Information Provided:

Flexible Budget created from above givens:

Contribution Margin Statement from Actual and Budgeted 2018 Income Statement

Segmented Income Statement created from above information:

Using the information provided above, prepare a budget for 2019 by segment. Budget to include the following:

1. Sales Budget

2. Materials Budget

3. Labor Budget

4. Disposal Budget

5. SG&A Budget

6. Segmented Cont

Also, list out your strategies for growth and expansion given the following:

Mike's Auto Center 2018 Actual 1,060,500 2018 Budget 1,101,600 Sales $ $ COGS Material Labor Disposal Rent Utilities Supervision Depreciation Maintenance Labor hours $ $ $ $ $ $ $ $ $ $ 475,250 224,680 23.00 35,000 42,000 12.00 22,000 50,000 50,000 12,000 910,930 149,570 $ $ $ $ $ $ $ $ $ $ Variable Expenses - Material, Labor and Disposal Fixed Expenses - Rent, Utilities, Supervision, Depreciation, maintenance, Insurance, Computer/Phone, Office Supplies, Advertising Three Products - Oil Change, Brakes, Tires BUDGET Oil Brakes Tires INC # of activities 6,120 1,530 918 Sales Price 25 200 700 0.35 2.00 4.50 Labor cost per hour $ 25 $ 25 S $ 25 Material cost $ 6 $ 70 $ 400 Disposal cost $ 2 $ $ 25 511,020 233,325 35,190 35,190 42.000 22,00 24,000 42,00 50,000 50,000 7,000 952,535 149,065 Total COGS Gross Profit ACTUAL Oil Brakes # of activities 7,000 1,400 Average Sales Price 24 210 Average Material Cost 7.25 65 Average Labor Hours 0.32 2.115 Average Labor Cost per h 26 26 Average Disposal Cost 2.5 0 Any rounding should be put in Tires Tires 800 748.12 416.88 4.3 26 21.88 SG&A Expenses Insurance $ Computer/Phone $ Office Supplies $ Advertising $ Total SG&A Expenses $ 12,000 3,250 2,800 6,000 24,050 $ $ $ $ $ 10,000 3,000 3,000 5,000 21,000 Operating Income $ 125,520 $ 128,065 Flexible Budget Revenue Total Actual Labor Hrs Labor cost for flexible budget Flexible Budget Material Cost Flexible Budget Disposal Cost Actual Sales Reveune Actual Direct Material Cost Actual Labor Cost Actual Disposal Cost $175,000 $280,000 2240 2961 $ 56,000 $ 74,025 $ $ 42,000 $ 98,000 $ $ 14,000 $ $ $ 168,000 $ 294,000 $ $ 50,750 $ 91,000 $ $ 58,240 $ 76,986 $ $ 17,500 $ $ $560,000 3440 86,000 $ 320,000 $ 20,000 $ 598,496 $ 333,504 $ 89,440 $ 17,504 $ $1,015,000 8641 216,025 460,000 34,000 1,060,496 475,254 224,666 35,004 Actual Spending Results $ 1,060,500 $ 45,500 Flexible Original/St F/ Budget Activity F/ atic Budget U Variance U $1,015,000$ (86,600) $ 1,101,600 Sales 475,250 $ 233,325 $ 35,000 $ 743,575 $ 316,925 $ (15,250) (17,300) (1,000) (33,550) 11,950 $ 460,000 $ $ 216,025 S $ 34,000 $ $ 710,025$ $ 304,975$ 51,020 8,655 1,190 60,865 (25,735) $ 511,020 $ 224,680 $ 35,190 $ 770,890 $ 330,710 Variable Expenses Material $ Labor $ Disposal $ Total Variable S Contribution Margin $ Fixed Expenses Rent $ Insurance $ Utilities S Supervision S Computer/phone 6 Office Supplies $ Advertising $ Maintenance $ Depreciation S Total Fixed Expenses S Operating Income $ (2,000) 2,000 42,000 $ 12,000 22,000 $ 50,000 $ 3,250 $ 2,800 $ 6,000 $ 12,000 $ 50,000 $ 200,050 $ 116,875 $ (250) 200 (1,000) (5,000) $ 42,000 $ 10,000 $ $ 24,000 $ $ 50,000 $ $ 3,000 $ $ 3,000 $ $ 5,000 $ $ 7,000 $ $ 50,000 $ $ 194,000 $ $ 110,975$ un vienu $ 42,000 10,000 $ 24,000 $ 50,000 3,000 3,000 $ 5,000 7,000 $ 