Just question 3
Abstract: You are the owner of your own cookie company. Fast growth and the need to expand have made it necessary for you to seek financing from a local bank. However, you need to show the banker your plans for the coming year. Using your own, unique data, you will prepare a comprehensive budget and proforma financial statements to show the banker your projected earnings and financial position. Good luck getting that bank loan! INTRODUCTION: You knew they were good, but you never thought Grandma's old cookie recipe would bring you this far! It all started about three years ago when you began using your Grandma's cookie recipe to bake, what most people consider, the "best tasting cookies they have ever put in their mouth." After finishing college, you started baking cookies as a little side business. You bake them right in your home and sell them to friends and local stores. Response has been great! People love the cookies, and you are making a little extra money Your fast sales growth has negatives in addition to positives. The volume of business has grown so much that you can no longer keep up with demand. Your desire to grow this hobby into a full-fledged business has led you to explore expanding. You have been investigating new facilities and equipment, and checking into the requirements of hiring a few employees. However, there is one problem; you don't have the money to expand! On the advice of a friend, you meet with a local banker. You share your dreams and ideas, and your need to borrow some money. The banker is encouraging and helpful. However, she states that the bank cannot lend you any money without a business plan that describes your financial results, marketing strategy, and projections for the future. You show the banker your income statement and balance sheet as of the most recent year-end, and the banker is impressed! "Looks very promising," she states. "But what I really need to see is what you plan to do with the money that I will lend you and what your business will look like next year." When you return home after the meeting, you pull out your old college accounting textbook. You realize that this is a master budget problem just like you did in college. After reviewing your class notes and reading the textbook, you settle in to produce a plan for next year. Chocolate Chip Cookies YIELD: 1 DOZEN INGREDIENTS: All Purpose Flour Baking Soda Baking Powder Kosher Salt Unsalted Butter Light Brown Sugar Granulated Sugar Eggs Vanilla Extract Dark Chocolate Chips 1 c. 1 tsp 42 tsp. 1/2 tsp 10 tbsp. 3/4 c. 1/2 c. 1 1 tsp 2 1/4 c. Requirements: 1. Think of your favorite cookie. Search the Internet and find a recipe for this type of cookie. This recipe will be your "Grandma's recipe" that you make and sell in your business. Print out this recipe. You must consult your recipe to determine the amount of ingredients required for one dozen cookies. You also must consult Exhibit 1 for information regarding the costs of ingredients, manufacturing overhead, and operating expenses. If your cookies have ingredients that are not included in Exhibit 1, these ingredients are considered part of overhead. 2. Now you must brainstorm to determine your sales projections, expected collection patterns, purchasing and payment patterns for the first three years of operations (prepare only annual budgets). A. Use the spreadsheet template provided by the text (chapter 8) to prepare the following operating budgets: (a) Sales budget (b) Cash collections Budget (c) Direct materials purchases budget (d) Cash disbursements budget (e) Direct labor budget (f) Manufacturing overhead budget (g) Sales and administration budget 3. In the development of your plans determine the capital contributions, equipment purchases, loans, minimum cash balances, and estimated tax rate. A. Use this information and information from your operating budgets completed in requirement 2 to prepare the following for the first three years of operations (prepare only annual statements/budgets). (a) Proforma variable income statement (b) Proforma absorption income statement (c) Cash budget EXHIBIT 1 Sales Price, Costs of Ingredients, Manufacturing Overhead, and operating Expenses Sales Price: Mark-up on total variable costs: 120% Cost of Raw Materials: Direct Materials unit cost Flour/Sugar (any kind) - per cup $0.15 Eggs -per egg $0.10 Butter, Shortening Oil - per cup $2.00 Chips/Nuts, etc - per cup $1.25 1 stick butter = % cup Direct Labor Costs: Although you operations will be automated there is a need for direct labor to oversee the machines, pack boxes, ship etc your direct labor budget. Manufacturing Overhead: I Variable costs Fixed Costs (feel free to change amounts) (per dozen): (per month): Utilities $0.50 Other indirect materials and labor $0.75 Maintenance $500 Depreciation $2,000 Rent $6,000 Utilities $1,500 Insurance $750 Taxes $1,000 Supervision $2,500 Totals VC. $1.25 FC. 14,250 Operating Expenses: Variable costs (per dozen): Sales Commission $0.50 Sales and Admin Fixed Costs (per month): Create your own cost structure