QUESTIONS 403
The selling expense recharged from the sales department is £15,000 per month
for the first half year, thereafter £12,000. Salaries are £25,000 per month, depreci-
ation is £5,000 per month and rates £8,000 per month. Light, heat and power are
expected to cost £3,000 per month for the first half year, falling to £2,000 thereafter.
žConstruct a budget for the year based on the above figures.
žWhat can you say about the rate of gross profit?
14.4 Griffin Metals Co. has provided the following data.
Anticipated volumes (assume production equals sales each quarter):
Quarter 1 100,000 tonnes
Quarter 2 110,000 tonnes
Quarter 3 105,000 tonnes
Quarter 4 120,000 tonnesThe selling price is expected to be £300 per tonne for the first six months and £310
per tonne thereafter. Variable costs per tonne are predicted as £120 in the first
quarter, £125 in the second and third quarters, and £130 in the fourth quarter.
Fixed costs (in £’000 per quarter) are estimated as follows:
Salaries and wages £3,000 for the first half year, increasing by
10% for the second half year
Maintenance £1,500
Rates £400
Insurance £120
Electricity £1,000
Depreciation £5,400
Other costs £2,500 in the first and fourth quarters, £1,800
in the second and third quarters
Interest £600
Capital expenditure £6,500 in the first quarter, £2,000 in the second
quarter, £1,000 in the third quarter and £9,000
in the fourth quarter
Dividend payment £10,000 in the third quarter
Debt repayments £1,000 in the first quarter, £5,000 in the second
quarter, £4,000 in the third quarter and £3,000
in the fourth quarterGriffin has asked you to produce a profit budget and a cash forecast for the year
(in four quarters) using the above data.
14.5 Mega Stores is a chain of 125 retail outlets selling clothing under the strong
Mega brand. Its sales have increased from £185 million to £586 million over the
last five years. The company’s gross profit is currently 83% of sales, giving it a
little more than 20% mark-up on the cost of goods and retail store running costs.
Corporate overhead is £19 million and the operating profit is £81 million.