Sunny Days Swimwear And Beach Accessories Budgets For 2019

Products

The management of the company is planning to make improvement in the overall production and sales of the business. As per the expectation of the management of the company, the overall sales of the company are anticipated to be around 12500 units considering all products which are offered by the business. The sales of the business for the year 2019 is anticipated to be $ 2,363,800. The sale of one-piece product is anticipated to be much than sales of other stock products which is offered by the business and the sales is anticipated to be $ 1,250,000. The anticipated sales for the month of January is anticipated to be maximum in comparison to sales of other months. The anticipated cash collection for the year 2019 is anticipated to be $ 2,399.450 and the cash collection for the month of January is shown to be maximum as per the anticipation of the management of the company (Petrick and Simpson 2013). The production units which is shown in the annual report of the business which is anticipated to be 7050 units for year in case of one piece. The total units that will be expected by the management for all the products during the year 15870 units is to be produced (Elhamma, and Zhang, 2013). The machine hours which are anticipated to be required for producing the budgeted production units which is 14246 hours. The fixed costs of the business which is anticipated by the business will comprise of utilities, insurance, factory supervisor’s salary, rent, maintenance and depreciation and the fixed costs of the business is expected to be $ 138,800. The operating expenses of the business for the year is anticipated $ 85,341. The operating expenses of the business affect the sales of the business directly and therefore also affect the profit generation ability of the business (Altay, Prasad and Tata 2013). The management considering the expenses of the business which is anticipated and also the budgeted sales anticipated by the business during the year, the profits of the business for the year is expected to be $ 817,502. The management therefore anticipates significant improvements in the operating structure of the business and also increase in the revenue generating capacity of the business. The management also expects a rise in the profits of the business along with increase in the expenses of the business during the year 2019.

Figure 1: (Graph Showing Contribution Margin)

Source: (Created by the Author)

 The contribution margin of the business is demonstrated in the graph which is shown above. The four main products which are offered by the business during the year are one piece, board shorts, towels and beach umbrellas. The contribution margin of beach umbrella is shown to be in negative which means that the management anticipated that the business will not be able to generate profits from the sale of the product. The contribution margin is shown to be 34.5% for the product one piece which the business offers. The contribution margin which is computed for the business are estimated considering the selling price, direct costs and other variable costs of the business. The contribution margin is shown to be maximum for one-piece products which also has the maximum selling price as a product. The contribution margin for beach umbrella is shown to be in negative which shows that the management might be facing loses in case the management continues to offer the product to the general public. The management of the company needs to improve the contribution margin for Beach Umbrellas and thereby also improve the sales of the same in the business (Noreen, Brewer and Garrison 2014). Contribution margin in a business shows the level of efficiency of the business in the operations of the business and also the ability of the business to generate profits after meeting the variable expenses of the business (Huynh, Gong and Nguyen 2013). In addition to this, contribution margin in a business is used for estimating the breakeven point of the business which is very important for the purpose of taking appropriate decisions regarding the operational activities of the business. The recommendation which can be suggested to the management of the company for making improvements in the contribution margin of the business are suggested below:

1. The management of the company needs to improve the variable costs of breach umbrellas in order to increase the contribution margin of the product and thereby allow the business to increase their profitability (Eappen et al.2013). The management needs to follow cost reduction strategies for Beach umbrellas as the contribution for the same is shown to be in negative.
2. The business needs to improve the conversion rate for the products which are offered by the business in order to improve the contribution margin of the business.

Budget Preparation

The cash position of the business is shown in the cash budget which is shown in the assessment and shows different activities which are undertaken by the business relating to cash inflows and cash outflow of the business during the year (Enow and Kamala 2016). The cash budget is prepared for a similar purpose in order to demonstrate the different activities which are undertaken by the business for the purpose of generating cash revenues of the business (Kaspina, Khapugina and Zakirov 2014). As per the cash budget, the cash receipt which the business received from sales is anticipated to be $ 2,399,450 for the year. The maximum cash receipt which the business anticipates to receive is from the month of $ 352,810 which shows that this is the peak month.

Figure 2: (Graph Showing cash Receipts of the Business)

Source: (Created by the Author)

The cash receipts of the business in terms of cash which is collected from sales revenue of the business are shown in the above graph. The graph above is shown for a period of 12 months for the year 2019 and the same is shown to be on the basis of estimated cash receipt which is forecasted by the management of the company. The cash receipts for the month of January is shown to be maximum in case of the business. The cash receipts then fall and the month of June and July is estimated to provide lowest cash receipts from sales which is undertaken by the business. The cash receipts again from the month of September will increase as per the anticipation of the management.

