Fozziwigs Rubber Chicken Factory Budget

Fozziwigs Rubber Chicken Factory

Introduction

Companies need to deal with various unforeseen events that arise in business transaction. In order to avoid such serious unexpected events, companies utilized different techniques which reduces such scenarios. Considering this, budgeting and forecasting are important parts of scenario planning process and along with this, a measure for risk management. With budgeting and appropriate forecasting strategy, this will result in correct or partial estimation with respect of payment and collection and also highlights areas where cost can be reduced. Beside this, budget and forecasting will also emphasize on risk in investment or business expansion. The focus of this paper would be on FozziWigs Rubber Chicken Factory budgeting forecasting and whether Fozzie should give up his trademarked™ shoes of great renowned the Rubber Chicken©™.

Discussion

As Fozzie has decided to stop his trademarked ™ shoes and started his own rather than sponsoring his trademarked shoes, then the following will be the scenario:

Fozziwigs Rubber Chicken Factory

Budget Forecast for 2013

Current Scenario

 

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Sales Units

3,600

3,850

4,100

4,350

4,950

5,550

6,150

6,750

4,000

4,000

4,000

4,000

Sale price - 80% of $6.98

$ 5.58

$ 5.58

$ 5.58

$ 5.58

$ 5.58

$ 5.58

$ 5.58

$ 5.58

$ 5.58

$ 5.58

$ 5.58

$ 5.58

Revenue

$ 20,102

$ 21,498

$ 22,894

$ 24,290

$ 27,641

$ 30,991

$ 34,342

$ 37,692

$ 22,336

$ 22,336

$ 22,336

$ 22,336

 

 

Cost of Sales

 

Food Expense for workforce - $0.65

$ 2,340

$ 2,503

$ 2,665

$ 2,828

$ 3,218

$ 3,608

$ 3,998

$ 4,388

$ 2,600

$ 2,600

$ 2,600

$ 2,600

RC component parts $ 2.15

$ 7,740

$ 8,278

$ 8,815

$ 9,353

$ 10,643

$ 11,933

$ 13,223

$ 14,513

$ 8,600

$ 8,600

$ 8,600

$ 8,600

Direct Labor - Interns $8.50 per hr

$ 1,275

$ 1,445

$ 1,445

$ 1,445

$ 1,445

$ 1,445

$ 1,445

$ 1,445

$ 1,275

$ 1,275

$ 1,275

$ 1,275

Accountant Salary

$ 750

$ 750

$ 750

$ 750

$ 750

$ 750

$ 750

$ 750

$ 750

$ 750

$ 750

$ 750

Rent Expense

$ 1,000

$ 1,000

$ 1,000

$ 1,000

$ 1,000

$ 1,000

$ 1,000

$ 1,000

$ 1,000

$ 1,000

$ 1,000

$ 1,000

Utility expense - Phone

$ 79.95

$ 79.95

$ 79.95

$ 79.95

$ 79.95

$ 79.95

$ 79.95

$ 79.95

$ 79.95

$ 79.95

$ 79.95

$ 79.95

Total cost of sales

$ 13,185

$ 14,055

$ 14,755

$ 15,455

$ 17,135

$ 18,815

$ 20,495

$ 22,175

$ 14,305

$ 14,305

$ 14,305

$ 14,305

 



 

Revenue

$ 20,102

$ 21,498

$ 22,894

$ 24,290

$ 27,641

$ 30,991

$ 34,342

$ 37,692

$ 22,336

$ 22,336

$ 22,336

$ 22,336

Cost of sales

$ 13,185

$ 14,055

$ 14,755

$ 15,455

$ 17,135

$ 18,815

$20,495

$ 22,175

$ 14,305

$ 14,305

$ 14,305

$ 14,305

Profit

$ 6,917

$ 7,443

$ 8,139

$ 8,835

$ 10,506

$ 12,176

$ 13,847

$ 15,517

$ 8,031

$ 8,031

$ 8,031

$ 8,031

Percentage increase

7.6%

9.35%

8.55%

18.91%

15.9%

13.72%

12.06%

-48.24%

0.00%

0.00%

0.00%

Sales Assumptions

Fozzie expects that their sales will increase up to August while due to off seasons sales units will reduce from September to December. Furthermore, selling price would be 80% of the competitors' i.e. $6.98 which will be constant for whole year. These assumptions are based on seasonal and previous trend (Brigham, 2011).

Cost Assumptions

As far as cost assumptions are concern, for each rubber chicken that is manufactured is forecasted to be $ 2.8 which includes, $ 0.65 in food for the workforce and component parts worth of $ 2.15.

Direct labors consist of student interns at cost of $8.50 per hour. It was assumed that in January150 hours will be needed and this will grow with 13.33% in February and constant till August, after that, September through December it will get back to same amount (Dayananda, 2012).

Expected Profit

If Fozzie stop sponsoring his trademarked shoes, the Fozzie would be ...