On The Beach: 2019 Budget Report

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On The Beach
2019 Budget Report
Date of Board Meeting
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On The Beach: 2019 Budget
Board Report
Page 2

Budgeted Financial Performance
It is expected that the financial performance of the company in the year 2019 would
be profitable. Budgeting tool has been used by the organization for the purpose of
evaluating the expected financial performance of the company in the year 2019. These
budgets are prepared on the basis of data collected by conducting a different type of
market research and company resource analysis (Wahlen, J., Baginski and Bradshaw,
2014). On the basis of budgets prepared at the starting of the financial year 2019, it is
expected that business operations of the company will generate an overall net profit of
$26412. In addition to that net profit margin of the company would be 1.11 % and
gross margin would be 4.14% (Hatten, 2015).
Overall expenses
Overall expenses of the company are very high which has resulted in a net profit of
1.11%. This portability margin is very low and it is essential that the overall indirect
and direct cost of the company should be reduced in order to increase the overall
profitability of the company. A substantial amount of expenses are incurred by the
company on operating expenses such as utilities, insurance, administration staff
wages, and office expenses. Insurance, administration staff wages and rent are very
essential expenses for the company (Barr and McClellan, 2018). Therefore one option
available with the organization is to reduce the utilities and general office expenses.
General office expenses are 25% of total administration cost which can be considered
as very high. The cost-reducing strategy should be prepared by the company and it
should be applied to expenses that are not very essential for increasing operational
productivity. These cost reducing strategies should not have any impact on the overall
operational capacity of the company as it can have long term negative impact on the
business operations (Schaper et.al, 2014).
Product-wise operating profitability
Statement showing product-wise operational profitability
Particular One Piece Board Shorts Towels Bags
Sales 1250000 913600 78000 117000
(-) Direct
material
424700 577283 70560 980050
(-) Labor
expense
347200 353955 25088 62160
(-) Variable
overhead 37,200.00 37,923.75 2,688.00 6,660.00
(-Fixed
overhead ) 48,902.40 66,471.77 8,833.98 14,591.85
On The Beach: 2019 Budget
Board Report
Page 3