Regarding the Brewery It is now 2021 and David has worked with us for several years. He always likes what he hears regarding our analysis. He would like to see a budget for his brewery that is very ambitious. He wants to pay himself $50,000 in salary and earn after tax (net income) $100,000. 1. He thinks he could raise the prices per case for each of the beer lines and/or change his packaging strategy, in order to reflect current marketing practices and pricing. 2. He has obtained assurances from his suppliers that the direct material costs will remain consistent on a per unit basis. (It appears that the commodity prices for hops and barley vary from year to year based on various factors. This is to be expected since they are dependent on the weather for the crop size each year.) 3. Other variable costs have probably increased roughly two percent each year since 2013. Except for direct labor. David was already paying $15 per hour. So you need to decide on what your group would consider a reasonable wage per hour in 2021. 4. Also, in addition to the $50,000 salary for himself the fixed costs will also have increased roughly two percent per year on a per shift basis (except for depreciation, it will remain the same regardless of how many shifts). Note: Assumptions will need to be made for increased fixed costs if shifts are added. 5. The brewery must continue to produce and sell all four beer lines in order to satisfy the distributors and end users. However, and there is always a however in life, all types of changes are on the table for your analysis, except buying new equipment. 6. David would also like your recommendation regarding the Sales Commission percentage. Incorporate your ideas into the budget and make sure to explain them to David. You need to provide a budgeted income statement for David complete with all supporting schedules (in good form) that support the budgeted income statement. You are free to propose anything you want except: buying new equipment and/or dropping a beer line. All the budget schedules should be supporting documents and the memo should lead David through the budget. It should include explanations/rationale for all of your decisions. The tax rate to use is 26.5%. Arizona Microbrewery, Inc. Existing Products: Total Sales Price per case Direct Materials per case Direct Labor per case Other Variable Costs per case Total Variable costs per case Contribution Margin per Case Number of cases sold last year DLH per case Total DLH last year MH per case Total MH last year Contribution Margin Income Statement: Saguaro Pale Ale Bisbee Bock 21.00 $ 24.50 $ 2.75 2.90 3.75 3.75 5.90 6.18 12.40 12.83 8.60 $ 11.67 $ 12,593 7,126 0.25 0.25 3,148.25 1,781.50 0.20 0.40 2,518.60 2,850.40 Ocotillo Amber Pilsner 23.50 $ 3.15 3.00 6.10 12.25 11.25 $ 6.827 0.20 1,365.40 0.25 1,706.75 Sedona Stout 26.50 4.00 5.25 6.34 15.59 10.91 4,184 0.35 1,464.40 0.30 1,255.20 30.730 7,759.55 8,330.95 Total Sales Revenue Total Variable Costs Contribution Margin Direct Fixed Costs Segment Margin Common Fixed Costs Operating Income Taxes (35%) Net Income Ocotillo Saguaro Pale Amber Sedona Ale Bisbee Bock Pilsner Stout Total $ 264,453.00 $ 174,587.00 $ 160,434.50 $ 110,876.00 $ 710,350.50 156,153.20 91,426.58 83,630.75 65,228.56 396,439.09 108,299.80 83,160.42 76,803.75 45,647.44 313,911.41 10,329.62 8,392.91 6,017.39 9,893.92 34,633.84 $ 97,970.18 $ 74,767.51 $ 70.786.36 $ 35,753.52 $ 279,277.57 $ 245,389.44 $ 33,888.13 11,860.85 $ 22.027.28 $ Detail of Total Variable Costs Total Direct Material $ 93,537.20 Direct Labor $ 116,393.25 Production Supplies $ 26,064.41 Variable Portion of Maintenance $ 40,892.55 Variable Portion of Utilities $ 27,610.57 Variable Office Supplies (sales forms, etc) $ 3,493.88 Shipping costs $ 31,619.19 8% Sales Commission $ 56,828.04 $ 396,439.09 Detail of Total Fixed Costs (Direct + Indirect) Brew Master / Quality Control manager $ 60,293.15 Receiving and Shipping department expenses $ 22,511.32 Depreciation $ 11,712.10 Facility costs (rent, taxes, insurance, etc) $ 78,938.15 Advertising & Marketing costs $ 22,994.91 Fixed portion of Maintenance (including IT supp $ 9,992.98 Fixed portion of Utilities (including refrigeration) $ 10,390.37 Fixed portion of Office Supplies $ 4,305.66 Fixed Salary of Salespeople $ 32,221.81 Administrative staff to assist owner $ 26,662.83 Total Fixed Costs $ 280.023.28 Regarding the Brewery It is now 2021 and David has worked with us for several years. He always likes what he hears regarding our analysis. He would like to see a budget for his brewery that is very ambitious. He wants to pay himself $50,000 in salary and earn after tax (net income) $100,000. 