Group #3
Katy EH Manufacturing Company
Peter Johnson and Lily Brown, owners, of Katy EH Manufacturing Company are in the process of preparing their preliminary budget for the upcoming year. Katy EH manufactures gas grills in three different models (A, B, and C). In comparison to its competitors, Katy EH is a small player in the industry. However, the company is expecting to have a profitable year. Johnson and Brown are reviewing the financial impact of the following scenarios: Drop Grill A; Lower the price of Grill C; Shift advertising focus; and lastly, Lower the price of Grill C and change its advertising focus.
Analysis was done on all the possible scenarios to see how it would impact the overall net income and see which option would benefit …show more content…
Out of the four options, this scenario was the only one who had a greater net income than the original option. Therefore, EH Katy should eliminate the other three options and consider option B to increase their current net income.
When we received our actual results for 2016 based on our choice scenario we realized that sales numbers were higher than expected on Grill A and C. We had also noticed that our net income was lower than what we would have expected out of those sales numbers. After analyzing the data from the Actual Sales versus our Budget we found that our cost numbers were off. We had actually spent more than we had expected on our Variable Costs associated with volume and our Fixed Costs.
Per our budget, our Variable Expenses should have been $13,890,000 and our Fixed Costs should have been $10,920,000. Our Actual Variable Expenses were $14,400,000 and our Actual Fixed Costs ended up being $11,190,000. We ended up being over budget on these costs by $780,000.00. Our largest discrepancies were in Materials, Labor, and Energy. Had we pegged our sales correctly we would have overestimated our net income by
Katy EH Manufacturing Company
Peter Johnson and Lily Brown, owners, of Katy EH Manufacturing Company are in the process of preparing their preliminary budget for the upcoming year. Katy EH manufactures gas grills in three different models (A, B, and C). In comparison to its competitors, Katy EH is a small player in the industry. However, the company is expecting to have a profitable year. Johnson and Brown are reviewing the financial impact of the following scenarios: Drop Grill A; Lower the price of Grill C; Shift advertising focus; and lastly, Lower the price of Grill C and change its advertising focus.
Analysis was done on all the possible scenarios to see how it would impact the overall net income and see which option would benefit …show more content…
Out of the four options, this scenario was the only one who had a greater net income than the original option. Therefore, EH Katy should eliminate the other three options and consider option B to increase their current net income.
When we received our actual results for 2016 based on our choice scenario we realized that sales numbers were higher than expected on Grill A and C. We had also noticed that our net income was lower than what we would have expected out of those sales numbers. After analyzing the data from the Actual Sales versus our Budget we found that our cost numbers were off. We had actually spent more than we had expected on our Variable Costs associated with volume and our Fixed Costs.
Per our budget, our Variable Expenses should have been $13,890,000 and our Fixed Costs should have been $10,920,000. Our Actual Variable Expenses were $14,400,000 and our Actual Fixed Costs ended up being $11,190,000. We ended up being over budget on these costs by $780,000.00. Our largest discrepancies were in Materials, Labor, and Energy. Had we pegged our sales correctly we would have overestimated our net income by