BUSN 278 Budgeting and Forecasting Entire Course

BUSN 278 Budgeting and Forecasting Entire Course
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BUSN 278 Budgeting and Forecasting Entire Course
BUSN278 Week 1 Section 1.0 Executive Summary (Draft)
BUSN 278 Week 2 Section 2.0 Sales Forecast (Draft)
BUSN278 Week 3 Section 3.0 Capital Expenditure Budget (Draft)
BUSN278 Week 4 Section 4.0 Investment Analysis (Draft)
BUSN278 Week 5 Section 5.1 Pro Forma Income Statement (Draft)
BUSN278 Week 6 Section 5.2 Pro Forma Cash Flow Statements (Draft)
BUSN278 Week 7 Final Budget Proposal
BUSN278 Week 7 Final Presentation
BUSN278 Course Project (Papa Geo’s Restaurant)
Project Overview:
This is an individual project where you will be acting as a consultant to an entrepreneur who
wants to start a new business. As the consultant, you’ll create a 5 year budget that supports the
entrepreneur’s vision and strategy, as well as the needs for equipment, labor, and other startup
costs.
You can choose from one of three types of new business startups — a landscaping company, a
restaurant, or an electronics store that sells portable computing devices. Each business has its
own Business Profile detailed in the sections below. The purpose of the Business Profile is to
guide you in understanding the scope of the business, the entrepreneur’s startup costs, and
financial assumptions.
The project requires you to create a written budget proposal, a supporting Excel Workbook
showing your calculations, and a PowerPoint presentation summarizing the key elements of the
budget proposal, which you assume will be presented to a management team.
This is an individual project. Each week you will complete a section of the project in draft form.
In Week 7, you will submit the final version of the project’s Budget Proposal, Budget

Workbook, and Budget Presentation in PowerPoint.
Deliverables Schedule / Points
Week
Deliverable
Points
1
Section 1.0 Executive Summary (Draft)
10
2
Section 2.0 Sales Forecast (Draft)
10
3
Section 3.0 Capital Expenditure Budget (Draft)
10
4
Section 4.0 Investment Analysis (Draft)
10
5
Section 5.1 Pro Forma Income Statement (Draft)
10
6
Section 5.2 Pro Forma Cash Flow Statements (Draft)
10
7
Final Budget Proposal
90
7
Final Presentation w/ PowerPoint
30
Total project points
180
Business Profile:Papa Geo’s – Restaurant
Vision
The vision of the entrepreneur is to create a single-location, sit-down Italian restaurant called
Papa Geo’s. The goal is to generate an income of $40,000 per year, starting sometime in the
second year of operation, as wells as profit that is at least 2% of sales.
Strategy
a) Market Focus/Analysis
The restaurant targets middle to lower-middle class families with children, as well as adults and
seniors, located in Orlando, Florida. The area within 15 minutes of the store has 10,000 families,
mostly from lower to middle class neighborhoods. Average family size is 4 people per
household. There is no direct competition; however, there are fast food restaurants like
McDonald’s, Taco Bell and Wendy’s in the geographical target market. The lower to middle
class population is growing at about 6% per year over the next five years in this area.
b) Product
The product is Italian food served buffet style, in an all-you-can-eat format, with a salad bar,

pizza, several different types of pasta with three or four types of sauces, soup, desserts, and a
self-serve soda bar. The restaurant is also to have a 500 square foot gaming area which has game
machines that children would be interested in using.
c) Basis of Competition
Customers come to this restaurant because of the good Italian food at a low price – you can get a
meal for $7, including drinks. Customers also eat at Papa Geo’s due to the cleanliness of the
facility, the speed of getting their seat and food, and the vending machines which keep the
children busy while adults enjoy their meal.
Startup Requirements*
Given Costs
• The cost of registering a limited liability company in Florida – filing fees listed at the bottom of
the application for located at: http://form.sunbiz.org/pdf/cr2e047.pdf
• Renovation of the facility expected to cost $15,000
• Business insurance, estimated at $1,000 per year
• Health and other benefits are 20% of the salaries of the manager and assistant manager
Costs you should estimate through research, experience or other methods
Soda fountain bar 2 pizza ovens Salad and pizza/dessert bar Approximately 100 square foot
commercial refrigerator 2 cash registers 6 video game vending machines Management office
with desk and lower-priced laptop computer Staff lunchroom equipment such as microwave,
sink, cupboards and refrigerator 20 four-seater tables with chairs Busing cart for transporting
dirty dishes from the dining area to the dishwashing area 140 sets of dishes, including cutlery
and drinking cups Commercial dishwasher Miscellaneous cooking and food handling equipment
like trays, lifters, spoons, pots etcetera The cost of an average of 7 employees on the payroll. All
operating costs, such as advertising, rent for a 3,500 square foot facility with male and female
washrooms (already installed), utilities, maintenance, and annual depreciation
*If you have questions about startup requirements, or think other startup costs necessary for the
business are missing, then make an assumption and state it in the relevant section of the report.
Given Financial Assumptions*
The owner will be granted a loan for the initial startup, repayable over 10 years at current interest
rates for small business loans. The owner will use personal funds to operate the business until it
generates enough cash flow to fund itself. Essentially, all sales are made by credit card. All credit
card sales are paid to the restaurant daily by the credit card company. 2.5% of sales is paid to the
credit card company in fees. Food suppliers give 30 days of trade credit. Inventories are expected
to be approximately 10% of the following month’s sales. The average meal costs $4.00 in
materials and labor. The average family spends $4.00 on vending machine tokens. Equipment is
depreciated on a straight-line basis over 5 years. Managers have health benefits, other workers do
not. The company will operate from 10:00 am to 9:00 pm, 7 days a week. The entrepreneur will
manage the store and draw a salary. Every shift has one person on the cash register, one keeping
the food bars stocked with food, two cooking the food, one on busing and table cleaning, a
manager, and assistant manager.
*If you believe any other assumptions are necessary, please state them in your budget proposal.
All Discussion Questions
w1 dq1 Budgeting and Planning
w1 dq2 Forecasting Techniques