1. He thinks he could raise the prices per case for each of the beer lines and/or change his packaging strategy, in order to reflect current marketing practices and pricing. 2. He has obtained assurances from his suppliers that the direct material costs will remain consistent on a per unit basis. (It appears that the commodity prices for hops and barley vary from year to year based on various factors. This is to be expected since they are dependent on the weather for the crop size each year.) 3. Other variable costs have probably increased roughly two percent each year since 2013. Except for direct labor. David was already paying $15 per hour. So you need to decide on what your group would consider a reasonable wage per hour in 2021. 4. Also, in addition to the $50,000 salary for himself the fixed costs will also have increased roughly two percent per year on a per shift basis (except for depreciation, it will remain the same regardless of how many shifts). Note: Assumptions will need to be made for increased fixed costs if shifts are added. 5. The brewery must continue to produce and sell all four beer lines in order to satisfy the distributors and end users. However, and there is always a however in life, all types of changes are on the table for your analysis, except buying new equipment. 6. David would also like your recommendation regarding the Sales Commission percentage. Incorporate your ideas into the budget and make sure to explain them to David. You need to provide a budgeted income statement for David complete with all supporting schedules (in good form) that support the budgeted income statement. You are free to propose anything you want except: buying new equipment and/or dropping a beer line. All the budget schedules should be supporting documents and the memo should lead David through the budget. It should include explanations/rationale for all of your decisions. The tax rate to use is 26.5%. Arizona Microbrewery, Inc. Existing Products: Total Sales Price per case Direct Materials per case Direct Labor per case Other Variable Costs per case Total Variable costs per case Contribution Margin per Case Number of cases sold last year DLH per case Total DLH last year MH per case Total MH last year Contribution Margin Income Statement: Saguaro Pale Ale Bisbee Bock 21.00 $ 24.50 $ 2.75 2.90 3.75 3.75 5.90 6.18 12.40 12.83 8.60 $ 11.67 $ 12,593 7,126 0.25 0.25 3,148.25 1,781.50 0.20 0.40 2,518.60 2,850.40 Ocotillo Amber Pilsner 23.50 $ 3.15 3.00 6.10 12.25 11.25 $ 6.827 0.20 1,365.40 0.25 1,706.75 Sedona Stout 26.50 4.00 5.25 6.34 15.59 10.91 4,184 0.35 1,464.40 0.30 1,255.20 30.730 7,759.55 8,330.95 Total Sales Revenue Total Variable Costs Contribution Margin Direct Fixed Costs Segment Margin Common Fixed Costs Operating Income Taxes (35%) Net Income Ocotillo Saguaro Pale Amber Sedona Ale Bisbee Bock Pilsner Stout Total $ 264,453.00 $ 174,587.00 $ 160,434.50 $ 110,876.00 $ 710,350.50 156,153.20 91,426.58 83,630.75 65,228.56 396,439.09 108,299.80 83,160.42 76,803.75 45,647.44 313,911.41 10,329.62 8,392.91 6,017.39 9,893.92 34,633.84 $ 97,970.18 $ 74,767.51 $ 70.786.36 $ 35,753.52 $ 279,277.57 $ 245,389.44 $ 33,888.13 11,860.85 $ 22.027.28 $ Detail of Total Variable Costs Total Direct Material $ 93,537.20 Direct Labor $ 116,393.25 Production Supplies $ 26,064.41 Variable Portion of Maintenance $ 40,892.55 Variable Portion of Utilities $ 27,610.57 Variable Office Supplies (sales forms, etc) $ 3,493.88 Shipping costs $ 31,619.19 8% Sales Commission $ 56,828.04 $ 396,439.09 Detail of Total Fixed Costs (Direct + Indirect) Brew Master / Quality Control manager $ 60,293.15 Receiving and Shipping department expenses $ 22,511.32 Depreciation $ 11,712.10 Facility costs (rent, taxes, insurance, etc) $ 78,938.15 Advertising & Marketing costs $ 22,994.91 Fixed portion of Maintenance (including IT supp $ 9,992.98 Fixed portion of Utilities (including refrigeration) $ 10,390.37 Fixed portion of Office Supplies $ 4,305.66 Fixed Salary of Salespeople $ 32,221.81 Administrative staff to assist owner $ 26,662.83 Total Fixed Costs $ 280.023.28