You own a frozen pizza manufacturing and distribution business. Our premium product, “Buzz all natural pizza” appeals to the adult learners at DeVry University.
A marketing survey revealed that this is a time-starved segment that is always in need of energy at the end of the day or week in order to do their schoolwork. Also being poor at time management this homogenous group requires a more direct form of energy, so that these students can reach peak academic performance. In order to meet this need, your pizza has caffeinated tomato sauce.
The Assignment
Obtain the course project workbook located in the class files. You are responsible for entering data in each of the worksheets (see tabs at the bottom). Each worksheet represents a deliverable. Data entry is required in the yellow highlighted cells. After you have input into the prescribed formulas, you are to explain the calculated answers.
Each worksheet is a separate deliverable.
Instructions
There are instructions in each of the five (5) worksheets. This is a summary of the requirements for each deliverable.
(A)    The Operating Budget

1. Input your forecast product mix, as provided by the Marketing department
2. Input the sales volume, as projected by your Field Sales managers.
3. Input the efficiency rate for your direct labor, as projected by the VP of Manufacturing
4. Input the sales commission, as provided by the VP of Sales and the department’s fixed costs
5. Input the administrative fixed costs as provided by the CFO.
6. Calculate and comment on the breakeven point
7. Calculate the sales volume needed to reach a target profit and comment

(B)    The Cash Budget

1. If needed, copy the sales from the 1st Quarter operating budget
2. Using an aging of the collection period, as provided by the credit manager, forecast cash receipts by month.
3. Calculate the cash disbursements by month
4. Determine the timing of a capital expenditure
5. Determine the timing and amount of financing

(C)    Performance Evaluation – Variance Analysis

1. Given actual results and the operating budgeted rates, prepare a flexible budget for one month.
2. Explain deviations from plan.

(D)    Incremental Analysis – Deciding whether to Outsource

1. Using the operating budget for the quarter, prepare the relevant costs for in-house production
2. Given avoidable costs, calculate whether the outsourcing decision will save costs in total.

(E)    Capital Investments – discounted cash flows

1. Input the cost of the project
2. Input the positive cash flows due to production cost savings
3. Decide on the “best” year in which to conduct major maintenance
4. Using Excel functions, given a “hurdle rate” calculate the project’s Net Present Value (=NPV) and the Internal Rate of Return (=IRR)
5. Calculate the payback period and profitability index.

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