50,000 $ 194,000 $ 136,710 (6,050) 5,900 (25,735) Of the fixed expenses, the following can be traced to specific segments: Oil Brakes Tires Rent 20% 30% 30% Utilities 10% 25% 35% Depreciation 10% 25% 25% Maintenance 30% 30% 5% Tires 598496 333504 89440 17504 Amounts not assigned to segments are common expenses of the b Sales revenue 1060496 168000 294000 Less: Variable Cost Material 475254 50750 91000 Labor Cost 224666 58240 76986 Disposal Cost 35004 17500 0 Rent 42,000 $ Utilities 22,000 $ Supervision 50,000 Depreciation $ 50,000 $ Maintenance 12,000 $ Total Variable Cost 910924 126490 167986 $ 4 4 4 44 4 44 44 44 44 440448 Contribution (Revenue 149572 41510 126014 158048 SG&A Expenses Insurance Computer/Phone Office Supplies Advertising Total SG&A Expenses 44 44 44 12,000 3,250 2,800 6,000 24,050 Operating Income $ 125,522 Additional Info: . General sales growth is expected to be 10% Expenses are expected to remain at 2018 levels Base 2019 priceing and costs off of the 2018 actual results .You cannot apply both the increased rent or increased advertising to the same segment Mike's has an opportunity to lease additional space that could be used to increase the activity in one of the three segments additional rent would be $10,000 per year and activity increases in the chosen area would be 2,000 oil changes, 250 Brake jobs or 72 tire jobs Mike is willing to increase the 2018 advertising spend in 2019 by $2,000 with the additional focused on one of the three segments - this is expected to increase sales dollars 10% in the affected segment . Currently there is one supervisor managing 4 hourly emplyees each working 2,080 hours per year or 8,320 total annual hours. If sales and expansion increases the total labor hours to the point of additional more than one more employees (additional 2,080 horus), then another supervisor will be needed at the same salary as the current one Mike's Auto Center 2018 Actual 1,060,500 2018 Budget 1,101,600 Sales $ $ COGS Material Labor Disposal Rent Utilities Supervision Depreciation Maintenance Labor hours $ $ $ $ $ $ $ $ $ $ 475,250 224,680 23.00 35,000 42,000 12.00 22,000 50,000 50,000 12,000 910,930 149,570 $ $ $ $ $ $ $ $ $ $ Variable Expenses - Material, Labor and Disposal Fixed Expenses - Rent, Utilities, Supervision, Depreciation, maintenance, Insurance, Computer/Phone, Office Supplies, Advertising Three Products - Oil Change, Brakes, Tires BUDGET Oil Brakes Tires INC # of activities 6,120 1,530 918 Sales Price 25 200 700 0.35 2.00 4.50 Labor cost per hour $ 25 $ 25 S $ 25 Material cost $ 6 $ 70 $ 400 Disposal cost $ 2 $ $ 25 511,020 233,325 35,190 35,190 42.000 22,00 24,000 42,00 50,000 50,000 7,000 952,535 149,065 Total COGS Gross Profit ACTUAL Oil Brakes # of activities 7,000 1,400 Average Sales Price 24 210 Average Material Cost 7.25 65 Average Labor Hours 0.32 2.115 Average Labor Cost per h 26 26 Average Disposal Cost 2.5 0 Any rounding should be put in Tires Tires 800 748.12 416.88 4.3 26 21.88 SG&A Expenses Insurance $ Computer/Phone $ Office Supplies $ Advertising $ Total SG&A Expenses $ 12,000 3,250 2,800 6,000 24,050 $ $ $ $ $ 10,000 3,000 3,000 5,000 21,000 Operating Income $ 125,520 $ 128,065 Flexible Budget Revenue Total Actual Labor Hrs Labor cost for flexible budget Flexible Budget Material Cost