The product should be a minimum of 43,000 bird houses.
1.)Estimate the impact a new product will have on the current financial information. Determine by what percentage revenue is expected to increase (consider the price that will be paid per unit and how many units you need to produce). Remember to meet the minimum for production and sales and to take into consideration the factors below:
Beginning finished goods inventory is zero
o Beginning work in process inventory is zero
o Ending finished goods inventory is 15% of budgeted unit sales valued at the selling price
o Ending work in process inventory is zero
o Bird house will sell for $22 per unit
o Desired ending inventory is 15% of budgeted unit sales
o Tax bracket for the company is 35%
o Current operating expenses will increase by 15% in the first year of production of the new product
o Sales and advertising costs will increase by 10% in the first year of production of the new product
o Factory wages will increase by 15% for additional labor in the first year of production of the new product
o Power and light costs will increase by 10% for extra usage in the first year of production of the new product
2.) Develop budgets to show the costs and expenses for the product in other areas of product development and production during its first year. This portion requires you to produce the following:
Sales Budget
Production Budget (how much development should cost and anticipation for production)
Direct Materials Purchases Budget
Direct Labor Cost Budget
Factory Overhead Budget (this should show labor and other costs, such as building costs)
Cost of Goods Sold Budget
Selling and Administrative Expenses Budget
Budgeted Pro-Forma Income Statement (should show potential income and potential expenses and costs)
Information:
Bird House
Components: Wood, plastic, nails/screws, and glue
Direct Materials:
Wood: 0.80 ft. per unit of product; cost is $6.00 per foot
Plastic: 0.50 lb. per unit of product; cost is $0.80 per pound
Nails/Screws: 15 nails per unit of product; cost is $0.01 nail/screw.
Glue: 30 oz. per unit of product; cost is $0.10 per oz.
Need: Wood 290ft
Need: Plastic: 340 lbs.
= 360 houses to sell at $22 per unit
Direct Labor:
Fabrication 0.20 hr. at $15 per hour
Assembly 0.30 hr. at $11 per hour
Below is the current financial information for the compnay These numbers do not reflect the impact of the new product.
Revenue: $3,453,234
Operating Expenses: $ 1,984,342
Net Income: $1,468,892
Estimated factory overhead costs for the first month (current/unadjusted):
Indirect factory wages $78,000
Power and light $7000
Depreciation of plant and equipment $19,300
Insurance and property tax $3,700
Estimated operating expenses for the first month (current/unadjusted):
Sales salaries expense $58,000
Advertising expense $25,000
Office salaries expense $36,000
Depreciation expense: office equipment $700
Telephone expense $832
Office supplies expense $300