Zenith Case
In the Zenith Computer Terminals (A) case, they are trying to figure out how to increase a net profit of $450,000 to $1 million within the next year. Rob Zwettler has recently been promoted to the assistant manager of President of Zenith Computer Terminals. His job is to work on different levels of the organizations.
Rob met up with each department (sales, production, marketing and administration) in the organization to learn more about what was happening in the departments. With what he has learned about each department, Zwettler has to make recommendations to the president of Zenith Computer Terminals Juan Mendez on how the organization can achieve the net profit of $1 million.
1. Develop a new budget based on how the ideal profit and loss statement should look if it reflects the president's bottom-line objective for ZCT. Justify your expenses for each of the five budgeted expense areas.
SALES $12,000,000 Less Expenses: Sales $1,800,000 Production 6,850,000 Marketing 1,500,000 Administration 450,000 Service + 400,000 - 11,000,000 $ 1,000,000
Justifications:
• Sales- $1,000,000 in extra sales should be achieved by normal 10% growth. Another $1,000,000 can be gained by adding four sales reps at a cost of $300,000. Therefore, add $300,000 to last year's expense to get new budget goal of $1,800,000.
• Administration- Eliminating three clerical jobs will reduce the clerical overhead by one-fourth, or $50,000, bringing next year's goal down to $450,000.
• Production- Last year's expense ($6,000,000) is increased by cost of new production line $400,000; $125,000; $325,000; a total of $850,000 making the new budget goal $6,850,000.
• Service- A target ratio of 3-1 (sales-service), with a projected sales force of 24 means three new service reps at a total cost of $120,000. Add $30,000 for tools and budget goal is $400,000.
2. What would be the net profit if sales:
A.
Rob met up with each department (sales, production, marketing and administration) in the organization to learn more about what was happening in the departments. With what he has learned about each department, Zwettler has to make recommendations to the president of Zenith Computer Terminals Juan Mendez on how the organization can achieve the net profit of $1 million.
1. Develop a new budget based on how the ideal profit and loss statement should look if it reflects the president's bottom-line objective for ZCT. Justify your expenses for each of the five budgeted expense areas.
SALES $12,000,000 Less Expenses: Sales $1,800,000 Production 6,850,000 Marketing 1,500,000 Administration 450,000 Service + 400,000 - 11,000,000 $ 1,000,000
Justifications:
• Sales- $1,000,000 in extra sales should be achieved by normal 10% growth. Another $1,000,000 can be gained by adding four sales reps at a cost of $300,000. Therefore, add $300,000 to last year's expense to get new budget goal of $1,800,000.
• Administration- Eliminating three clerical jobs will reduce the clerical overhead by one-fourth, or $50,000, bringing next year's goal down to $450,000.
• Production- Last year's expense ($6,000,000) is increased by cost of new production line $400,000; $125,000; $325,000; a total of $850,000 making the new budget goal $6,850,000.
• Service- A target ratio of 3-1 (sales-service), with a projected sales force of 24 means three new service reps at a total cost of $120,000. Add $30,000 for tools and budget goal is $400,000.
2. What would be the net profit if sales:
A.