Question:
This Business Plan is for a New Business which I wish to start. I need the following budgets mocked up for potential investors:
All reports over a 12month Period
- Purchases Budget
- Cost of Sales or Cost of Services Budget
- Selling and Administrative expenses budget
- Schedule of ‘expected collections from customers’ budget
- Schedule of ‘expected payments for purchases’ budget
- Cash budget
- Income Statement budget
- Statement of Financial Position budget
I have started on an Excel worksheet, I have done a simple expense and CVP analysis. I just need the rest done.
I will also need a detail explanation so I can add to my report in terms of each budgets 250 words each.
Remember this is a mockup for a new business I predict that the sales will be 10% lower in Winter/Autumn and 10% higher in in Spring/Summer.
All the information should on the excel sheet to help formulate the rest of the budgets, but if the information required is not there just make it up but explain it in the report part.
Answer:
Business description:
This is the business plan for the product _____________. This is one of the most unique products and hence, has a huge potential in the market.
Marketing strategy:
The following marketing strategy would be used:
- The company shall partner with the other companies that are thinking of manufacturing somewhat similar product. For this, negotiation shall be undertaken.
- A collaboration with the users shall be undertaken
- The customers shall be helped in order to solve a problem
- New channels and platforms shall be experimented. For this, a study shall be undertaken
- The customers shall be interacted with so that the wishes and the needs of the customers can be known and dealt with utmost priority
Financial structure:
The cash budget for the product has been laid down and this indicates that an amount of $520 million is required.
This would be financed as follows:
- A loan from the bank shall be taken for an amount of $ 470 million and the rest would be financed as follows:
- Venture capital
- As share capital from the investors in the market
The combination shall be finalised once the venture capitalists confirm the amount that they invest in the business.
Budgets:
| Data for calculations | ||||||
| First quarter | Second quarter | Third quarter | Next year | |||
| Estimated unit sales | 74,400.00 | 59,520.00 | 66,960.00 | 89,280.00 | ||
| Sales price | 7,000.00 | 7,000.00 | 7,000.00 | 7,000.00 | ||
| Direct labour hours per unit | 9 | 9 | 9 | 9 | ||
| Direct labour hourly rate | 50.00 | 50.00 | 50.00 | 50.00 | ||
| Direct materials cost per square metre | 1,070.00 | 1,070.00 | 1,070.00 | 1,070.00 | ||
| Selling and admin expense | 1897,81,302.83 | 1707,99,149.33 | 2032,96,678.99 | – | ||
The above is the budgeted sale units, selling price etc for the product ABC that would be manufactured. The sales units are expected to 74,400, 59,520 and 66,960 for First, second and third quarter respectively. The selling price of the product is expected to be $9 per unit, the direct labour hours for each unit would be 9 and the direct labour rate would be $50 per hour. Also, the direct materials cost per square metre shall be $1070 for each unit and the selling and administrative expense would be fixed at the rate of $
| 1897,81,302.83 | 1707,99,149.33 | 2032,96,678.99 |
For first, second and third quarter respectively.
The following are the required budgets:
Purchase budget:
The following is the required budget:
| (Amounts in $) | ||||||
| First quarter | Second quarter | Third quarter | Total | |||
| Particulars | ||||||
| Direct material usuage: | ||||||
| Production budget | 62,512.00 | 63,984.00 | 80,352.00 | 2,06,848.00 | ||
| Direct material quantity(per square metre) | 1,070.00 | 1,070.00 | 1,070.00 | |||
| Direct material usuage (in square metres) | 668,87,840.00 | 684,62,880.00 | 859,76,640.00 | 1544,39,520.00 | ||
The calculation of the purchase budget includes the following:
Budgeted Direct Material Purchases in Units
= Budgeted Beginning Direct Material in Units
+ Direct Material in Units Needed for Production
− Budgeted Ending Direct Material in Units
Direct material purchase budget:
| First quarter | Second quarter | Third quarter | Total | ||
| Particulars | |||||
| Direct material usuage: | |||||
| Production budget | 62,512.00 | 63,984.00 | 80,352.00 | 2,06,848.00 | |
| Direct Material in Units Needed for Production | Part A | 2,50,048.00 | 2,55,936.00 | 3,21,408.00 | 8,27,392.00 |
| Part B | 3,75,072.00 | 3,83,904.00 | 4,82,112.00 | 12,41,088.00 | |
| Less: Budgeted Ending Direct Material in Units | Part A | 14,880.00 | 11,904.00 | 13,392.00 | |
| Part B | 14,880.00 | 11,904.00 | 13,392.00 | ||
| Purchase budget | Part A | 2,35,168.00 | 2,44,032.00 | 3,08,016.00 | |
| Part B | 3,60,192.00 | 3,72,000.00 | 4,68,720.00 | ||
| In Amounts | Part A | 20929952 | 21718848 | 27413424 | |
| Part B | 428,62,848.00 | 442,68,000.00 | 557,77,680.00 |
Cost of Sales or Cost of Services Budget:
The following is the required budget:
| (Amounts in $) | ||||||
| First quarter | Second quarter | Third quarter | Total | |||
| Particulars | ||||||
| Sale | 74,400.00 | 59,520.00 | 66,960.00 | |||
| Opening stock | 47,600.00 | 35,712.00 | 40,176.00 | |||
| Cost per unit | 2,120.00 | 2,120.00 | 2,120.00 | (assuming the marginal costing) | ||
| Cost of goods sold | 1009,12,000.00 | 757,09,440.00 | 851,73,120.00 | |||
| Others | 26,800.00 | 23,808.00 | 26,784.00 | |||
| Cost per unit | 3,035.92 | 2,669.40 | 2,530.08 | |||
| Cost of goods sold | 813,62,601.04 | 635,53,171.84 | 677,65,559.66 | |||
| Total cost of goods sold | 1822,74,601.04 | 1392,62,611.84 | 1529,38,679.66 | |||
The calculation of the cost of sales includes the following:
=Beginning inventory + purchases – ending inventory.
