Overview of Expected Results | Report

Surf N Sea
2020 Budget Report
Date of Board Meeting
Name of Report
Author(s)

Approved by:
Surf N Sea: 2020 Budget
Board Report
Page 2

Contents
1. Overview of Expected Results...................................................................................3
2. Product Analysis........................................................................................................3
3. Cash Position..............................................................................................................4
4. Analysis of Market Conditions..................................................................................6
5. Summary of Recommendations.................................................................................7
References......................................................................................................................8
Surf N Sea: 2020 Budget
Board Report
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1. Overview of Expected Results
From the overall analysis it can be stated that the Surf and Sea Company basically
produces the four products which are one-piece swimsuits for women, Board shorts
for men, Beach Towels, Beach Umbrellas. The different budgets are prepared on the
basis of sales budget, production budget, and direct materials and cash purchase
budget direct labour budget, manufacturing overhead budget and a lot more. The total
sales amounted to $2363800 whereas the cost of the goods sold is $1868817. The
gross margin of the company is 20.94% whereas the net profit margin will be 17.50%.
Overall the net performance is sound and smooth, since the net profit of the company
is $413583 (Noe, Hollenbeck, Gerhart and Wright, 2017). This can again be
compared on the basis of the cash flow statement where the cash on hand in January
was $155627 whereas the position of the company tends to improve as the months
pass by. Overall the position of the cash has improved and the company is having
enough cash to pay back the loans and the liabilities. The direct materials and the
direct labour are apportioned on the basis of the rates specified for fabric and elastic,
as well as time provided over the machine hours. The operating expenses are also
recorded in the income statement and it can be identified that insurance is too
expensive and the company must make sure to divide it by taking insurance in bulk
(DeNisi and Murphy, 2017). The division of the fixed and the variable costs also
helps the company in understanding its position well.
2. Product Analysis
Particulars One-piece
Board
Shorts Towels
Beach
Umbrellas
Surf N Sea: 2020 Budget
Board Report
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Sales 1250000 913600 130000 70200
Variable costs 3 2.25 1.2 6
Contribution 1249997 913597.75 129998.8 70194
Fixed costs 61788 56449 12852 7711
Contribution
Margin 5% 6% 10% 11%
Table 1: Contribution Margin by Product
From the table above it can be analyzed which product provides the higher
contribution margins and which area is more potential and favorable for Surf and Sea
company. The contribution margin ratio is the contrast between an organization's
deals and variable costs, communicated as a rate. The all out edge created by a
substance speaks to the all-out income accessible to pay for fixed costs and produce a
benefit. In simpler terms it is the ratio which tells how many the fixed costs can be
paid. The highest ratio is of Beach umbrellas as this section is able to pay back the
fixed costs in the faster manner (Ríos, Guillamón,Benito and Bastida, 2018).
Thereafter, Towels sections are playing well and at last one piece department is
having the contribution margin at 10%. This is mainly due to the less fixed costs is
required to be paid in case of towels, beach umbrellas and the case is reversed in case
of the one-puce ad board shorts. Further the variable costs were also high in case of
one-piece and board shots as they are the primary products. The net profit is the
ultimate deciding factor which section is performing better and what potential future
benefits can be availed form the particular section. Henceforth, the contribution ratio
is necessary to calculate.
3. Cash Position
Surf N Sea: 2020 Budget
Board Report
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The cash position of Surf and Sea can be analyzed in from the cash budget prepared in
the monthly basis. The cash flow statement is the statement which helps in analyzing
the overall cash inflows and the cash outflows of the company. The cash flow
statement is basically blue print of cash in detail and tells about the movement of the
cash in the potential as well as non-potential directions. The cash budget of Surf and
Sea has been posted below to give an insight in detail (Jensen, Barrett and Mude,
2017).
