Part B Top-Down Operating Budget (15 marks)

Prepare the operating forecasts for 2020 and 2021 using the 2019 percent of sales method. (Fill in the blanks)

Questions regarding top-down budget

1. Prepare the forecasts for 2020 and 2021. Note: the 2020 actuals are not complete yet and the CFO needs an estimate to show the CEO.

2. The company uses a job cost system and has specialized labour for its jobs. The Human Resources department has done a great job recruiting talent for each job but there is a lot of competition for this labour. The forecast above is the best guess of what it will cost to attract and retain talent. What type of cost are labour costs in the forecast. If this cost reduces the contribution margin, what happens to break-even sales?

3. What are two benefits of preparing the forecasts or budgets?

4. What is included in a master budget and who may use it?

5. What are two examples of why cash levels can be different than net income for a year?

Part B - Top-Down Operating Budget (15 marks) Prepare the operating forecasts for 2020 and 2021 using the 2019 percent of sales method. (Fill in the blanks) Industry Market share Adual 2019 1.000.000 2014 FOT 2020 1500 000 2012 Porced 300.000 RCT2021 1,750,000 20 Force 350.000 Sofies Material Labour Factory Overhead COGS Gross Profit Selling Corporate Overhead Operating Politol Troms of OP Net Income 25.00% 35.00% 20.00 80.00% 20.00% 5.00% 1000 5.00 25.00 3.75% 200.000 50.000 70.000 40.000 160.000 40.000 10,000 20.000 10.000 2500 7500 Accounts Receivable Inventory Foods Total 5.00% 20.00% 10.00% 100.00% 10,000 40.000 20.000 200.000 270.000 Accounts Payable Debit Common Rock Opening Net Income Tot 10.00% Pugto Balance Fixed 20.000 120.000 120.000 2500 120.000 10.000 120000 21.250 7500 270.000 Questions regarding top-down budget 1. Prepare the forecasts for 2020 and 2021. Note: the 2020 actuals are not complete yet and the CFO needs an estimate to show the CEO. 2. The company uses a job cost system and has specialized labour for its jobs. The Human Resources department has done a great job recruiting talent for each job but there is a lot of competition for this labour. The forecast above is the best guess of what it will cost to attract and retain talent. What type of cost are labour costs in the forecast. If this cost reduces the contribution margin, what happens to break-even sales? 3. What are two benefits of preparing the forecasts or budgets? 4. What is included in a master budget and who may use it? 5. What are two examples of why cash levels can be different than net income for a year