Budgeting and Control Homework, Statistics Problem Example

The financial plan is composed of a three month profit and loss forecast, a cash flow forecast, a forecasted balance sheet, and a calculation of the breakeven points. In conjunction, these estimates project reasonable images with regards to the organization’s financial future. The procedure of formulating the financial plan provides greater insights into the operation of an organization. The financial plan is used by creditors and stakeholders in order to predict a company’s financial performance (Hoening  & Karlsson, 2004; Brinkmann et al., 2010). The projections with regards to profit are accompanied by the following assumptions:

• The buyer will not default on the payment of the account receivable to the dress manufacturing concern.
• The loans are made at zero percent annual interest.
• The loans are paid from the receipt of the accounts receivables.
• The account receivables serve as collateral for the loan.
• It can be assumed that the bank will make loans at zero percent interest.

However, since there is a facility which is being devalued at an annual rate, the lending institution may be said to have an interest in the organization’s well-being. Consequently, the loan is at zero percent interest in the report, the following assumptions are made: The accounts receivable will be received with thirty to sixty days of the receipt by the buyer. In the second assignment, there is a variable equation. A flexible budget was formulated for assignment two which demonstrates the variances in costs with regards to the production of the dress manufacturing concern at 80%, 90% and 100% capacity. This equation is detailed by the fact that at a level of production of more than 27,000 units, the cost of packaging will decrease by ten percent. In another scenario and the production overhead will decrease by 8.33% per unit if the production exceeds 28,000 units.

The variable costs are not included because it is not identified how many units are made by a worker in an hour. It is not detailed how much material is required in order to produce one dress. Consequently, the variable costs are taken as being a component of the production overhead. The variable element of $0.03 per machine hour is also included in the overhead costs. More information is required in order to include the labor rates, the overhead per labor hour, the direct materials which are applied and the variable element of $0.03 per machine hour. Consequently, the assumption which is held in this assignment is that these costs are included in the overhead costs.

References

Brinkmann, J., Grichnik, D., & Kapsa, D. (2010). Should entrepre4neurts plan or just storm the castle? A meta- analysis on contextual factors impacting the business of p  planning performance relationship in small firms. Journal of Business Venturing, 25(1): 24- 40.

Honig, B., & Karlsson, T. (2004). Institutional forces and the written business plan. Journal of Management, 30(1): 29- 48.