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The following table summarizes historical income statement performance for Company XYZ. Utilizing the historical information provided and the assumptions outlined below, prepare a budget for
The following table summarizes historical income statement performance for Company XYZ. Utilizing the historical information provided and the assumptions outlined below, prepare a budget for the upcoming fiscal year and a projection for the following year. In other words, you should have budgets for two years.
Company XYZ Historical Income Statement | ||
Prior Year 1 Actual | Prior Year 2 Actual | |
Revenue | ||
Sales | $2,000,000 | $2,135,000 |
Other Operating Revenue | 175,000 | 166,000 |
Total Revenue | 2,175,000 | 2,301,000 |
Operating Expenses | ||
Salaries | 750,000 | 772,500 |
Fringe Benefits | 187,500 | 193,125 |
Supplies | 37,500 | 38,438 |
Utilities | 55,000 | 56,650 |
Insurance | 125,000 | 125,000 |
Depreciation | 200,000 | 210,000 |
Other Operating Expenses | 275,000 | 280,500 |
Total Operating Expenses | 1,630,000 | 1,676,213 |
Operating Income | 545,000 | 624,788 |
Interest | 185,000 | 190,000 |
Earning before Taxes | 360,000 | 434,788 |
Income Tax (@30%) | 108,000 | 130,436 |
Net Income | $252,000 | $304,351 |
Operating Margin | 25.1% | 27.2% |
Net Income % | 11.6% | 13.2% |
Additional Historical Information
- Total number of FTEs (full-time equivalent) employees was 14.4
- The Board of Directors approves salary increases each year
- Fringe benefits have not increased over the past few years; however, information suggests that this is not a trend that will continue
- Total net fixed assets for the organization were $2,500,000 in prior year 1 and $2,600,000 in prior year 2
Assumptions for Budget Year 1
- Management has requested an increase in FTEs of 2.5
- Salary increases will be given at 2.5%
- Fringe benefits as a % of total salaries are anticipated to increase 2%
- Inflation for all non-salary expenses is projected to be 2.5%
- Capital purchases for the budget year are projected to be $300,000
- Sales are projected to increase 2.5%
- Other operating revenue is projected to increase $25,000
Assumptions for Budget Year 2
- Management has requested an increase in FTEs of 1.5
- Salary increases will be given at 1.5%
- Fringe benefits as a % of total salaries are anticipated to increase 1%
- Inflation for all non-salary expenses is projected to be 1.5%
- Capital purchases for the budget year are projected to be $150,000
- Sales are projected to increase 3%
- Other operating revenue is projected to increase $25,000
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