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This assignment should be regarded as an opportunity for you to forecast the next twelve months of operations of an organisation of your own choosing. To make it as relevant as possible for your own use, I suggest that you choose either the business you are working in now (provided you have access to sufficient financial and strategic information), or alternatively a proposed business venture that you are involved with in some personal way.
The final set of outputs will be three financial statements with supporting schedules and discussion. You will analyse the statements to confirm the feasibility of all your plans; you will likely do this analysis a number of times to optimise the business and its underlying operation (an example of this might be how you manage your working capital: debtors, inventory, and creditors).
The supporting schedules will include, but not be limited to, revenue forecast, expenses forecast, manufacturing and inventory forecasts, cash collections and payments, capital budget, forecasts of investment and borrowing requirements, aspects of working capital, and others that are relevant to your business.
A good way to do this would be using a set of linked spreadsheets so that changing a parameter flows through the whole plan.
1. Calculate and prepare all the supporting schedules in the master budget (operating and financial budgets); document all relevant assumptions that are necessary to prepare your forecasts.
2. Analyse the cost structure arising from your forecasts, comment on operating leverage, and opportunities and threats you perceive to be inherent in your cost structure
3. Prepare and present a properly formatted set of financial statements (Income Statement, Balance Sheet, and Statement of Cash Flows)
4. Analyse and discuss your final set of financial statements. If you decide to proceed with a plan that results in financial outcomes that are potentially risky or have negative implications, also document how you plan to manage that risk
5. Provide a professional presentation (e.g., proof-read and use the appropriate format and presentation for a report).
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A budget helps in the proper allocation of funds which are generated through various sources and the optimum use of the available resources. A budget with a validity of maximum one year which is prepared as a planning document for the organisations which encircles all the other budgets like operating budgets, financial budget etc. This type of budgets is popularly termed as the master budgets. A master budgets concords with the financial year of the organisation. The master budget can be split into quarters and further, into months.
Initially, the organisation started its operations by manufacturing frozen foods. The organisation is going to venture in the filled with Edible Oil in order to diversify the business. According to the conducted survey undertaken by our marketing team, Edible Oil possesses huge potential over the market with an expected demand of around 8000 units. In order to cope up with the demand, the organisation should produce 8500 units. The selling procedure of the product will start from Birmingham and further, it will be sold around all the corners of the United Kingdom (Barrow, Barrow & Brown, 2012). We would require an amount of £1000000 for the purpose of this project and the loan will be repaid for over five years.
The production will be of 8500 units with a calculated direct materials cost of £7.14. £3.5 will be the cost for the direct components with a labour charge of £4.89. The total variable cost will be £15.54. The expected total overhead cost will be £67000 for the entire year. The total overhead cost of £67000 will be dispensed over 8500 units as the same will be the amount of production. The final selling price of the product will be £25.76 per litre which will be sold at a markup of 10%.