Jakob is considering selling one of his special plant varieties online. He will require specific materials for this product line. He hopes to start selling this line in April and has provided you with his expectations of sales in units. April 1300, May 1400, June 1500, July 1650. He needs 400 grams of potting mix and one pot for each plant. Potting mix is priced at 2 cents per kilogram, the plants cost on average $4, and the pots are $3 each.

He thinks it would be a good idea to have half of the finished goods ready at the end of one month for the next month’s sales. All materials are available without lag times. The plants will incur a labor cost of $20 each and sell for $65 each. He doesn’t predict any other significant costs at this stage.

Required:

a) Jakob would like you to demonstrate how to budget for sales, labor, production (in units), and materials (in dollars). Prepare a production, materials, and labor budget for the online plants in Excel for the months of April, May, and June.

Further requirements

Write an email to Jakob explaining your professional opinion on:

1. The non-financial benefits and costs that might be associated with the purchase of the special van; and

2. Jakob can source the potting mix from a supplier overseas for half the original estimate. He does not know anything about this supplier except for the price of their potting mix. Outline some of the issues of accountability and possible implications that may be associated with using this cheaper supplier.

3. From the budgets produced above advise Jakob on whether he should commit to the new plant variety online.