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Production Budget and Financial Projections

The document provides information to project a company's 2020 production budget, sales budget, and financial statements based on 2019 data. It determines the company needs to produce 5,900,000 units in 2020 based on inventory targets. It then estimates quarterly production needs of 7,000, 7,500, 10,500, and 10,500 units respectively. Finally, it projects the company will have a 2020 net income of $10.5 million, current assets of $73.5 million, current liabilities of $52.5 million, and will pay $3 million in cash dividends based on maintaining 2019 profit margins and a dividend rate of $0.05 per share.

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Mariz Timario
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3K views3 pages

Production Budget and Financial Projections

The document provides information to project a company's 2020 production budget, sales budget, and financial statements based on 2019 data. It determines the company needs to produce 5,900,000 units in 2020 based on inventory targets. It then estimates quarterly production needs of 7,000, 7,500, 10,500, and 10,500 units respectively. Finally, it projects the company will have a 2020 net income of $10.5 million, current assets of $73.5 million, current liabilities of $52.5 million, and will pay $3 million in cash dividends based on maintaining 2019 profit margins and a dividend rate of $0.05 per share.

Uploaded by

Mariz Timario
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

ACTIVITY

PRODUCTION BUDGET, SALES BUDGET AND PROJECTED FINANCIAL STATEMENTS

1. Determine the number of units to be produced in 2020 given the following information:

a. Inventories at the Beginning of the Year 250,000 units


b. Projected Sales in 2019 5,750,000 units
c. Target Level of Ending Inventories 400,000 units

Projected Sales in 2019 5,750,000 units

Target Level of Ending Inventories 400,000 units

Less: Target Level of Beginning Inventories 250,000 units

Beginning Inventories Number Units 5,900,000 units

2. Given the following information, estimate the quarterly production in 2020


a. Inventories, December 31, 2019 2, 500 units
b. Projected Quarterly sales and target level of ending inventories in 2020:

Quarter Projected Sales Target Level of Ending


Inventories
Quarter 1 8,000 1,500
Quarter 2 6,000 3,000
Quarter 3 8,500 5,000
Quarter 4 12,500 3,000

Prepare a production budget schedule for 2020 showing the quarterly data.
Quarter Year
1 2 3 4
Projected sales 8,000 6,000 8,500 12,500 35,000
Target Level of Ending Inventories 1,500 3,000 5,000 3,000 3,000
Total 9,500 9,000 13,500 15,500 38,000
Less: Beginning Inventory 2,500 1,500 3,000 5,000 2,500
Required Production 7,000 7,500 10,500 10,500 35,500

3. An analyst wants to project the financial statements of a company in 2020. He has gathered the
following information for 2019:

Current Assets 70 000 000


Property, Plant and Equipment 110 000 000
Current Liabilities 50 000 000
Bank Debt 30 000 000
Common Stocks, P1 par 60 000 000
Retained Earnings 40 000 000
Sales 200 000 000
Net Income 10 000 000
Assumptions:

- Current Assets and current liabilities are expected to vary with sales
- The net profit margin in 2019 is expected to hold in 2020
- Projected sales in 2020 is P210 million
- The company plans to pay P0.05 cash dividends per share in 2020.

Compute the following for 2020:

a. Net income
b. Current Assets
c. Current Liabilities
d. Cash Dividends

(Note: net profit margin is calculated by dividing net income by net sales)

A. Net Income

= (Net income in 2019/Sales in 2019) x 100%

= (10,000,000/200,000,000) x 100% = 5%

= 5% x 210,000,000

Project Net Income in 2020 = 10,500,000


B. Current Assets

= (Current assets in 2019/Sales in 2019) x 100%

= (70,000,000/200,000,000) x 100% = 35%

= 35% x 210,000,000

Project Net Income in 2020 = 73, 500, 000

C. Current Liabilities

= (Net income in 2019/Sales in 2019) x 100%

= (50,000,000/200,000,000) x 100% = 25%

= 25% x 210,000,000

Project Net Income in 2020 = 52, 500,000

D. Cash Dividends

= Common Stocks x Cash dividends per share in 2020

= 60,000,000 x 0.05 = 3,000,000

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