 375,000
$ 240,000
$ 914,250
$5,198,250

13-44: Production Budget Continued

13-48: Comprehensive Budget Plan

13-48: Budgeted material purchases
BI + Purchases -
Used

See top of p. 524