PART 6: BUDGETING & PRODUCTION PLANNING Another year has gone by. It is now the start of January 2023. Over the course of the last year your client has expanded further, adding to its capacity to manufacture miscellaneous items. Those investment decisions have been made using th

PART 6: BUDGETING & PRODUCTION PLANNING
Another year has gone by. It is now the start of January 2023. Over the course of the last year your client has expanded further, adding to its capacity to manufacture miscellaneous items. Those investment decisions have been made using the Weighted Average Cost of Capital and the project evaluation methodology you so helpfully provided to the client in the previous parts of the assignment.
The firm – and the miscellaneous items industry generally – have enjoyed strong growth over the last few years. As a result, many new firms have entered the market, and competition is tough. Your client believes that the days of easy profits in a rapidly-expanding industry are over, and the firm is going to have to plan carefully in order to ensure its success in the long run. Your client has again asked for your help in this planning. Two of the areas in which your client wants your help are budgeting and production planning.
BUDGETING
The firm has found from past experience that demand for miscellaneous items is highly variable throughout the year, making budgeting a difficult process. In particular, the firm has found in previous years that sales sometimes increase sharply in April each year and then decrease again in October. Your client has provided you with the following sales figures for the last three months (October to December 2022) as well as sales forecasts for each of the next 12 months. (Note: These sales figures are expressed as the number of thousands of UNITS sold – they are not dollar figures. For example, the firm sold 2450,000 miscellaneous items in October 2022.)