here Abstract: You are the owner of your own cookie company. Fast growth and the need to expand have made it necessary for you to seek financing from a local bank. However, you need to show the banker your plans for the coming year. Using your own, unique data, you will prepare a comprehensive budget and proforma financial statements to show the banker your projected earnings and financial position. Good luck getting that bank loan! INTRODUCTION: You knew they were good, but you never thought Grandma's old cookie recipe would bring you this far! It all started about three years ago when you began using your Grandma's cookie recipe to bake, what most people consider, the "best tasting cookies they have ever put in their mouth." After finishing college, you started baking cookies as a little side business. You bake them right in your home and sell them to friends and local stores. Response has been great! People love the cookies, and you are making a little extra money Your fast sales growth has negatives in addition to positives. The volume of business has grown so much that you can no longer keep up with demand. Your desire to grow this hobby into a full-fledged business has led you to explore expanding. You have been investigating new facilities and equipment, and checking into the requirements of hiring a few employees. However, there is one problem; you don't have the money to expand! On the advice of a friend, you meet with a local banker. You share your dreams and ideas, and your need to borrow some money. The banker is encouraging and helpful. However, she states that the bank cannot lend you any money without a business plan that describes your financial results, marketing strategy, and projections for the future. You show the banker your income statement and balance sheet as of the most recent year-end, and the banker is impressed! "Looks very promising," she states. "But what I really need to see is what you plan to do with the money that I will lend you and what your business will look like next year." When you return home after the meeting, you pull out your old college accounting textbook. You realize that this is a master budget problem just like you did in college. After reviewing your class notes and reading the textbook, you settle in to produce a plan for next year. Chocolate Chip Cookies YIELD: 1 DOZEN INGREDIENTS: All Purpose Flour Baking Soda Baking Powder Kosher Salt Unsalted Butter Light Brown Sugar Granulated Sugar Eggs Vanilla Extract Dark Chocolate Chips 1 c. 1 tsp 42 tsp. 1/2 tsp 10 tbsp. 3/4 c. 1/2 c. 1 1 tsp 2 1/4 c. Requirements: 1. Think of your favorite cookie. Search the Internet and find a recipe for this type of cookie. This recipe will be your "Grandma's recipe" that you make and sell in your business. Print out this recipe. You must consult your recipe to determine the amount of ingredients required for one dozen cookies. You also must consult Exhibit 1 for information regarding the costs of ingredients, manufacturing overhead, and operating expenses. If your cookies have ingredients that are not included in Exhibit 1, these ingredients are considered part of overhead. 2. Now you must brainstorm to determine your sales projections, expected collection patterns, purchasing and payment patterns for the first three years of operations (prepare only annual budgets). A. Use the spreadsheet template provided by the text (chapter 8) to prepare the following operating budgets: (a) Sales budget (b) Cash collections Budget (c) Direct materials purchases budget (d) Cash disbursements budget (e) Direct labor budget (f) Manufacturing overhead budget (g) Sales and administration budget 3. In the development of your plans determine the capital contributions, equipment purchases, loans, minimum cash balances, and estimated tax rate. A. Use this information and information from your operating budgets completed in requirement 2 to prepare the following for the first three years of operations (prepare only annual statements/budgets). (a) Proforma variable income statement (b) Proforma absorption income statement (c) Cash budget EXHIBIT 1 Sales Price, Costs of Ingredients, Manufacturing Overhead, and operating Expenses Sales Price: Mark-up on total variable costs: 120% Cost of Raw Materials: Direct Materials unit cost Flour/Sugar (any kind) - per cup $0.15 Eggs -per egg $0.10 Butter, Shortening Oil - per cup $2.00 Chips/Nuts, etc - per cup $1.25 1 stick butter = % cup Direct Labor Costs: Although you operations will be automated there is a need for direct labor to oversee the machines, pack boxes, ship etc your direct labor budget. Manufacturing Overhead: I Variable costs Fixed Costs (feel free to change amounts) (per dozen): (per month): Utilities $0.50 Other indirect materials and labor $0.75 Maintenance $500 Depreciation $2,000 Rent $6,000 Utilities $1,500 Insurance $750 Taxes $1,000 Supervision $2,500 Totals VC. $1.25 FC. 14,250 Operating Expenses: Variable costs (per dozen): Sales Commission $0.50 Sales and Admin Fixed Costs (per month): Create your own cost structure here
