Citizen Inc.
Summary of the business
Citizen Inc. is a fully incorporated business and is headquartered in Kentucky. The company was founded in April 2016 and is set to begin operations in July this year. It is registered to produce t-shirts, including branded t-shirts. The company will use screen printing to produce long-lasting t-shirts. The company currently has four employees. These include designers and a marketer. The target market includes high school and university students. It will also use a website for online sales.
I have contributed $5,000 to start up the business. Market research indicates positive prospects in the industry hence I expect the business to do well. The business will start operations in July 2016. This paper provides the budgets for the firm including the sales budget, purchases, administrative expenses and cash budget.
Financial plan: Cash budget
A cash budget is important since it gives the amount required and the amount the business expects to raise every month. If there are any deficits, it is easier to make early arrangements for funding with the business bank.
Assumptions
Sales
The business will sell 5,000 T-shirts in the first month of operation. This quantity is expected to increase by 10% every month as the business reaches more customers. Each T-shirt will be sold for $8. 60% of the total sales will be in cash while the rest will be credit sales to registered members. Debtors will pay 80% of their dues one month after sale and fully settle the balance after two months. With the verification measures and conditions for credit facilities, we do not expect any bad debts.
Purchases
Each T-shirt will require one metre of material to make. The business will purchase each metre of the material at $2.50. 60% of the total purchases will be paid in cash while the remaining 40% will be on credit. We have negotiated an agreement with the suppliers that credit purchases will be paid in full one month after the purchase.
Administrative and selling expenses
The business will also incur administrative and selling expenses. The total monthly administrative and selling expenses will be $10,500 as shown in the appendix.
It is the policy of the business to maintain a cash balance of at least $10,000 any time to cater for any unexpected expenditures. As shown by the budget, the ending cash balance in each of the three months will be more than $10,000 hence they will be no need for an overdraft. The cash budget will help in controlling expenditure in the business.
The budgets prepared will enhance cost control. Cost control is important to minimize waste. It can determine variances every quarter to assess its performance and take corrective actions.
Environment management plan
The company will use environmentally friendly methods in production and waste management. It aims to use renewable sources of energy to minimize environmental pollution. All suppliers will be required to comply with the company’s environmental standards as a precondition for doing business.
Bibliography
Albrecht, W. Steve, James Stice, Earl Stice, and Monte Swain. Accounting Concepts &
Applications. Cincinnati, Ohio: South-Western, 2011.
Berger, Alexander. Standard Costing, Variance Analysis And Decision-Making. München:
GRIN Verl. 2011.
Braun, Karen Wilken and Wendy M Tietz. Managerial Accounting. Boston: Pearson, 2013.
Drury, Colin. Cost And Management Accounting. Andover, Hampshire, UK: South-Western
Cengage Learning, 2011.
Horngren, Charles T and Charles T Horngren. Management Accounting. Toronto: Pearson
Canada, 2012.
Kindly check the word count well. I have written 572 words excluding the title page, footnotes and bibliography. The client has strictly instructed me to write a maximum of two pages. One of the revision instructions is that the paper must not more than two pages.
Thanks
APPENDICES
