Profit and Loss Account
1. The estimates have been done for 4 years beginning from 2012 to 2015.
2. IN the case study, the budgeted sales for 2012 have been given. This has been used as the base to calculate the budgeted sales for the 4 years.
3. The revenue for the three products the Company is selling in the current year is compared with the sales taken in the budget. The sales of prepared apple products, Pick your own apples, Community events has risen by 30%, 40% and 20% respectively. This is the ratio which is been used in calculating the sales for the 4 years.
4. The gross margin for the new product is provided in the case study as 12% and the net income is $95000. Based on this percentage, the sales and COGS are calculated.
5. The COGS is taken as the percentage of sales and same method is being used to calculate the COGS for the following years.
6. The administrative expenses has increased by 30% in the year 2013 as this is the 1st year after the company has launched the new product and that leads to an increase in promotion and other expenses for the new product/venture.
7. It is assumed that the Company has taken a loan amounting to $950000 to finance the new project and its interest cost @ 8% is added to the cost.
Balance Sheet
1. In the case study, a forecasted balance sheet is provided, thisexample has been used in mapping the remaining 3 years.
2. Accounts receivable is calculated in terms of sales. In the budgeted balance sheet the debtors stand at 7%. This percentage has also been used to calculate the debtors for remaining years.
3. The cash flow has been assumed to be increasing by $90,000 per year.
4. By looking at the cash flow I believe it is evident that the Company will have limited surplus inventory for the new product that is why I have kept it at a low level.
5. The new addition of the apple juice machine has been added to the fixed asset inventory. I have used the assumption that the new machine will be discarded in 7 years i.e I have assumed that the entire block will be depreciated over 7 years and as a result/accordingly the net is calculated.
6. As it is assumed that the Company has taken a loan for financing the new machine for apple juice production, this has been added to long term debt.
7. The shareholder equity is increased every year thus the profit earned over the period is added to the shareholders equity.
Part -2:
Devise a benchmarking review for Anthony's Orchard. To do this, discuss recommended strategies and measures that will be useful to measure progress towards the objective in your gapanalysis?