Assume the following:
• Sales will increase for the next quarter by the same percentage increase from the previous quarter to the last reported quarter. For example, if sales increased 8% from the last quarter to the current reported quarter, you will use 8% as the sales increase for your pro formas.
Calculate the expenses to determine what will change and what will remain the same.
Note: Not all costs are associated with the cost of sales. It will be up to you to determine which line items need to be increased and which ones need to be left alone. This will require you to distinguish between fixed and variable costs. For a reminder of the difference between fixed and variable costs, please watch the video Business Costs (Fixed Costs and Variable Costs) Explained (Links to an external site.). https://www.youtube.com/watch?v=E7qWYu0xJfg
Within each line item expense explain your rationale, as well as provide a brief summary.
Part 2
Then, calculate a quarterly variance analysis using the Variance Analysis tab of the Financial Forecasting Template (the same template you used for Part 1). Complete the following in your variance analysis:
• In the Excel template, insert the line items.
• In Column C, (Q4, 20NN) enter the previous quarter’s numbers as the budget.
• In Column D, (Q1, 20NN) enter the current quarter’s actual numbers.
• In Column E, the spreadsheet will calculate the dollar difference between the budget and actual numbers.
• In Column F, the spreadsheet will calculate the percentage change.
• In Column G, analyze and speculate the rationale for the variances.
Submit your completed Financial Forecasting Template to Waypoint.
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