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Hamdan Footwear Start-Up Company’s Business Plan

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Hamdan Footwear Start-Up Company’s Business Plan

Executive Summary

Hamdan Footwear is a start-up company, planned to start operating in June 2015. The demand for shoe in the United Arab Emirates is constantly rising owing to the changing lifestyle and increased urban population. The company will be a semi-mechanized footwear production unit, which will focus on producing affordable footwear for ladies. The footwear will include sandals, sleepers and rubber shoes. The footwear will be sold directly to wholesalers and retail outlets in Abu Dhabi and other cities within the UAE. The target market already has similar established units. The production capacity will be around 800 pair of shoes daily of which 60 percent will constitute sandals and sleeper, while the rest will be rubber shoes. Sandals and sleepers will be sold at 100 AED per pair, while the rubber shoes will be sold at 80 AED per pair. The initial capacity will be 50 percent (400 pairs per day), while the optimal capacity will be 80 percent (640 pairs per day). The optimal capacity will be achieved in the fourth year. This means there will be a 10 percent increase in the production capacity each year. This production capacity is deemed financially feasible and validates the capital outlay, as well as the costs of operation. In addition, the owners extensive knowledge and experience in the footwear industry, excellent quality of shoes, striking designs, reasonable pricing and strong market connection are the main elements of success for this company. The company will position itself as an exceptional service provider. Sales revenue in the first year is projected at around 7392000 AED. The revenue is expected to go up to 15259200 AED by the third year. Hamdan Footwear will be managed by working partners. The number will be 5 partners in the beginning. The company expects to make a return of roughly 7000000 AED in the first year, with over 80 percent level of production. The company will be financed for start-up through owners’ contribution.

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Business Information

Business History

Hamdan Footwear is a start-up company situated on Hamdan Street, Abu Dhabi. The company will start operating on June 2015. The company will be a semi-mechanized footwear production unit, which will focus on producing affordable footwear for ladies. The footwear will include sandals, sleepers and rubber shoes. The footwear will be sold directly to wholesalers and retail outlets within the target market. In addition, the footwear will be under the company’s brand name. The owners of Hamdan Footwear have a long history together, dating back to when they were working for a local footwear company as shoe designers. In the early 2015, they seized an opportunity to come together and form their own company.

Mission and Vision

The Hamdan Footwear’s mission is to be the top brand and manufacture of stylish ladies shoes in Abu Dhabi and the entire UAE. By setting up an up market, retail presence in Abu Dhabi, that act as a complementary for the wholesale distribution and maximizing operational processes to reduce costs and time wastage, Hamdan Footwear aspires to control its target market. The company’s long-run vision is to be known for exceptional, trend-setting ladies footwear and to increase its presence across the region.

Key Initiative and Strategic Objectives

As already been mentioned, the company’s long-term mission is to be the top brand and manufacturer of stylish ladies shoes in Abu Dhabi and the entire UAE. However, its strategic objective includes: revenue maximization; establishment of high-status retail presence in Abu Dhabi and its environs; expanding the market of its products through vigorous promotion and multi-channel marketing; and optimization of a company’s operations to reduce costs and satisfy customers.

Revenue maximization will be achieved through business expansion, which requires increased brand awareness, increased retail outlets and hiring qualified sales personnel. High-status retail presence will be achieved by locating retail outlets at prime locations and through market segmentation. The product promotion will entail the use of the mass media, internet marketing, trade fairs, strategic alliances, and contract marketing among others. Optimization of key operations will be achieved by streamlining the cost structure, consumer satisfaction and constant evaluation of the company’s operations.

Ownership and Management

Hamdan Footwear will be owned by partners. The number will be around 5 partners in the beginning. The partners will contribute equally in the day-to-day operations of the company. This is due to the fact that they all have extensive knowledge and experience in the footwear industry, particularly in designing female footwear. The company will also hire production supervisors, foreman, mechanic, helpers, marketing executives, procurer, accountant, office messengers and watchmen. The owners will act as the managers and designers.

Location and facilities

As previously been mentioned, the company’s administrative and operating offices will be based in Hamdan Street, Abu Dhabi, as well as its semi-mechanized footwear production unit. Its retail stores will be spread across the five major cities in the UAE, that is, two in Abu Dhabi, two in Dubai, one in Sharjah, one in Al Ain and one in Ajman.

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Products

Product Description

Hamdan Footwear will focus on producing stylish and affordable ladies footwear. The footwear will include sandals, sleepers and rubber shoes. Even though leather shoes account for approximately 48 percent of the UAE market, the demand for rubber and plastic shoes is increasing day by day, hence the company’s product choice (ICCI 1).

