You are the Finance Administrator of Company X, a midsized manufacturing company and your

department is responsible to prepare the production budget for the company.

1.
The industry data for demand growth, in the past 5 years
Period Demand
2014 5,000
2015 5,500
2016 6,500
2017 7,000
2018* 6,500
*up to 30 June 2018

At the beginning of July 2018, the government announced that the nation’s economic growth
will slow down for the next three months, but they’re confident it will regain strengths in the
months following the slower growth period.

The government predicts the economic growth at 6.8% for the next three months, to anticipate
the lower growth, down from 7% previously.

Economic growth in the past 4 years

Period Economic Growth
2014 6.0%
2015 6.3%
2016 8.4%
2017 6.2%

2. Your company is one of the market pioneers who currently hold 40% - 45% market share. Based
on market structure analysis, this is an oligopoly industry.
3.
Product price growth in the past 4 years
2014 2015 2016 2017
Maximum $350 $330 $385 $320
Average $200 $280 $250 $290
Minimum $180 $265 $220 $275
4.
Monthly raw material price growth in the past 4.5 years (per Kg)
Period 2014 2015 2016 2017 2018
January $2.0 $2.4 $3.7 $4.7 $2.9
February $2.2 $2.2 $3.8 $4.2 $2.8
March $2.3 $2.4 $4.2 $4.2 $2.8
April $2.4 $2.6 $4.3 $3.8 $2.9
May $2.3 $2.5 $4.3 $3.2 $3.0
June $2.4 $2.5 $4.4 $3.0 $3.0
July $2.6 $2.4 $4.6 $3.0 -
August $2.5 $2.7 $5.0 $3.1 -
September $2.4 $2.8 $4.9 $2.9 -
October $2.2 $2.8 $4.8 $2.8 -
November $2.4 $3.1 $4.8 $2.9 -
December $2.5 $3.0 $5.2 $3.1 -
***: to produce 1 unit, 10 Kg of raw materials is needed

5.
Monthly labour rate growth in the past 4.5 years (per hour)
Period 2014 2015 2016 2017 2018
January $2.0 $2.3 $3.0 $5.0 $6.0
February $2.0 $2.3 $4.0 $5.0 $6.0
March $2.0 $2.5 $4.0 $5.0 $6.0
April $2.0 $2.5 $4.0 $5.0 $6.0
May $2.0 $2.5 $4.0 $5.0 $6.0
June $2.0 $2.5 $4.5 $5.0 $6.0
July $2.0 $2.5 $4.5 $5.0 -
August $2.3 $2.5 $4.5 $5.0 -
September $2.3 $3.0 $4.5 $5.5 -
October $2.3 $3.0 $5.0 $5.5 -
November $2.3 $3.0 $5.0 $5.5 -
December $2.3 $3.0 $5.0 $5.5 -
***: to produce 1 unit, 8 hours of labour is needed

6.
The company’s fixed assets
Assets Purchase Price Estimated Life Estimated Residual
Value
Office Building $200,000 15 years $50,000
on 1 January 2012
Warehouse Building $110,000 10 years $10,000
on 18 March 2012
Machineries $17,000 8 years $1,000
on 21 March 2012
7.
Electricity cost in the past 4 years
Period Output Cost
2014 2,200 unit $5,000
2015 2,500 unit $5,300
2016 2,900 unit $5,450
2017 2,600 unit $5,600

8.
Raw material inspection cost in the past 4 years
Period Inspection Time Cost
2014 100 hours $2,500
2015 150 hours $2,650
2016 175 hours $2,800
2017 180 hours $2,850

This inspection cost is realized as a non value added cost to the company, and the management
wishes to minimize and to get rid of this cost in the next 5 years period.

Prepare the production budget for 2019 and explain your analysis!