Jan
uar
y
Feb
rua
ry
Mar
ch
Apr
il
Ma
y
Jun
e July
Aug
ust
Sep
tem
ber
Oct
obe
r
Nov
em
ber
Dec
em
ber
TOT
AL
Opening
Balance
$
32,
250
$
1,5
5,6
27
$
2,5
5,6
96
$
3,2
9,2
89
$
4,1
6,2
43
$
4,5
7,1
81
$
4,6
4,7
03
$
4,6
0,0
13
$
4,1
2,7
18
$
4,2
2,5
76
$
4,6
8,1
13
$
4,9
4,6
48
$43
,69,
058
Cash
Receipts:
Sales
revenue
$
3,5
2,8
10
$
2,7
8,5
88
$
2,4
5,5
92
$
2,0
8,5
92
$
1,2
5,9
64
$
87,
288
$
83,
800
$
93,
320
$
1,9
6,5
36
$
2,3
4,9
08
$
2,3
1,1
00
$
2,6
0,9
52
$23
,99,
450
Total
Cash
Availabl
e
$
3,8
5,0
60
$
4,3
4,2
15
$
5,0
1,2
88
$
5,3
7,8
81
$
5,4
2,2
07
$
5,4
4,4
69
$
5,4
8,5
03
$
5,5
3,3
33
$
6,0
9,2
54
$
6,5
7,4
84
$
6,9
9,2
13
$
7,5
5,6
00
$67
,68,
508
Cash
Payment
s:
$
-
Direct
Material
s
Purchase
s
$
1,1
4,9
80
$
79,
039
$
81,
235
$
57,
048
$
38,
650
$
33,
920
$
41,
958
$
67,
378
$
88,
798
$
94,
371
$
1,0
2,5
13
$
1,1
3,9
55
$
9,1
3,8
44
Direct
Labour
$
87,
710
$
74,
186
$
64,
960
$
42,
672
$
26,
222
$
24,
388
$
26,
362
$
50,
484
$
71,
386
$
70,
140
$
76,
510
$
87,
164
$
7,0
2,1
84
Variable
Overhea
d Costs:
<
xxxx>
$
9,3
98
$
7,9
49
$
6,9
60
$
4,5
72
$
2,8
10
$
2,6
13
$
2,8
25
$
5,4
09
$
7,6
49
$
7,5
15
$
8,1
98
$
9,3
39
$16
,16,
028
Surf N Sea: 2020 Budget
Board Report
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Fixed
Overhea
d Costs:
F
actory
Supervis
or’s
Salary
$
5,0
00
$
5,0
00
$
5,0
00
$
5,0
00
$
5,0
00
$
5,0
00
$
5,0
00
$
5,0
00
$
5,0
00
$
5,0
00
$
5,0
00
$
5,0
00
$
60,
000
R
epair
and
mainten
ance
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
6,0
00
U
tilties
$
450
$
450
$
450
$
450
$
450
$
450
$
450
$
450
$
450
$
450
$
450
$
450
$
5,4
00
R
ent
$
4,6
00
$
4,6
00
$
4,6
00
$
4,6
00
$
4,6
00
$
4,6
00
$
4,6
00
$
4,6
00
$
4,6
00
$
4,6
00
$
4,6
00
$
4,6
00
$
55,
200
I
nusrance
$
183
$
183
$
183
$
183
$
183
$
183
$
183
$
183
$
183
$
183
$
183
$
183
$
2,2
00
Operatin
g Costs:
U
tilities
$
50
$
50
$
50
$
50
$
50
$
50
$
50
$
50
$
50
$
50
$
50
$
50
$
600
In
surance
$
500
$
500
$
500
$
500
$
500
$
500
$
500
$
500
$
500
$
500
$
500
$
500
$
6,0
00
A
dministr
ative
$
2,5
00
$
2,5
00
$
2,5
00
$
2,5
00
$
2,5
00
$
2,5
00
$
2,5
00
$
2,5
00
$
2,5
00
$
2,5
00
$
2,5
00
$
2,5
00
$
30,
000
G
eneral
office
expenses
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
1,5
00
$
18,
000
In
terest
$
1,1
62
$
1,1
62
$
1,1
62
$
1,1
62
$
1,1
62
$
1,1
62
$
1,1
62
$
1,1
62
$
1,1
62
$
1,1
62
$
1,1
62
$
1,1
62
$
13,
941
R
ent
$
1,4
00
$
1,4
00
$
1,4
00
$
1,4
00
$
1,4
00
$
1,4
00
$
1,4
00
$
1,4
00
$
1,4
00
$
1,4
00
$
1,4
00
$
1,4
00
$
16,
800
Total
Payment
s
$
2,2
9,4
33
$
1,7
8,5
19
$
1,7
2,0
00
$
1,2
1,6
37
$
85,
026
$
79,
766
$
88,
490
$
1,4
0,6
16
$
1,8
6,6
78
$
1,8
9,3
71
$
2,0
4,5
66
$
2,2
9,3
03
$18
,30,
169
Cash on
Hand
$
1,5
5,6
27
$
2,5
5,6
96
$
3,2
9,2
89
$
4,1
6,2
43
$
4,5
7,1
81
$
4,6
4,7
03
$
4,6
0,0
13
$
4,1
2,7
18
$
4,2
2,5
76
$
4,6
8,1
13
$
4,9
4,6
48
$
5,2
6,2
97
$4
9,3
8,3
39
Surf N Sea: 2020 Budget
Board Report
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It can be seen that the cash was negative for the company for the month of March and
April and thereafter it gradually increased. The variable cost was too high in the
starting if the years but soon the company realized that it’s not going to be fruitful
situation for the company hence, the cash position needed immediate improvement.
