1. Provide a brief description of a business (you can make it up), including the

Question

1. Provide a brief description of a business (you can make it up), including the name of your business and the industry in which you operate. Be sure to identify and explain a product that you will manufacture. ( i do not need assistance with this part, I have chosen to be a table manufacturing company). (ie. 4 legs, flat top, made of wood).

2. Calculate the cost to manufacture this product on a per unit basis considering the cost factors of material, labour and manufacturing overhead. This calculation will form the basis of the cost of goods sold amount.

3. Determine the expected selling price of this product based on market research or based on a required gross profit.

4. Determine the amount of operating expenses, and selling and administrative expenses that will be required each month to operate your business. (These expenses could all be considered cash basis).

Section 2

1. Based on the information developed in Section 1 prepare a Sales Budget differentiating between cash and credit sales for each month of operations starting January 1, 2016, the first month of operation, to the end of the first quarter ended March 31, 2016. You should state the collection period for the credit sales. Usually a company’s collection period is 30 days, however you may wish to do some research on your industry to see what the average collection period is of similar companies.

2. Based on the forecasted sales budget in #1, prepare an Inventory Purchases Budget for each monthly period and set a target for the ending inventory at each month end. You should state the payment period that is expected. Prepare a Cash Budget for each month based on the Sales and Inventory Budgets and the estimated operating expenses each month.

Section 3

1. Based on the Budgets prepared in Section 2 prepare a Pro Forma Income Statement, Pro Forma Balance Sheet and Pro Forma Statement of Cash Flows for the quarter ended March 31, 2016.

2. Explain how your company would make use of these Pro Forma Financial Statements for business purposes and decision making.

Explanation / Answer

1) The industry which we operate is making of a portable solar powered fan, The company name is solar surge which has 10 units of labor and manufactures solar fans by using various parts that are procured from other vendors

2) The unit has costs that are divided as follows 20% is the cost of labor, 20% is the cost of materials, 10% for the cost of packaging and another 20% for facility and services, 30% is for the profit

3) The price of the product stands at 100 dollars per unit

4) the operating expenses are very clear here we sell 100 units per month and get 10,000 dollars as revenue and we spend 2000 on overheads 2000 on materials and 1000 on packaging and 2000 on utilities we are left with 3000 cash.;

1) It is straight forward in first quarter the amount recieved from sales is 30,000 and we have spent 6000 that quarter on overheads and 6000 on materials and 3000 on packaging and 6000 on utilities we are left with 10,000 cash which is our profit.

2) It must be very clear when you make a financial statement, The investment and profit must be calculated and annualised returns must also be calcualted.

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