w2 dq1 Linear Regression
w2 dq2 Seasonal Variations
w3 dq1 Revenue Budget
w3 dq2 Capital Expenditures Budget
w4 dq1 Capital Budgeting
w4 dq2 New Business Startups
w5 dq1 Master Budget
w5 dq2 Cash Budgeting
w6 dq1 Cost Behavior
w6 dq2 Variance Analysis
w7 dq1 Administering the Budget
w7 dq2 Presenting and Defending a Budget
BUSN 278 Week 4 Midterm
(TCO 1) The type of budget that is updated on a regular basis is known as a ________________
(TCO 2) The quantitative forecasting method that uses actual sales from recent time periods to
predict future sales assuming that the closest time period is a more accurate predictor of future
sales is:
(TCO 3) The regression statistic that measures how many standard errors the coefficient is from
zero is the ________________
(TCO 4) Capital expenditures are incurred for all of the following reasons except:
(TCO 5) Which of the following is not true when ranking proposals using zero-base budgeting?
(TCO 6) Which of the following ignores the time value of money?
(TCO 1) There are several approaches that may be used to develop the budget. Managers
typically prefer an approach known as participative budgeting. Discuss this form of budgeting
and identify its advantages and disadvantages.
(TCO 2) There are a variety of forecasting techniques that a company may use. Identify and
discuss the three main quantitative approaches used for time series forecasting models.
(TCO 2) The Federal Election Commission maintains data showing the voting age population,
the number of registered voters, and the turnout for federal elections. The following table shows
the national voter turnout as a percentage of the voting age population from 1972 to 1996 (The
Wall Street Journal Almanac; 1998):
(TCO 3) Use the table “Food and Beverage Sales for Paul’s Pizzeria” to answer the questions
below.
(TCO 6) Jackson Company is considering two capital investment proposals. Estimates regarding
each project are provided below:
(TCO 6) Top Growth Farms, a farming cooperative, is considering purchasing a tractor for
$468,000. The machine has a 10-year life and an estimated salvage value of $32,000. Top
Growth uses straight-line depreciation. Top Growth estimates that the annual cash flow will be
$78,000. The required rate of return is 9%.

Part (a) Calculate the payback period.
Part (b) Calculate the net present value.
Part (c) Calculate the accounting rate of return
BUSN 278 Final Exam Answers
(TCO 1) Which of the following statements regarding research and development is incorrect?
(TCO 2) Priority budgeting that ranks activities is known as:
(TCO 3) The regression statistic that measures how many standard errors the coefficient is from
zero is the ________________
(TCO 4) It is important that budgets be accepted by:
(TCO 5) The qualitative forecasting method that individually questions a panel of experts is
________________
(TCO 6) Which of the following is a disadvantage of the payback technique?
(TCO 1) There are several approaches that may be used to develop the budget. Managers
typically prefer an approach known as participative budgeting. Discuss this form of budgeting
and identify its advantages and disadvantages.
(TCO 2) There are a variety of forecasting techniques that a company may use. Identify and
discuss the three main quantitative approaches used for time series forecasting models.

(TCO 2) Use the table “Manufacturing Capacity Utilization” to answer the questions below.
Manufacturing Capacity Utilization
In Percentages
Day Utilization Day Utilization
1 82.5 9 78.8
2 81.3 10 78.7
3 81.3 11 78.4
4 79.0 12 80.0
5 76.6 13 80.7
6 78.0 14 80.7
7 78.4 15 80.8
8 78.0
Part (a) What is the project manufacturing capacity utilization for Day 16 using a three day
moving average?
Part (b) What is the project manufacturing capacity utilization for Day 16 using a six day moving
average?
Part (c) Use the mean absolute deviation (MAD) and mean square error
(TCO 3) Use the table “Food and Beverage Sales for Luigi’s Italian Restaurant” to answer the
questions below.
Food and Beverage Sales for Luigi’s Italian Restaurant
($000s)
Month First Year Second Year
January 218 237
February 212 215
March 209 223
April 251 174
May 256 174
June 216 135
July 131 142
August 137 145
September 99 110
October 117 117
November 137 151
December 213 208
Part (a) Calculate the regression line and forecast sales for February of Year 3.
Part (b) Calculate the seasonal forecast of sales for February of Year 3.
Part (c) Which forecast do you think is most accurate and why?

(TCO 6) Davis Company is considering two capital investment proposals. Estimates regarding
each project are provided below:
Project A Project B
Initial Investment $800,000 $650,000
Annual Net Income $50,000 45,000
Annual Cash Inflow $220,000 $200,000
Salvage Value $0 $0
Estimated Useful Life 5 years 4 years
The company requires a 10% rate of return on all new investments.
Part (a) Calculate the payback period for each project.
Part (b) Calculate the net present value for each project.
Part (c) Which project should Jackson Company accept and why?
(TCO 6) Top Growth Farms, a farming cooperative, is considering purchasing a tractor for
$468,000. The machine has a 10-year life and an estimated salvage value of $32,000. Top
Growth uses straight-line depreciation. Top Growth estimates that the annual cash flow will be
$78,000. The required rate of return is 9%.
Part (a) Calculate the payback period.
Part (b) Calculate the net present value.
Part (c) Calculate the accounting rate of return.