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Master Budget Project

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Eli McMakin
Eli McMakin

The document contains a master budget project for Earrings Ltd. that analyzes three what-if scenarios to address seasonal fluctuations: 1) subleasing warehouse space, 2) changing ending inventory levels, and 3) making advertising a variable expense. Implementing all changes is projected to increase equity by $272,900 while keeping liabilities constant. The document also contains a master budget project for Hillyard Company that analyzes three scenarios to address weak financials and compete in the office supplies market: 1) targeting the B2B market by cutting advertising and hiring salespeople, 2) using net 30 terms to boost revenue from collection fees, and 3) reducing borrowing costs by finding cheaper loans.

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Master Budget Project Earrings Ltd.
Earrings Ltd. Analysis Sales revenues inconsistent due to seasonal fluctuations Cash borrowed to pay for these seasonal changes
What-If Scenarios 1. Sublease unused warehouse space for $4000/month 2. Change ending inventory to 60% of next quarter to even out seasonal fluctuations 3. Change advertising to be a variable expense of 20% of next month to increase ROI
Quarter 2 Impact Equity increases by $272,900 while Liabilities remain constant: $1,618,700 $1,891,600 $1,519,700 $1,792,600 $1,000,000 $1,100,000 $1,200,000 $1,300,000 $1,400,000 $1,500,000 $1,600,000 $1,700,000 $1,800,000 $1,900,000 $2,000,000 Baseline Combined Scenarios What-If Scenario: All Changes implemented Assets Equity
Master Budget Project Hillyard Company
Hillyard Company Analysis Very weak bottom line numbers Office Supplies are not a growing market so you must compete for market share
Scenario 1 Go after B2B market Cut Advertising by $20,000/month ($52,000 to $32,000 Hire 2 full-time B2B salesmen at $4000/month plus variable 5% sales commission Cut fixed costs while focusing on revenue growth
Scenario 2 Use Net 30 to entice early payments Revenue boost due to 1% collection fees on Credit Estimated 50% pay cash and 50% pay Credit
Scenario 3 Reduce borrowing costs by 50% Find bank/funding pool to give .5%/month loans Fed rates are very low, and our budget estimates show our default rate risk is very low

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Master Budget Project

  • 2. Earrings Ltd. Analysis Sales revenues inconsistent due to seasonal fluctuations Cash borrowed to pay for these seasonal changes
  • 3. What-If Scenarios 1. Sublease unused warehouse space for $4000/month 2. Change ending inventory to 60% of next quarter to even out seasonal fluctuations 3. Change advertising to be a variable expense of 20% of next month to increase ROI
  • 4. Quarter 2 Impact Equity increases by $272,900 while Liabilities remain constant: $1,618,700 $1,891,600 $1,519,700 $1,792,600 $1,000,000 $1,100,000 $1,200,000 $1,300,000 $1,400,000 $1,500,000 $1,600,000 $1,700,000 $1,800,000 $1,900,000 $2,000,000 Baseline Combined Scenarios What-If Scenario: All Changes implemented Assets Equity
  • 6. Hillyard Company Analysis Very weak bottom line numbers Office Supplies are not a growing market so you must compete for market share
  • 7. Scenario 1 Go after B2B market Cut Advertising by $20,000/month ($52,000 to $32,000 Hire 2 full-time B2B salesmen at $4000/month plus variable 5% sales commission Cut fixed costs while focusing on revenue growth
  • 8. Scenario 2 Use Net 30 to entice early payments Revenue boost due to 1% collection fees on Credit Estimated 50% pay cash and 50% pay Credit
  • 9. Scenario 3 Reduce borrowing costs by 50% Find bank/funding pool to give .5%/month loans Fed rates are very low, and our budget estimates show our default rate risk is very low