The recommendation which can be suggested to the business for making improvements in the cash position of the business are listed below in details:

• The cash flow of the business can be improved by formulating a strategy for improving the cash sales of the business and also reducing the expenses which are undertaken by the business during the period (Atieh 2014).
• The business sales a majority of the products of the business on credit basis and therefore the management need to improve the credit policy of the business in order to ensure that the debtor collection policy is appropriate and funds are not blocked (Ward 2016). This will significantly improve the cash position of the business significantly.
• The management also needs to reduce the expenses of the business which will in turn reduce the cash outflow of the business.

In the new era of globalization and technological advancements, the industry of manufacturing is in its growing phase. The technological advancements and effects of globalization has brought about new process and techniques which can be applied by businesses in order to improve the operational structure of the business. As per the estimates which are received from Australian Bureau of Statistics, around 2,238,299 actively trading businesses are operating in the market while some others are already being set up for starting a new business in Australia. The increase in the new businesses which are coming into the market for manufacturing industries are about 3.1% which suggest that there is tremendous opportunities in the market to develop and achieve growth (Abs.gov.au. 2018). The bureau further provides evidence as to the rapid development which is achieved by manufacturing businesses between the period of 2016 to 2017. Therefore, the market conditions which is currently in place in the Australian economy is favorable for establishing of new businesses as well for achieving growth for the already established businesses.

As per the analysis of the market conditions, the management of the company should target growth and increase in the scale of operations of the business. The estimates of the management which is provided in the different budgets which are prepared by the management, suggest that the business can anticipate growth in the operations of the business (Hamza, Mutala and Antwi 2015). The management has also developed a plan to increase the sales of the business and thereby also expand the business entering new areas of operations. The budgets also show that the management wants to improve the cash position of the business in order to have better liquidity position which can ensure that the management can undertake any project without being concerned about the funds. The management also has the options to further better the products and services which are offered in order to derive a competitive edge in the market to face the new competitors which are coming up in the industry. The management also the prospect to introduce new products in the market in order to attract more customers to the business and thereby improve the revenue generating capacity of the business. Therefore, there are wide variety of options for the business in future which the management needs to select appropriately.

The recommendation which can be suggested to the management of the company for improving the contribution margin and also the cash position of the business. The management needs to follow the following recommendations are listed below:

1. The towel products which is offered by the business can also be improved by in terms of sales of the business. The management needs to attract new customers and appropriately promote the product which is offered by the business.
2. The management of the company needs to improve the costs of the business in order to ensure that the profits of the business are appropriate.
3. The management can also introduce new products in the market in order to ensure that the sales and profitability of the business has increased.

References

Abs.gov.au. 2018. 8165.0 – Counts of Australian Businesses, including Entries and Exits, Jun 2013 to Jun 2017. [online] Available at: https://www.abs.gov.au/ausstats/[email protected]/mf/8165.0 [Accessed 13 Sep. 2018].

Altay, N., Prasad, S. and Tata, J., 2013. A dynamic model for costing disaster mitigation policies. Disasters, 37(3), pp.357-373.

Atieh, S.H., 2014. Liquidity Analysis Using Cash Flow Ratios as Compared to Traditional Ratios in the Pharmaceutical Sector in Jordan. International journal of Financial research, 5(3), p.146.

Eappen, S., Lane, B.H., Rosenberg, B., Lipsitz, S.A., Sadoff, D., Matheson, D., Berry, W.R., Lester, M. and Gawande, A.A., 2013. Relationship between occurrence of surgical complications and hospital finances. Jama, 309(15), pp.1599-1606.

Elhamma, A. and Zhang, Y.I., 2013. The relationship between activity based costing, business strategy and performance in Moroccan enterprises. Accounting and Management Information Systems, 12(1), p.22.

Enow, S.T. and Kamala, P., 2016. Cash management practices of small, medium and micro enterprises in the Cape Metropolis, South Africa. Investment Management and Financial Innovations, 13(1), pp.230-236.

Hamza, K., Mutala, Z. and Antwi, S.K., 2015. Cash Management Practices And Financial Performance Of Small And Medium Enterprises (SMEs) In The Northern Region Of Ghana. International Journal of Economics, Commerce and Management, 3(7), pp.456-480.

Huynh, T., Gong, G. and Nguyen, A., 2013. Integrating activity-based costing with economic value added. Journal of investment and management, 2(3), pp.34-40.

Kaspina, R.G., Khapugina, L.S. and Zakirov, E.A., 2014. Employment of activity-based costing in the process of company business model generation. Life science journal, 11(8), pp.356-359.

Noreen, E.W., Brewer, P.C. and Garrison, R.H., 2014. Managerial accounting for managers. New York: McGraw-Hill/Irwin.

Petrick, I.J. and Simpson, T.W., 2013. 3D printing disrupts manufacturing: how economies of one create new rules of competition. Research-Technology Management, 56(6), pp.12-16.

Ward, J., 2016. Keeping the family business healthy: How to plan for continuing growth, profitability, and family leadership. Springer.

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