Background

You own a frozen pizza manufacturing and distribution business. Our premium product, Buzz All Natural Pizza appeals to the adult learners at DeVry University. A marketing survey revealed a time-starved segment that is always in need of energy at the end of the day or week in order to do their schoolwork. Also being poor time managers, this homogenous group requires a more direct form of intervention in order to reach peak academic performance. In order to meet this need, your pizza has tomato sauce.

Deliverable #1

The Operating Budget (Week 3)

1. Input the sales volume, as projected by your Field Sales managers.
2. Input your forecast product mix, as provided by the Marketing department.
3. Input the efficiency rate for your direct labor, as projected by the VP of Manufacturing.
4. Input the sales commission, as provided by the VP of Sales and the department's fixed costs.
5. Input the administrative fixed costs as provided by the CFO.
6. Calculate and comment on the break-even point.
7. Calculate the sales volume needed to reach a target profit and comments.

The Cash Budget (Week 3)

1. If needed, copy the sales from the first quarter operating budget.
2. Using an aging of the collection period, as provided by the credit manager, forecast cash receipts by month.
3. Calculate the cash disbursements by month.
4. Determine the timing of a capital expenditure.
5. Determine the timing and amount of financing.

To see details of this assignment, go to the Week 3 Course Project: Deliverable #1 Overview page. Submit your deliverable(s) to the Week 3 Course Project: Deliverable #1 Submission page.

Background: The Business Plan

• Marketing: You have a segmentation analysis of the lifestyle variables the adult market. The results support the need to invigorate and refuel with comfort food that is also nourishing. What better choice for adults than pizza? What will fill this need and differentiate Buzz-Time Pizza is the tomato sauce.
• Operations: You and a couple of friends will make, bake, and deliver made-to-order pizzas in two sizes. There is room in a garage for refrigeration, preparation tables, and a wood-fired oven. The sales manager will make all deliveries in his or her vehicle.
• Financing: Clearly, this is a long-term investment. The three founders, who will each contribute an equal amount, have agreed not to draw a salary for 3 years. You have hired a sales manager and a part-time office manager.

The Operating Budget

1. Input the sales volume, as projected by your Field Sales managers. The sales manager has provided the following sales estimates and price points for the first quarter of 2020. Input these values in the worksheet labelled

1. Input your forecast product mix, as provided by the Marketing Department. There is much debate as to the probable sales mix between the two sizes. Assume that an equal number of large and medium size pizzas will be sold (make sure these two add up to 100%).
2. Input the efficiency rate for your direct labor, as projected by the VP of Manufacturing. Direct labor consists of your Pepe, who has agreed to a low wage as long as and bathroom breaks are included. DO NOT CHANGE THIS LABOR RATE. However, you must calculate the chef's efficiency rate. Assume that it takes 15 minutes to make a pizza from order to box. Input your standard rate of how many minutes it will take to make one pizza from order to box.
3. Input the sales commission, as provided by the VP of Sales and the department's fixed costs. Ingredient and material costs, based on quotes after an extensive request for proposal (RFP), are good for two years. DO NOT CHANGE THE DIRECT MATERIAL RATES. The only variable selling cost is a sales commission based on a percent of sales revenue. The sales commission rate should be 1% of sales revenue.
4. Input the administrative fixed costs as provided by the CFO. Selling expenses include a fixed component for the sales manager's salary and car allowance for any company business use of their personal auto. Fixed selling expense for January should be $50,000 and fixed administration expense for January should be $60,000.
5. Calculate the break-even sales for January.
6. Calculate sales volume needed to make $200,000 in net income for January.

The Cash Budget

1. If needed, copy the sales from the first quarter operating budget. Ensure that the sales revenues for January through March is the same as that on the operating budget.
2. Using an aging of the collection period, as provided by the credit manager, forecast cash receipts by month. Calculate total cash receipts for January through March. For each cash you are to assume that half of the direct material from the current month's purchases and half are from the prior month's purchases. All selling and administrative expenses are paid in the month incurred.
3. Calculate the forecast direct material cash payments by month.
4. Assume the capital expenditure will occur in February.
5. Determine the timing and amount of financing. The new debt financing should occur in February and the debt should be paid in March.

January February March Number of pizzas sold 40,000 42,500 45,000 Sales Price for Large: $10.50 Sales Price for Medium: $8.50 Insert Formulas Y Tell me what you want to do O Comments Home Draw Page Layout Data Review View E Share E Conditional Formatting v E Insert v Calibri (Body) General v 11 E Format as Table v X Delete v Sensitivity Paste Sort & Filter Find & Select Ideas E Cell Styles v H Format v fx $200,000 net income target, M12 1 Prepare a Master Operating Budget for the First Quarter Buzz Pizza Target Market: adult leamers, timestarved, poor time management Total Ctr Aarl (A) Input the planned product mix (B) Irput the forecast sale volume (9 Input the number of pizza made per hour Jan Feb 5 Sales : 6 Units (8) Average Sales Price/unit (A) wgtd. Sales Price (al 2 topping) Poce/unit $ % Sales (D) Input the sales commkssion as a N. of revenue average Total Sales Reverue Inout the sales manager's salary Large $ 10.50 (E) (F) Inout the office manager's salary Medium $ 8.50 10 Variable Costs Istated as per unit) IG) Calculate the breakeven point in sales units 11 Production 12 Selling 2.55 $ 2.55 $ Direct Labor. (H) Calculate the sales units needed to reach a 2.55 s200.000 nt income target, (9 efficiency rate as minutes per pizza hourly labor cost plus fringe benefits $ Total direct labor par pizzaS 2.55 $ 2.55 $ 13 Total Variable Costs per unit 2.55 12.00 Contribution Margin 24 24 14 (2.55) $ DIV/oI CM per unit $ CM Ratio (2.55) $ 15 (2.55) 16 #DIV/0I #DIV/O! #DIV/0I Direct Materials 17 Fixed Costs Dough 0.25 18 Seling (E) 19 Administration (F) cheese 0.50 toppings 0.75 Tutal Fixed Costs 20 caffinated tornato sauce 1.00 21 Boxes 0.05 Total direct material per pizza 22 Net Income S 2.55 23 24 Breakeven Point in sales units Sales comissiors (D) (G) Total Variable Selling Expenses per pizza 25 S 26 Sales units for a Target Profit of $200,000 (H) 27 28 29 an Cash Budget Variances Decisions Capital Operating Budget