What is involved in cost forecasting and cost analysis?

In preparing a budget, we need to forecast two types of costs: fixed and variable

One of the most important ways to classify costs is by how they behave in accordance with changes in increased sales, extended hours of operation or another measure of activity. Thus, most costs can be classified as “variable”, or ”fixed”  costs.

Variable costs vary in direct proportion to changes in activity.

Utility costs vary depending upon the hours during which the business premises remain open.

Other variable costs are materials used by a factory or gasoline expenses based on the mileage driven.

Fixed costs remain relatively consistent regardless of changes in activity. Examples here would include rent, insurance and property taxes.

Indirect Cost : are costs that are not directly accountable to a particular function or product. (Advertising , Overhead , Electricity,  insurance , labor, real estate taxes are indirect costs)

Direct Cost : cost that can be directly traced to producing specific goods or services.(labor and materials that can be identified physically in the product produced)

What are my screen printing job set-up costs?

Film positives :  8 1/2 x 11 Film positives are 55 cents each.

Screen :  13 cents per screen/color

Ink :       15  cents per job/color

(1 gallon = 3785 Gram, Medium size logo takes about 20 grams .

 Gallon will produce about 190 one color Logo)

T-Shirt :    $1.90 each.

Sweatshirt :  $11.98 each

Direct Fixed costs ( One Logo , Two-  color Job)

Film positives      2*0.55=$1.10

Screen                  2*0.13=$0.26

Total                                               $1.36

Direct Variable costs

Ink                         $0.15*2=$0.30

T-Shirt                   $1.90

Sweatshirt             $11.98

Estimate your occupation expenses, including rent,  maintenance, utilities, insurance, etc

1. Printing Machine Operator
2. Sales Representative (Owner)

à How much of each will you buy? From whom?

àAre you getting the best deal?

àCan you return unsold merchandise?

àHave you a stock control plan to avoid overstocks, understocks and out of stocks?

àHave you established a line of credit with each supplier?

àHow must you pay? C.O.D. “collecting the charges upon delivery”? 30 days? 60 days?

For The Logo Company

Local Suppliers

Just in Time Inventory

C.O.D

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Single-Segment Strategy

A strategy that recognizes the existence of several distinct segments but focuses on only the most profitable segment.

Company Goals and Objectives

First year Goal is to produce T-Shirts and Sweatshirts.

Company strengths and core competencies

Survey - Consumer preferences : Students would like to have their own customized Apparel

Sales forecasting is the process of organizing and analyzing information in a way that makes it possible to estimate what your sales will be.

à Use past data if you have it!

à  Marketing Research

What the Bookstore has on the shelves?

Collection patterns

30 days