Prepare the operating forecasts for 2020 and 2021 using the 2019 percent of sales method (Fill in the blanks) Industry Market share Actual 2019 1,000,000 20% FCT 2020 1,500,000 20% Forecast 300,000 FCT 2021 1,750,000 20% Forecast 350,000 % of sales 105,000 122,500 Sales Material Labour Factory Overhead COGS Gross Profit Selling Corporate Overhead Operating Profit (op) Taxes (% of OP) Net Income 25.00% 35.00% 20.00% 80.00% 20.00% 5.00% 10.00% 5.00% 25.00% 3.75% 200,000 50,000 70,000 40,000 160,000 40,000 10,000 20,000 10,000 2,500 7,500 Cash Accounts Receivable Inventory Fixed assets Total % sales 5.00% 20.00% 10.00% 100.00% 10,000 40,000 20,000 200,000 270,000 MINI Accounts Payable Debt Common Stock 10.00% Plug to Balance Fixed 20,000 120,000 120,000 120,000 120000 Font Plug to Balance Fixed Debt Common Stock Opening RE Net Income Total 120,000 120,000 2,500 7,500 270,000 120,000 10,000 120000 21,250 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? 3