The fixed costs are bound to happen and it cannot be reduced whereas the variable
costs that have scope of reduction were quite nominal except in case of direct
materials and labors. The operating expenses are paid on the monthly basis and so are
the fixed costs except repair and maintenance. The variable costs were also minimal
in comparison to the direct costs (Flammer, 2015). Now the company is having
enough cash to purchase new assets and at the same time can pay back the liabilities
off. This also ensures the company is generating the cash faster from accounts
receivables. The cash in hand at the end of the month is $526297 which is enough to
be in the hand. When the payments are higher than the cash income than the situation
is in trouble whereas the company has taken initiatives to keep the expenses in control
(Arkan, 2016).
4. Analysis of Market Conditions
Graph 1: Retail Clothing Trends, Source: Australian Bureau of Statistics [link to
source]
5. Summary of Recommendations
There are certain recommendations which shall be followed by the company such as
getting rid of the obsolete assets that are not useful in generating the proper sales. The
long term loans shall be made available instead of short term liabilities to avoid the
burden of increased leverage and debt. From the overall analysis it can be concluded,
that the company is performing better and can bring more attractiveness in its
operations and businesses. The cash position of the company is sound and the overall
Surf N Sea: 2020 Budget
Board Report
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profit is also maintained by the company (Nimtrakoon, 2015). Further, the company
shall make two products as primary products and the two products as secondary to
keep a constant supervision of which area is more potential and how well it will act as
a feasible product. The customer centric policies shall be adopted by the company in
order to grasp the greater market shares and increase the existing customer base.
Surf N Sea: 2020 Budget
Board Report
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References
Arkan, T., 2016. The importance of financial ratios in predicting stock price trends: A
case study in emerging markets. Finanse, Rynki Finansowe, Ubezpieczenia, 79(1),
pp.13-26.
DeNisi, A.S. and Murphy, K.R., 2017. Performance appraisal and performance
management: 100 years of progress?. Journal of Applied Psychology, 102(3), p.421.
Flammer, C., 2015. Does corporate social responsibility lead to superior financial
performance? A regression discontinuity approach. Management Science, 61(11),
pp.2549-2568.
Jensen, N.D., Barrett, C.B. and Mude, A.G., 2017. Cash transfers and index
insurance: A comparative impact analysis from northern Kenya. Journal of
Development Economics, 129, pp.14-28.
Nimtrakoon, S., 2015. The relationship between intellectual capital, firms’ market
value and financial performance: Empirical evidence from the ASEAN. Journal of
Intellectual Capital, 16(3), pp.587-618.
Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M., 2017. Human resource
management: Gaining a competitive advantage. New York, NY: McGraw-Hill
Education.
Ríos, A.M., Guillamón, M.D., Benito, B. and Bastida, F., 2018. The influence of
transparency on budget forecast deviations in municipal governments. Journal of
Forecasting, 37(4), pp.457-474.
Surf N Sea: 2020 Budget
Board Report
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