Supply Chain Task 1

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B1: BUDGETS
The Marketplace simulation helped me realize how complicated and difficult decision making can be when trying to build a company. Among the most important simulation results were utilizing the budgets and pro forma statements. Budgets are beneficial as a financial plan by listing all planned expenses and income. The purpose is to be able to forecast revenues and expenses and create a business model that operates effectively to make sure overhead can be paid. -------------------------------------------------

Top of Form Income Statement|
 | Quarter 1| Quarter 2| Quarter 3| Quarter 4|
Gross Profit|
  Revenues| 0| 2,073,055| 6,888,870| 8,280,065|
- Rebates| 0| 63,375| 204,750| 238,875|
- Cost of Goods Sold| 0| 1,607,135| 4,380,818| 5,254,248| = Gross Profit| 0| 402,545| 2,303,302| 2,786,942|
| | | | |
| | | | |
| | | | |
Expenses|
  Research and Development| 120,000| 0| 120,000| 0|
+ Advertising| 0| 160,352| 198,598| 311,897|
+ Sales Force Expense| 0| 166,980| 249,324| 283,910|
+ Sales Office Expense| 470,000| 270,000| 480,000| 370,000| + Marketing Research| 0| 15,000| 15,000| 15,000|
+ Shipping| 0| 35,124| 89,753| 101,533|
+ Inventory Holding Costs| 0| 0| 0| 0|
+ Excess Capacity Cost| 0| 0| 0| 0|
+ Depreciation| 0| 45,833| 45,833| 45,833|
= Total Expenses| 590,000| 693,289| 1,198,508| 1,128,173| | | | | |
| | | | |
| | | | |
  Operating Profit| -590,000| -290,744| 1,104,794| 1,658,769| | | | | |
| | | | |
| | | | |
Miscellaneous Income and Expenses|
+ Other Income| 0| 0| 0| 0|
- Other Expenses| 0| 0| 0| 0|
= Earnings Before Interest and Taxes| -590,000| -290,744| 1,104,794| 1,658,769| | | | | |
| | | | |
| | | | |
+ Interest Income| 3,600| 450| 2,250| 3,000|
- Interest Charges| 0| 0| 0| 0|
= Income Before Taxes| -586,400| -290,294| 1,107,044| 1,661,769| | | | | |
| | | | |
| | | | |
- Loss Carry Forward| 0| 0| 876,695| 0|
= Taxable Income| 0| 0| 230,349| 1,661,769|
| | | | |
| | | | |
| | | | |
- Income Taxes| 0| 0| 69,105| 498,530|
= Net Income| -586,400| -290,295| 1,037,938| 1,163,238| | | | | |
| | | | |
| | | | |
Earnings per Share| -29| -10| 26| 29|
Bottom of Form------------------------------------------------- Top of FormBottom of Form|
I used the income statement as part of my budget analysis because it has a more detailed breakdown of expenses. When completing the numbers or Quarter 1 it was a bit a struggle because a large amount of money is being spent on R&D at $120,000, sales office space at $470,000, and fixed plant capacity at $1,100,000. With net operating cash at -$586, 400, I could feel the anxiety of starting a new business even though this was just a simulation. It’s always tough to see large expenses without one computer being sold. In Quarter 2 it was relieving to see that total revenues came to $2,073,055. Even though advertising cost $160,352; sales force $166,980; and sales office expense at $270,000, I was more confident about moving forward conservatively to increase sales for Quarter 3. If I were to do the simulation again I would increase my production capacity so I could manufacture more units to get ready for Quarter 4; however, I didn’t do it and wanted to see another quarter of results to make sure there was an upward trend. In increased my sales force, my marketing, and opened a new sales office. In Quarter 3 revenues jumped from $2,073, 055 to $6,888,870 which I was pleased to see. However, my production costs more than doubled from $1,607,135 to $4,308,818. I increased my budgets for advertising, sales force, and sales office expenses and as a result my net operating cash went from -$244,461 to $1,083,772 which put me...
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