financial mgt

1 Sales Forecast

As shown in the Products sales for 2012, the monthly average units sold and selling price for screwdriver are 60,000 and $100, for saws are 40,000 and $125.

Although Lipscomb suggested that use the numbers in some bestselling month, these numbers are not proper to forecast the whole year sales. Sold units in summer months are much higher than in other months, so we need to consider how to balance the best season and the worst season.

In 2013, Harvey’s sales forecast should be based on the average number rather than the best numbers as Lipscomb recommended.

Sales Forecast for 2013
	Screwdrivers	Saws
Units	720,000	480,000
Price	$100	$125
Total	72,000,000	60,000,000

2 Purchases budget (raw materials, labor, all resources)

To meet the units supposed to be sold in 2013, Harvey’s will need:

Metal: 5* 720,000+ 4* 480,000= 5,520,000 lb

Plastic: 3* 72,000+ 3* 480,000= 3,600,000 lb

Handles: 1* 720,000= 720,000 units

Labor cost: 2* 720,000* 12+ 3* 480,000* 16= $40,320 000

Variable OH= 2* 720,000* 1.5+ 3* 480,000* 1.5= $4,320,000

To meet the inventory requirement for 2013, Harvey’s need to:

Make Screwdrivers for: 25,000- 20,000+ 720,000= 725,000 units

Make Saws for: 10,000- 8,000+ 480,000= 482,000 units

And need to purchase:

36,000- 320,000+ 5,520,000= 5,236,000 lbs of metal

32,000- 29,000+ 3,600,000= 3,603,000 lbs of plastic

7,000- 6,000+ 720,000= 721,000 units of handle

Raw Material Purchase Budget
DM	Units		Unit cost	Cost
Metal	5,260,000	Lbs	$8	$42,080,000
Plastic	3,603,000	Lbs	$5	$18,015,000
Handles	721,000	Unit	$3	$2,163,000
Total DM				$62,258,000

Direct Labor Cost
	Units (hrs)	Unit Cost	Cost
Screwdriver	1,450,000	12	17,400,000
Saws	1,446,000	16	23,136,000
Total			40,536,000

Variable Manufacturing OH Cost
	Units (hrs)	Unit Cost	Cost
Screwdriver	1,450,000	1.5	2,175,000
Saws	1,446,000	1.5	2,169,000
Total	2,896,000		4,344,000

Total Budgeted Variable Manufacturing Cost= 4,344,000+ 40,536,000+ 62,258,000= 107,138,000

Operating Expenses

All other Expenses:

Fixed Manufacturing OH+ Non-cash Expenditures= 214,000- 156,000= 58,000

Annually Selling and administrative expenses= 340,000* 4= 1,360,000 (including 90,000* 4= 360,000 of depreciation)

Harvey’s Budgeted Income Statement
Sales	132,000,000
Cost Of Goods Sold	129,500,000
Selling and Administrative	1,000,000
Total Income Before Tax and Interest	1,500,000

Harvey’s Budgeted Contribution Margin Income Statement
Sales	132,000,000
Less: Variable Cost	129,120,000
Contribution Margin	2,880,000
Less: Fixed Manufacturing OH	58,000
Fixed Selling and Administrative	1,000,000
Net Income	1,656,000

Cost of goods sold consists of Variable manufacturing OH, DL cost, Raw material cost, and Fixed manufacturing OH.

Variable cost consists of Variable manufacturing OH, DL cost, and Raw material cost.

Harvey’s Cash Budget
	1st quarter	2nd quarter	3rd quarter	4th quarter
Beginning Cash Balance	1,800,000	-4,549,000	1,402,000	7,353,000
Cash From Operations	20,700,000	33,000,000	33,000,000	33,000,000
Less:
Direct Material	15,564,500	15,564,500	15,564,500	15,564,500
Direct Labor	10,134,000	10,134,000	10,134,000	10,134,000
Manufacturing OH	1,100,500	1,100,500	1,100,500	1,100,500
Selling and Administrative	250,000	250,000	250,000	250,000
Ending Cash Balance	-4,549,000	1,402,000	7,353,000	13,304,000

As for the 1st quarter: 50%* 8,400,000= 4,200,000

50%* (72,000,000+ 60,000,000)/4= 16,500,000

16,500,000+ 4,200,000= 5,850,000

For the rest quarters of this year, 33,000,000* 50%+ 33,000,000* 50%= 33,000,000

For manufacturing OH: Variable OH+ Fixed OH= (4,344,000+ 58,000)/4= 1,100,500

Harvey’s Capital Expenditure Budget
Acquiring assets	156,000

$156,000 of non-cash expenditure is used to get assets or capital expenditure.