Obien, Francine Denise Eleanor G.

Abm 12 Y1-7
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

Number of Units= Expected sales + Target level of ending inventory

Number of Units= 5,750,000 + 400,000 Units
= 6,150,000- Inventories at the beginning of the year
=6, 150,000- 250,000 Units

Number of 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 1 Quarter 2 Quarter 3 Quarter 4 Year

Expected Sales 8,000 6,000 8,500 12,500 35,000

in Units

Target Level of 1,500 3,000 5,000 3,000 3,000

Inventories

Total: 9,500 9,000 13,500 15,500 38,000

Less of 2,500 1,500 3,000 5,000 2,500

Beginning
Inventories

Required 7,000 7,500 10,500 10,500 35,500

production
 Obien, Francine Denise Eleanor G.

Abm 12 Y1-7
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
Net profit margin in 2019 = (Net income in 2019/ Net sales in 2019) x100
Net profit margin in 2019=(10,000,000/200,000,000)x 100%
Net profit margin in 2019 = (0.05)(100%)
Net profit margin in percent= 0.05 or 5%
Projected net income in 2020= 0.05 x Sales in 2020
Projected net income in 2020= 0.05 x 210,000,000
Projected net income in 2020= 10,500,000
b. Current Assets
Current Assets in 2019= (Current Assets in 2019/ Net sales in 2019) x100%
Current Assets in 2019=(70,000,000/200,000,000)x100%
Current Assets in 2019=(0.35) or 35%
Projected Current Assets in 2020= 0.35 x Sales in 2020
Projected Current Assets in 2020= 0.35 x 210,000,000
Projected Current Assets in 2020= 73,500,000

c. Current Liabilities
Current Liabilities in 2019= (Current Liabilities in 2019/ Net sales in 2019) x100%
Current Assets in 2019=(50,000,000/200,000,000)x100%
Current Assets in 2019=(0.25) or 25%
Projected Current Assets in 2020= 0.25 x Sales in 2020
Projected Current Assets in 2020= 0.25 x 210,000,000
Projected Current Assets in 2020= 52,500,000

d. Cash Dividends
Cash Dividends in 2020= (Common stocks in 2019 x Cash dividends per share in 2020)
Cash Dividends in 2020= (60,000,000) (0.05)
Cash Dividends in 2020= 3,000,000

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