Finance Manager

You are relatively new finance manager. You are unfamiliar with the existing production and sales numbers, but you are experienced in creating basic financial analysis and forecasting investment options. Therefore, the CEO has asked you to complete a decision data worksheet for each of the possible decisions. The decisions and worksheets are outlined in the CEO Request to Finance Manager

Staffing Details:

Executive Management – One Executive (CEO) supports the organization at $150,000 per year

Administrative Staff – The company needs one administrative staff per 20 employees (including managers). Each administrative staff costs $50,000

Management – Sales and Operations managers have a maximum capacity for 15 employees. Example 35 employees requires 3 managers. Sales must have at least one manager and each product line must have at least one operations manager. Each manager costs $75,000

Employees – The labor rate for production costs include the production employees wage. Sales staff are salary plus commission. The commission is calculated in the cost of sales, but the sales staff wages are going to be included in the staffing costs.

Sales and Administrative Overhead

The sales staff and administrative staff operated from the same corporate building and share the total administrative overhead of $15,000 per month (includes building, insurance, utilities, etc). Only one sales / admin building is needed for the company regardless of chairs sold and product lines carried.

CEO Request to Finance Manager

As the CEO you have been able to consult with your Operations Manager and Marketing Manager. You have most of the numbers you need but you are struggling to put the pieces together to make a sound operational decision for your company. You decide to breakdown the following options using a worksheet so you can build a final decision tree with as few options as possible. However, you still need the help of your Finance Manager to input the final details and indirect costs. You provide the following worksheets to your Finance Manager and request assistance:

Is there a decision cost (e.g. project or building conversion) associated with this decision?

Production Capacity and Sales Demand: Use the Sales data and the Production data to complete the following table
Product Monthly Production Capacity Average Monthly Sales

(Average of forecasted sales from most accurate method)
Maximum Sales

(Average monthly sales unless limited by capacity)
Raw materials needed phase (1) to meet sales

***Are any of your products limited by production capacity or can manufacturing support the average monthly sales?

Gross Revenue and Net Contribution: Using the above production requirement determine the cost per product produced and the cost of sales:
Product Cost to Produce Each x Average Demand Cost to Sell (commission) x Average Demand Sales Price x Average Demand Net Contribution to Profit or Fixed Costs % of Total Net Contribution

Total

Salaries and Employees: Determine how many employees are needed and the total cost of salaries:
Product Production (note: cost included in production costs) Production Managers Sales Employees Sales Manager Admin

(Total only)
Executive

(Total only)

— —
— —
— —
Total
Cost Each
Total Cost

**Will any employees be hired or terminated as a result of this decision? (Change from existing conditions?)

Fixed and Indirect Costs: Determine the indirect fixed costs and the split per product line by multiplying the cost by the % contribution listed above
Cost (monthly) Supreme Standard Basic
Salaries (total)
Admin / Sales Building $15,000 (one)
Manufacturing Buildings $10,000 (each)
Total

Annual Net Revenue: Determine the Net Annual Revenue for Each product line
Product Contribution Monthly Indirect Cost Share Monthly Net Revenue Annual Net Revenue

Total

**Note: The total net revenue all lines will be included as the final node value on the decision tree

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Posted on May 28, 2016Author TutorCategories Question, Question