Selling and Administrative expenses budget:
The following is the required budget:
| First quarter | Second quarter | Third quarter | |
| Selling and admin expense | 1897,81,302.83 | 1707,99,149.33 | 2032,96,678.99 |
The calculation of the cost of sales includes the following:
=Budgeted selling expenses + budgeted administrative expenses
Schedule of ‘expected collections from customers’ budget:
The following is the required budget:
| (Amounts in $) | |||||
| Particulars | First quarter | Second quarter | Third quarter | Total | |
| Receipts: | |||||
| Sales: | |||||
| Previous months | 499,96,800.00 | ||||
| First quarter | 3541,44,000.00 | 1562,40,000.00 | 5208,00,000.00 | ||
| Second quarter | 2833,15,200.00 | 1249,92,000.00 | 4166,40,000.00 | ||
| Third quarter | 3187,29,600.00 | 4687,20,000.00 | |||
| Total cash inflow | 4041,40,800.00 | 4935,55,200.00 | 4437,21,600.00 | – | |
Schedule of ‘expected payments for purchases’ budget:
The following is the required budget:
| (Amounts in $) | |||||
| Particulars | First quarter | Second quarter | Third quarter | Total | |
| Payments: | |||||
| Purchases | 637,92,800.00 | 659,86,848.00 | 831,91,104.00 | 2129,70,752.00 | |
| Total cash outflow | 637,92,800.00 | 659,86,848.00 | 831,91,104.00 | 2129,70,752.00 | |
Cash budget:
The following is the required budget:
| (Amounts in $) | |||||
| Particulars | First quarter | Second quarter | Third quarter | Total | |
| Receipts: | |||||
| Sales: | |||||
| Previous months | 499,96,800.00 | ||||
| First quarter | 3541,44,000.00 | 1562,40,000.00 | 5208,00,000.00 | ||
| Second quarter | 2833,15,200.00 | 1249,92,000.00 | 4166,40,000.00 | ||
| Third quarter | 3187,29,600.00 | 4687,20,000.00 | |||
| Cash borrowed | 538,43,702.00 | ||||
| Total cash inflow | 4041,40,800.00 | 4933,98,902.00 | 4437,21,600.00 | – | |
| Payments: | |||||
| Purchases | 637,92,800.00 | 659,86,848.00 | 831,91,104.00 | 2129,70,752.00 | |
| Dividend | 1800,00,000.00 | 1800,00,000.00 | |||
| Purchase of land | 386,88,000.00 | 386,88,000.00 | |||
| Direct labour | 281,30,400.00 | 287,92,800.00 | 361,58,400.00 | ||
| Other expenses | 1897,81,302.83 | 1707,99,149.33 | 2032,96,678.99 | 5638,77,131.15 | |
| Total cash outflow | 4617,04,502.83 | 3042,66,797.33 | 3226,46,182.99 | 10886,17,483.15 | |
| Opening balance | 37,20,000.00 | 37,20,000.00 | |||
| Cash repaid | 538,43,702.00 | 538,43,702.00 | |||
| Interest paid | 2,69,218.51 | 2,69,218.51 | 5,38,437.02 | ||
| Cash available | -538,43,702.83 | 3039,97,578.82 | 2685,33,262.48 | 5186,87,138.47 | |
The following is the formula for cash budget:
Beginning cash balance + receipts – payments
Income Statement budget:
The following is the required budget:
| (Amounts in $) | ||||
| Particulars | First quarter | Second quarter | Third quarter | |
| Revenue | 5208,00,000.00 | 4166,40,000.00 | 4687,20,000.00 | |
| Less: cost of goods sold: | 1822,74,601.04 | 1392,62,611.84 | 1529,38,679.66 | |
| Gross profit | 3385,25,398.96 | 2773,77,388.16 | 3157,81,320.34 | |
| Less: fixed cost | 1897,81,302.83 | 1707,99,149.33 | 2032,96,678.99 | |
| Net profit | 1487,44,096.13 | 1065,78,238.83 | 1124,84,641.35 | |
Statement of Financial Position budget:
The following is the required budget:
| Statement of financial position: | |||
| Assets | (Amounts in $) | ||
| Inventory | 2114,13,299.04 | ||
| Office supplies | 1573,93,677.26 | ||
| Total assets | 3688,06,976.30 | ||
| Liabilities: | |||
| Payables | – | ||
| Capital | 3688,06,976.30 | ||
| Total liabilities | 3688,06,976.30 | ||
