Financial Manager's Report for CropCo's Fungikill Extension Project (Essay Sample)

Financial Manager's Report
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Financial manager's report
CropCo new extension will aid in the manufacture of Fungikill, one of the organization's main products. The extension has a rather significant effect on the organization's finances as it requires funds to be set up. In addition to the setup funds, other financial concepts need to be considered as the extension is considered. Departments directly involved in the manufacture of fungicides, insecticides, and pesticides have proven a need for the extension. From a financial perspective, much needs to be done to help understand the implication this extension will have on the organization and how it will affect the organization.
Financial implications of the new venture
The new extension has different financial requirements which need to be looked into carefully. Financial performance is used to masure the competitveness of the organization (Batchimeg, 2017, p. 22). The cost estimates based on the project management element show that funds will be needed in three distinct categories; equipment, installation, and the extension itself. The extension design and building aspect demand an estimate of £ 2 million. This amount will be used in the architectural design of the new building, the building of the extension, and the building of a substation, hose, pump house, and chiller house. The extension is larger than the existing manufacturing plant. It will provide more space for working, helping increase the number of items produced by the plant. The electricity cost is estimated at £800,000, which includes the general wiring of the new extension and the new substation. The project is costly because it is a joint venture between the in-house project team and outside contractors. There is an additional cost of £1.2 million used for mechanical processes and a further £1 million cost on the services. The total amount needed for the successful completion of the extension project is £5 million.
Projected Extension Estimate




Capital Costs

Cash £ (000)

Civils

2000

Design and Architecture


Planning permission


Build Extension


Excavation foundations


Erect structural frame


chiller house


substation


pump house


compressor house




Electrical


General

800

cable instalation


power


lighting


network


telemetry


power system layout


New Substation


New power supply




Mechanical

1200

Fungicide production online




Services

1000



TOTAL

5000

CropCo's sales of FungiKill industrial in the year before the extension were at £14.4 million. The organization also incurred an expense cost of £3.09 million in the same year and labor costs of £660,000. Based on the costs of the annual expenses of the manufacturing company, the organization can manage to handle the extension. From a financial point of view, the organization should not bear the entire cost of the extension as it will affect its finances. The firm's financial team came up with two different ways to inject cash into the organization's funds to help with the extension. The funds can be found through taking loans from financial providers or bringing on board investors who will inject a part of the money needed to the company in exchange for equity. The organization can pay for a part of the extension and seek support for the rest of the funds, hence providing it financial cushion as the profits gotten from the previous sales are used in the organization's operational expenses and cannot cover the entire extension project.
Profit and loss of existing operations
CropCo is incurring different expenses annually to produce fungicides, pesticides, and insecticides based on the existing operations. The profit and loss help in the calculation of production to help analyze lead time function as explained by Shirai and Amano (2017, p. 183-200). It is essential to understand the expenses an organization incurs in its costs to profit or lose. The organization incurs the cost of marketing and advertising every month, which amounts to £6500. These costs are divided into three; direct marketing, advertising, and R&D, which play a significant role in the company. The Administrative expenses incurred every month add up to £251,000. Annually the total cost of administrative and marketing costs is £3.09 million. These costs include the materials used within the month, wages and salaries, utilities, labor, meals, insurance, and other administrative costs. The fungikill sales show a consistent output of products in the year with sales of £1.2 million per month and a total of £14.4 million.
There is an additional annual labor cost of £660,000. The estimated profit gained from the sale of the fungikill is £10.65 million. Based on the figures, the organization makes a considerable profit every year from the plant through industrial sales. The organization may make losses with the opening of the new extension. However, the probability is that it will manage to rise again. Due to the costs of the extension, the profits and revenues will be affected. However, the fungikill seems to be a great product that may increase the new venture's profits.
Projected contribution by additional sales to the domestic and commercial markets
The domestic and commercial markets are some of the most numerous markets in the agricultural industry. While industries are committing to farming, it is clear that individuals and farming organizations are more inclined to the practice. Venturing into fungikill for commercial and personal use is a great way of inclusivity. It helps expand the production of the organization. There are many more domestic and commercial farmers than there are industrial farmers. The extension will increase the number of products produced by the company, increasing the number of sales as the organization ventures into fungikill at home and fungikill commercial.
Sales Forecast

 

selling price per unit

 






Before Extension project





Quantity per month

300000

 

 

 

selling price per unit

 

4

 

 






sales per month

 

 

 

1200000






Sales per year

 

 

 

14400000











After extension project










Year 1





quantity per month

 

 

 

 

fungikill at home

80000

3

 

240000

fungikill commercial

200000

4

 

800000

fungikill industrial

300000

4

 

1200000

 

 

 

 

 2240000

TOTAL per year

 

 

 

26880000

 

 

 

 

 

Year 2