Katrina's Kids Financial Budgeting and Performance Analysis 2007

This assignment presents a comprehensive financial analysis of Katrina's Kids for the year 2007, focusing on budgeting and financial statement preparation. The solution includes a budgeted income statement, detailing projected income, sales collections, and expenses for the first three months of the year. It also covers a statement of budgeted production, calculating the number of units to be produced based on sales forecasts and inventory levels. Furthermore, the assignment analyzes the cost of goods manufactured and sold, comparing data from 2006 and 2007 to assess financial performance. The solution also includes a budgeted income statement and a revised budgeted income statement, providing insights into the company's profitability under different scenarios, including changes in sales volume and pricing. The analysis provides a detailed look at various financial aspects, including sales, cost of goods sold, and various expenses, offering a complete overview of the company's financial position and performance.

Budget Planning

Question 1
Katrina's Kids
Budgeted Income Statement
For the year 2007
Particulars January February March
Opening Cash Balance 50,000.00 264,581.67 413,280.00
Add: Receipts (Sales Collection) 639,450.00 666,900.00 666,900.00
Less: Payments
Materials 200,000.00 293,333.33 293,333.33
Labour 73,333.33 73,333.33 73,333.33
Manufacturing Cost 10,000.00 10,000.00 10,000.00
Commission and Shipping 53,352.00 53,352.00 53,352.00
Fixed Selling and Admin Expenses 88,183.00 88,183.00 88,183.00
Machinery - - 500,000.00
Closing Cash Balance 264,581.67 413,280.00 61,978.33
December January February March
Sales (in units) 51,000 55,575 55,575 55,575
Per unit selling price 12 12 12 12
Monthly sales 612,000.00 666,900.00 666,900.00 666,900.00
50% of Current month's Sales 306,000.00 333,450.00 333,450.00 333,450.00
50% of next month's Sales 306,000.00 333,450.00 333,450.00
Collection of Sales 639,450.00 666,900.00 666,900.00

Katrina's Kids
Statement of Budgeted Production
For the Year 2007
Particulars Year
Capacity (Units) 1,100,000
Expected Sales 666,900
Add: Finished Goods as on 31st December, 2007 (Closing Stock) 264,100
Less: Finished Goods as on 31st December, 2006 (Opening Stock) 51,000
No. of Units Produced 880,000
Note: Calculation of No. of units to be produced in the year 2007
Particulars Units
Production capacity in the year 2006 750,000
Production capacity in the year 2007 1,100,000
No. of Units produced in the year 2006 600,000
Therefore, no. of units to be produced in the year 2007=
No. of produced units during the year 2006 X Capacity of production in the year 2007
Production capacity in the year 2006
= 600,000 X 1,100,000
750,000
= 880,000
Note: Calculation of No. of units to be sold in the year 2007
Particulars Units
No. of units sold in the year 2006 570,000
% increase in sales in the year 2007 17%
Therefore, no. of units expected to be sold in the year 2007 666,900

Note: Calculation of Finished Goods as on 31st December, 2007 (Closing stock)
Particulars Units
Finished Goods as on 31st December, 2006 (Opening Stock) 51,000
Add: No. of units to be produced in the year 2007 880,000
Less: No. of units expected to be sold in the year 2007 666,900
Finished Goods as on 31st December, 2007 (Closing Stock) 264,100
Question 2
Katrina's Kids
Statement of Cost of Goods Manufactured
&
Cost of Goods Sold
For the year 2007
Particulars 2006 2007
Capacity (Units) 750,000 1,100,000
Production (Units) 600,000 880,000
No. of units sold (Units) 570,000 666,900
Price per unit 12.00 12.00
Direct Materials 4.00 2,400,000.00 4.00 3,520,000.00
Direct Labour 1.00 600,000.00 1.00 880,000.00
Variable Overhead 2.00 1,200,000.00 3.95 3,476,000.00
Fixed Manufacturing Overhead 0.30 180,000.00 0.26 230,000.00
Cost of Goods Manufactured 7.30 4,380,000.00 9.21 8,106,000.00
Add: Opening Stock of Finished Goods 21,000 198,000.00 51,000 372,300.00
Less: Closing Stock of Finished Goods 51,000 372,300.00 264,100 2,432,721.14
Cost of Goods Sold 4,205,700.00 6,045,578.86
Question 3

Katrina's Kids
Budgeted Income Statement
For the year 2007
Particulars 2006 2007
No. of units expected to sale 570,000 666,900
Selling price per unit 12.00 12.00
Sales 6,840,000.00 8,002,800.00
Less: Cost of Goods Sold 4,205,700.00 6,045,578.86
Gross Profit 2,634,300.00 1,957,221.14
Less: Variable Selling and Administrative Expenses 547,200.00 640,224.00
Less: Fixed Selling and Administrative Expenses 986,000.00 1,111,000.00
Surplus 1,101,100.00 205,997.14
Question 4

Katrina's Kids

Revised Budgeted Income Statement
For the year 2007
Particulars
Capacity (Units) 1,100,000
Production (Units) 880,000
No. of units sold (Units) 684,000
Price per unit 11.00
Sales 7,524,000.00
Direct Materials 4.00 3,520,000.00
Direct Labour 1.00 880,000.00
Variable Overhead 3.95 3,476,000.00
Fixed Manufacturing Overhead 0.26 230,000.00
Cost of Goods Manufactured 9.21 8,106,000.00
Add: Opening Stock of Finished Goods 51,000 372,300.00
Less: Closing Stock of Finished Goods
234,10
0 2,156,380.23
Cost of Goods Sold 6,321,919.77
Add: Variable Selling and Administrative
Expenses 601,920.00
Add: Fixed Selling and Administrative Expenses 1,111,000.00
Cost of Sales 8,034,839.77
Surplus (Sales-Cost of Sales) (510,839.77)
Sales 7,524,000.00