Question
PROJECT 1: MASTER BUDGET The real-world (this company is in the northwest suburbs of Chicago) scenario: Your company assembles wire (light-metal) closet shelving units at
PROJECT 1: MASTER BUDGET
The real-world (this company is in the northwest suburbs of Chicago) scenario: Your company assembles wire (light-metal) closet shelving units at a manufacturing facility and ships them to home builders and chain "big box" do-it-yourself stores.
It is October, 2021 and you, the budget manager, just received an e-mail from the CFO, asking you to put together a 2022 budget.
The projected (because the year is not yet over) 2021 financial information is below. There are three items for you to complete by filling in the applicable personalized information. Then you need to prepare a 2022 budget by filling in the 2022 boxes below and submitting to the CFO.
So how to get that done?
For a successful Master Budget, you would seek information and input from your company's:
Sales Manager
Production Manager
Administration Manager
This information (reflecting some real-world vagueness and uncertainty) is in the detail further below:
2021 Projected 2022 Budget sales
$ 2,400,000
Production Costs:
Direct Material 630,000
Direct Labor 420,000
Manufacturing Overhead (you fill in)
Other Expenses:
Sales commissions 480,000
Office/Mgmt. Salaries 325,000
Rent 156,000
Utilities 9,000
Supplies 25,000
All Other 60,000
Total costs and expenses (you fill in)
Net Income (you fill in)
Budget input from key personnel:
SALES MANAGER
The Sales Manager is in charge of sales of wire shelving in linear feet (the key metric for this business)..
She solicits and receive orders from home builders and chain stores
The following is projected sales data for (full year) 2021:
150,000 linear feet to the home builders market at a sales price of $10 per linear foot
.
60,000 linear feet to the chain store market at a sales price of $15 per linear foot.
In 2022, the home builders market is expected to improve ("a little") over 2021
However, COVID-19 had a favorable impact on the chain store market as more people had more time to work on home improvement projects in 2020 and 2021. This is expected to "decline significantly" in 2022 as people are tired of being at home and home improvement projects!.
Sales prices (what is charged to the customers) per linear foot are planned to remain the same in 2022.
Salespersons are compensated fully on commission (and the 2022 commission rate is the same as 2021).
PRODUCTION MANAGER
The production manager is in charge of assembly of these units in the assembly facility adjacent to the office.
Production at the company facility is based on the assembly of the shelving by the linear foot. You assemble what you need to fill orders, since there is no space for unsold inventory
The production manager is also responsible for procurement of the raw materials (metal). You currently pay at a rate of $3 per linear foot, but your supplier is planning a price increase.
The production manager is also responsible for the assemblers that she directly supervises. They are paid by production at $2 per linear foot.
The production manager earns an annual salary (which is the entire manufacturing overhead). That salary (unique to each student in the class, evidently some are more generous than others!) is as follows:
Kassie: $53,000
John: $55,000
Aidan: $57,000
Mike: $60,000
Christian: $62,000
Sakai: $64,000
Maggie: $66,000
Patty: $68,000
Will H. $70,000
Tori: $72,000
Amber: $74,000
William M. $76,000
Marko: $78,000
Jen: $80,000
Hannah: $81,000
Natalia: $82,000
Angela: $84,000
Awilda: $85,000
Roberto: $86,000
Melissa: $88,000
Marcus: $89,000
Jonathon: $90,000
Sean: $92,000
Jes: $95,000
However, in each of the salary scenarios above, the production manager wants a raise next year!
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