Essay Example on Calendar year for Sun Worship Leisure Wear Include

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Overview of Expected Results The results expected for the 2018 calendar year for Sun Worship Leisure Wear include Ø Sales Income 2 242 500 Ø Cost of Goods Sold 1 509 874 Ø Operating Expenses 81 900 Ø Net Income 650 726 Should the expected results be realised Sun Worship Leisure Wear will have achieved a 29 profit margin indicating positive financial efficiency and stability Additionally it is budgeted that Sun Worship Leisure Wear will have having produced 27 470 units sold 27 340 units and at the conclusion of 2018 Sun Worship Leisure Wear will have a cash surplus of 499 252 2 Product Analysis The Bikini line has the most positive contribution margin at 36 11 both the Board Short and Towels lines are also resulting in positive Contribution margins with 19 18 and 12 61 respectively The Bag line however is currently expected to run with a negative contribution margin of 8 1 I recommend investigating if this is product line contributes to sales of other products or if costs can be improved If not it may be prudent to drop the Bag line from production Table 1 Contribution Margin by Product Bikinis Board Shorts Towels Bags Selling Price P U 100 00 75 00 55 00 45 00 Direct Materials 32 25 34 25 31 50 26 50 Direct Labour 28 00 21 00 11 20 16 80 Variable Manufacturing Overheads 3 64 5 36 5 36 5 36 Contribution Margin P U 36 11 19 18 12 61 8 1 3 Cash Position The Monthly Cash Budget has been prepared for the 2018 calendar year The budget reflects an expected cash surplus of 499 252 at the conclusion of December 2018 after satisfying all required payments This cash liquidity is desirable however Sun Worship Leisure Wear should determine a fixed cash balance level any surplus should then be used to pay down the loan which in will reduce the monthly interest payments and assist with reducing fixed costs 



Dividend payments to shareholders are possible with the cash surplus however once the loan is paid down it would behoove Sun Worship Leisure Wear to consider investing surplus cash flows to protect the company against any cash flow declines in the future Dividend payments to shareholders 4 Analysis of Market Conditions The Australian retail clothing industry generates annual revenues of 20 billion dollars and is expected to grow during the 2017 2018 financial year by 3 7 IBISWorld 2017 According to data available from Statista the worldwide in data contributing countries trend for retail clothing revenues is increasing and as seen in Graph 2 is expected to continue increasing through 2022 While increasing revenues are predicted actual revenue growth is predicted to slow as seen in Graph 3 2017 revenue growth is predicted at 18 4 falling to 7 7 in 2022 This trend would predict that although revenues will rise corresponding costs will also increase this means that although revenues look likely to increase profits margins are likely to diminish The retail clothing industry has suffered with the recent worldwide economic uncertainties with consumers less inclined to spend money on apparel leading this sector to underperform compared with other sectors of the economy One of the major trends affecting the retail apparel industry is the increase in consumers shopping for apparel on the Internet from the comfort of their home rather than shopping at a traditional brick and mortar store Emerging technology such as mobile applications are changing the way retailers do business As such companies such as Sun Worship Leisure Wear must embrace the growing markets in the current market this means embracing internet sales dollars and increasing our online footprint As evidenced in Graph 4 while the Australian Bureau of Statistics ABS Retail Sales continue to show minimal growth online sales markets are continuing to experience substantial growth this market has potential and as a retail company we need to be utilising its full potential to see continued growth in sales and revenues

With online retail sales in growth its recommended that Sun Worship Leisure Wear expand their online presence by expanding their online store and investigating the cost on online platform advertising such as on Facebook and Twitter to tap into the online markets 5 Summary of Recommendations As we look forward to 2018 based on the budget forecasts the following recommendations are submitted for the board to consider With regards to the products currently being produced the Bag line is estimated to run at a negative contribution margin of 8 1 I recommend investigating if this is product line contributes to sales of other products or if costs can be improved If not I recommend that Sun Worship Leisure Wear drop the Bag line from production With regards to the cash surplus Sun Worship Leisure Wear should determine a fixed cash balance level any surplus should then be used to pay down the loan which in will eliminate the monthly interest payments therefore reducing fixed costs A cash surplus can also be used to pay dividends to shareholders however it is recommended that the loan be paid down in full before dividends are considered With regards to the market in 2018 its recommended that Sun Worship Leisure Wear expand their online presence by expanding their online store and investigating the cost on online platform advertising to tap into the online markets


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