Financial Analysis and Planning for the New Line of Building Materials in 2024
The following information relate to projected figures of the new line of building materials for the year 2024
Sales Information:
Sales projections for unit sales are as follows, with an estimated average selling price per unit of 130:
January: 6,500 units
February: 7,800 units
March: 7,200 units
April: 6,300 units
May: 5,500 units
Production Information:
The starting inventory of finished goods on January 1st stands at 4,500 units. To ensure constant customer demand fulfilment, the sales manager insists on maintaining closing stock levels at 1.3 times the subsequent month's expected sales.
Raw Materials Information:
Each unit produced necessitates 3 kilograms of material, with an estimated cost of 4 per kilogram. The raw materials inventory on January 1st is 13,420 kilograms. The company follows a policy of increasing closing stock levels by 12?ch month to guarantee an adequate raw material supply.
Labour Information:
Every unit produced requires 3 skilled labor hours and 2 unskilled labor hours. Skilled labor costs 16 per hour, while unskilled labor costs 6 per hour.
Production Overheads Information:
Production overheads are allocated at a rate of 3.50 per direct labor hour.
Administration Overheads Information:
Administration overheads are initially budgeted at 26,750 for January and are expected to escalate by 8% monthly.
Selling Overheads Information:
Selling overheads account for 14% of monthly sales revenue. The sales manager believes that the current average selling price per unit of 130 is at the upper limit of what customers are willing to pay at present.
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