Flexible Budget Disposal Cost Actual Sales Reveune Actual Direct Material Cost Actual Labor Cost Actual Disposal Cost $175,000 $280,000 2240 2961 $ 56,000 $ 74,025 $ $ 42,000 $ 98,000 $ $ 14,000 $ $ $ 168,000 $ 294,000 $ $ 50,750 $ 91,000 $ $ 58,240 $ 76,986 $ $ 17,500 $ $ $560,000 3440 86,000 $ 320,000 $ 20,000 $ 598,496 $ 333,504 $ 89,440 $ 17,504 $ $1,015,000 8641 216,025 460,000 34,000 1,060,496 475,254 224,666 35,004 Actual Spending Results $ 1,060,500 $ 45,500 Flexible Original/St F/ Budget Activity F/ atic Budget U Variance U $1,015,000$ (86,600) $ 1,101,600 Sales 475,250 $ 233,325 $ 35,000 $ 743,575 $ 316,925 $ (15,250) (17,300) (1,000) (33,550) 11,950 $ 460,000 $ $ 216,025 S $ 34,000 $ $ 710,025$ $ 304,975$ 51,020 8,655 1,190 60,865 (25,735) $ 511,020 $ 224,680 $ 35,190 $ 770,890 $ 330,710 Variable Expenses Material $ Labor $ Disposal $ Total Variable S Contribution Margin $ Fixed Expenses Rent $ Insurance $ Utilities S Supervision S Computer/phone 6 Office Supplies $ Advertising $ Maintenance $ Depreciation S Total Fixed Expenses S Operating Income $ (2,000) 2,000 42,000 $ 12,000 22,000 $ 50,000 $ 3,250 $ 2,800 $ 6,000 $ 12,000 $ 50,000 $ 200,050 $ 116,875 $ (250) 200 (1,000) (5,000) $ 42,000 $ 10,000 $ $ 24,000 $ $ 50,000 $ $ 3,000 $ $ 3,000 $ $ 5,000 $ $ 7,000 $ $ 50,000 $ $ 194,000 $ $ 110,975$ un vienu $ 42,000 10,000 $ 24,000 $ 50,000 3,000 3,000 $ 5,000 7,000 $ 50,000 $ 194,000 $ 136,710 (6,050) 5,900 (25,735) Of the fixed expenses, the following can be traced to specific segments: Oil Brakes Tires Rent 20% 30% 30% Utilities 10% 25% 35% Depreciation 10% 25% 25% Maintenance 30% 30% 5% Tires 598496 333504 89440 17504 Amounts not assigned to segments are common expenses of the b Sales revenue 1060496 168000 294000 Less: Variable Cost Material 475254 50750 91000 Labor Cost 224666 58240 76986 Disposal Cost 35004 17500 0 Rent 42,000 $ Utilities 22,000 $ Supervision 50,000 Depreciation $ 50,000 $ Maintenance 12,000 $ Total Variable Cost 910924 126490 167986 $ 4 4 4 44 4 44 44 44 44 440448 Contribution (Revenue 149572 41510 126014 158048 SG&A Expenses Insurance Computer/Phone Office Supplies Advertising Total SG&A Expenses 44 44 44 12,000 3,250 2,800 6,000 24,050 Operating Income $ 125,522 Additional Info: . General sales growth is expected to be 10% Expenses are expected to remain at 2018 levels Base 2019 priceing and costs off of the 2018 actual results .You cannot apply both the increased rent or increased advertising to the same segment Mike's has an opportunity to lease additional space that could be used to increase the activity in one of the three segments additional rent would be $10,000 per year and activity increases in the chosen area would be 2,000 oil changes, 250 Brake jobs or 72 tire jobs Mike is willing to increase the 2018 advertising spend in 2019 by $2,000 with the additional focused on one of the three segments - this is expected to increase sales dollars 10% in the affected segment . Currently there is one supervisor managing 4 hourly emplyees each working 2,080 hours per year or 8,320 total annual hours. If sales and expansion increases the total labor hours to the point of additional more than one more employees (additional 2,080 horus), then another supervisor will be needed at the same salary as the current one