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Developing a Budget for a business: Framed Botanical Prints

For a business making framed botanical prints:

1..Prepare the following budgets for 1 quarter broken down monthly regarding your chosen item: estimated sales budget, estimated direct materials budget, estimated direct labors budget, estimated manufacturing overhead budget, estimated selling and administrative expenses, and an estimated income statement.
2. Classify all manufacturing costs and selling and administrative expenses as either variable or fixed.
3. Prepare a contribution margin income statement separating all variable and fixed costs into their own categories.
4. Determine the breakeven point in units and dollars. Also, determine the number of units and dollars that need to be sold to make a target profit of $5,000 a month.
5. Identify what types of trends you should be aware of in the industry and who the primary competitors are.
6. Answer the following question: If you had to improve the bottom line, what would you do and what concerns would you have going forward.
7. Choose a piece of equipment that you might consider purchasing to increase production of your item and address the following questions: What types of capital budgeting factors would you look at when deciding whether to do this? What would be the relevant costs that you would consider in this decision?

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Solution Preview

Discussion for 1, 6, 7 and 8:

1. Product: Framed Botanical Prints
Manufacturing process: Mount print on foam board. Cut frame pieces to correct length, glue corners, staple gun corners, put on backing and hangers.

6. Trends: People are choosing to decorate their homes because they are not able to upgrade to better housing due to layoff or ...

Solution Summary

Excel computations for breakeven and budgets. *Short* discussion on trends, bottom line, and potential equipment costs to get you started (not a full featured sample project).