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Business plan: Product Budgeting Project - Essay Example

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Product Budgeting Project Introduction This business plan highlights various aspects of product budgeting of an industrial product named as “Highnoon”. “Highnoon” is a product being manufactured and sold by the organization under progress; its future growth and estimates are analyzed regarding the budgeting aspects…
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Business plan: Product Budgeting Project
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Download file to see previous pages Some of the assumptions taken to complete the product budgeting practice are stipulated below. Assumptions 1. The product is made up of the two raw materials named Beflow and Affton. 2. Two kinds of labour are used in the production process of the product, which are skilled and non-skilled labour. 3. For capital expenditure, since this is the first year of operations, therefore, the organization has planned to invest only in the furniture and equipments. The requirement for having a factory is fulfilled by arranging a facility on rent. 4. Selling price of the product is set as ?130 and ?140 for the first and last six months of the first year. 5. It is assumed that prices of raw materials and labour costs will remain steady and stable throughout the year. 6. Overheads are estimated to be 75% of the direct labour cost. 7. Closing stock is assumed to be around at least 15% of the next month’s sales volume. 8. 65% of the sales are expected to be received in the month of sales whereas the remainder amount is assumed to be received in the next month of sales. 9. ...
Discussion Unit Cost Given the assumptions and market prices of the raw materials and labour costs, the unit cost of the product “Highnoon” is estimated at ?121.75. This cost includes ?20.25 in terms of direct material, ?58 in terms of direct labour and ?43.5 in terms of overheads. Budgets There are six kinds of budget prepared for the purpose of this product budgeting such as Capital Expenditure Budget, Sales Budget, Purchases Budget, Production Budget, Direct Labour Budget and, lastly, Cash Budget, all of these are included in the analysis covering 12 months of first year of operations of the business. Capital expenditure budget amounts to ?45,000 in total; ?20,000 are to be invested in the first six months, whereas the remaining amount is intended to be paid next six months. Sales budget is allocated in such a manner that 450 units are expected to be sold out in the first quarter, 500 units in the next two quarters and 550 units in the last quarter amounting total sales of around ?871,500 for the whole year. As far as the production budget is concerned, around 6,000 units are expected to be sold out whereas around 6,083 units are assumed to be produced. By multiplying the production units with unit costs provides the total production cost of the period amounts to ?740,605. Closing inventory is also valued at the unit cost amounting to ?10,105. From the purchases budget, it can be viewed that the quantity of Beflow and Affton is expected to remain around 912 kg and 608 kg respectively with their corresponding rates of ?55 and ?120. The cumulative amount of total purchases of both the raw materials is expected to be ?128,707. For direct labour budget, it is expected that the skilled labour would consume around ...Download file to see next pagesRead More
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