Sales and Budgeting Costs
Sales Cash flow short- and long term based on cash inflows and outflows. Description of the cash flow cycle; Activity-based costing and effective cost control. Examination of resources, the market, products and overcoming barriers (Goh, 2014) Cost Information and Cost Analysis Various costs incurred for producing and distribution. Including explanation of fixed and variable costs; total manufacturing costs (variable and fixed). Production costs- determined my manufacturing costs to forecast sales and revenue including variable and fixed costs Pricing Strategy- finding the right sales price Pricing- for new products and competitive products; for providing information on costs to produce our products. Production- The product mix how we can reduce costs to match our competition Capital Budget (Gordon, J. (2014)) Capital expenditures for new equipment, analysis of project and expenditure with what needs to be done based on the investment decision criteria based on NPV, IRR and MIRR This way we can determine the value of cash flows, both inflows and outflows; return on projects and the rate of return, the measure of return and modifying the rate of return for the investment for short- and long-term period. CVP fixed and variable costs, future sales and advantages and disadvantages when discussing of the operating leverage; profit increases or decreases. For short term budgeting and the cost volume relationship. (Markgraf, 2014) TVM for the financial impact for expenses based on investment decisions, to understand the time value of money BEP the point at which we will make a profit from the investment (Atkinson, Kaplan, Matsumura, & Young, pg.64-73, 2011) Weekly tasks or assignments (Individual or Group Projects) will be due by Monday and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time. For this problem imagine you are an accountant and come into work to find several urgent emails waiting for you to respond. The first email is from Andrew, the president of a new division that has been started in the south-east to manufacture customized electrical components. After the first two months he feels that his sales cost are out of control. - Respond to Andrew with a prescription for control systems that he can put into place to forecast, monitor and control sales expenses. The second email is from Brenda the head of production. Brenda wants to purchase an offset press to print manuals instead of purchasing them from local print shops. In the past the life of a product was several years and changes were minor. Today the product life cycle is less than 6 months and manuals are developed concurrent to the productions startup. - What information will Brenda need to get the equipment approved in the capital budget? Prepare responses for the emails from Andrew and Brenda. - The total of your responses should be 3 - 4 pages, not including title or references. - All references must be cited.
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Sales and Budgeting Costs
Responding to Andrew's email
The email from Andrew states that sales costs are out of control. This response to him comprises a prescription for control systems that he can put into place to forecast, monitor and control sales expenses. A sales expense forecast is basically understood as an estimate of the company's continuing sales expenses for the year (Case, 2013). In forecasting sales expenses, Andrew can utilize the accounting records for sales expenses from the previous month as a guide and then make alterations to reflect price increases or changes to the strategy of the company.
Creating a sales expense forecast is essential in getting a correct picture of what the business will or could look like. A sales expense forecast is indispensable for the business owner and his/her sales goals; it essentially keeps costs down and keeps the business owner on track (McConnell, 2011). Andrew should identify what he will need to spend. He should make sure that the business is bringing in more money than the expenses. Andrew needs to estimate all the sales expenses, and then divide them by twelve in order to obtain the company's monthly sales expense. Incase some expenses hit a certain month harder compared to the rest, he should adjust for that particular month. It is notable that with correct sales forecasting processes, the company would attain significant benefits like: enhanced cash-flow, the ability to identify sales trend or pattern, detailed knowledge of consumers and the goods which they order, as well as the ability to plan for both production and capacity. These benefits would lead to increased revenue, increased efficiency, reduced costs, as well as increased retention of customer (Case, 2013).
Monitoring the sales expenses is particularly essential whenever the company's outgoing cash flow surpasses the company's income. Andrew can use Cash Flow Monitoring Worksheet in monitoring the spending on sales for the next few months. As he makes payments, he should complete the worksheet. Monitoring the sales expense each month would give Andrew the intelligence needed in making better decisions in the coming months. He would be able to identify opportunities for immediate savings. Being able to manage expenses would enable Andrew to cut costs. Monitoring and capturing all expenses would certainly help in reducing sales expenses.
Expense planning and tracking: this control system would greatly help in controlling the expenses. By budgeting for sales expenses and closely monitoring the sales expenses every month, one would be able to know exactly how much he needs to spend on sales. He would also precisely know how much the company requires to sell its products and how much the company has to produce every month so as to sustain a commercially economical and healthy business (Shapiro, 2012).
Decreasing expenses: This is the other control system. Controlling sales expenses largely entails decreasing expenses. This would involve reducing inventory and/or reducing the number of staff members. However, both could cost the business greatly. In decreasing sales expenses, one needs to consider both variable and fixed expenses. Fixed expenses are fixed for a particular time per...