Key of products

Hamdan footwear will create trend-setting ladies footwear under its own brand. They will be sold at affordable prices. Their products will include sandals, sleepers, and closed and open rubber shoes. Out of the three products, rubber shoes will be considered to be the main product. However, the production of the three varieties of shoes will depend on seasonal trends. The shoes will range from number 6 to 11.

Future Products

In the future, the company plans to start manufacturing leather shoes. The production of leather shoes requires a considerably high amount of capital. The company is also planning to diversify its products to include men and children’s footwear. In addition, the company will expand its ladies footwear designs to include Stilettos, pumps, court shoes and boots among others.

Company’s competitive edge

The company’s main competitive edge is its unique products, product pricing, and owners’ extensive experience and expertise in footwear design. Other competitive advantages will include: proficiency in production, historical contact with the targeted areas of sales, and promptness within a limited budget. During the first year, the proprietor will carry out all the company’s operation with a limited number of employees. However, additional workers will be hired in the subsequent years. The owners and the employees will work as a team, enabling direct evaluation of all employees and direct participation so as to make sure that clients’ needs and expectation are met.

The competitive edge of unflagging professionalism will be upheld through prompt response to client inquiries, timely delivery of consignments, and reserving breaks for the employees among others. The company’s products will be unique and stylish, and will be sold at reasonable prices. The owners have over a decade experience in shoe design. This will be an added advantage to the company. The owners having worked for local shoe companies as designers also provide a competitive edge since they have interacted with some of the clients on a personal level. In addition, the company will employ highly qualified staff. Last but not least, the company’s highly qualified personnel will ensure that the projects are completed on time and within the budget.

Market and Sales Analysis, and Plan

Competencies

The business idea and plan have been validated through a market research. The footwear market in the UEA is growing rapidly and it is highly valued. Almost every street in major cities in the UAE has retail stores selling footwear products. The location of the company’s retail stores is very strategic. The product pricing is also reasonable and competitive. The basis of the market research is to make us stand out among our competitors. The market research focused on the competitors, whereby we looked at their pricing, products, customer service, and the general business.

Customers

The footwear market in the United Arab Emirates is estimated to be over a billion Dirham. Most of the footwear is imported from China and Europe, particularly Italy and Spain. Over the last decade, the country’s demand for footwear has increased tremendously. The increase in demand is partly attributed to the rising urban population, changes in lifestyle, increased number of tourists who visit the country to shop, and changing retail footwear market. Males provide the largest market for footwear products in the UAE. This attributed to their population dominance. The number of males in the UAE is almost three times that of females (ICCI 2).

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In the year 2014, the market for stylish footwear in the UAE was estimated to be over 1.7 million. This market comprises of women between the age of 18 and 35 living in the major cities. The market was worth more than $ 100 million and is anticipated to reach $180 million by 2017. Women between 18 to 35 years represent 12 percent of the total population within the target market. They are expected to spend more than $200 million in the next 3 years (ICCI 3).

Demographics and Geographic

As already been mentioned, the target market is female consumers from five major cities in the UAE, which are Abu Dhabi, Dubai, Sharjah, Al Ain and Ajman. Abu Dhabi and Dubai provide the largest market for the company’s products, with a combined population of over 1.3 million females between the ages of 18 to 35. Sharja, Al Ain and Ajman have a combined population of around 250000 females between the ages of 18 to 35 (Federal Research Division 5).

Market Analysis Pie Chart

Market Analysis Pie Chart

Market Analysis Potential Customers Growth 2015 2016 2017 CAGR
Abu Dhabi
Dubai
Others
35%
20%
7%
2000
1400
600
2500
1550
642
3050
1749
824
10%
15%
5%
Total 6.27 6.27

Behavioral factors

Female consumers in the UAE not only consider shoes to protect and soothe their foot, but also for image and fashion. Regardless of their small number, women tend to buy more shoes than men. Typically, men always buy around two to four pairs of shoes annually, while women buy up to ten pairs of shoes in a year. Unlike western women who prefer Stilettos, court shoes and boots, women in the UAE prefer sandals, open shoes and sleepers. This largely attributed to the weather pattern in the Gulf region, which is extremely hot. The UAE market is divided into two segments: the lower segment and the upper segment. The lower segment constitutes of relatively cheap plastic and rubber shoes, whereas the upper segment is predominantly leather products. Nevertheless, trend-setting plastic and rubber shoes are also found in the upper segment (ICCI 3). The above factors will help the company to adapt production and marketing strategies to cash in on these influences in a manner that will meet the needs of the consumers and distributors.

Marketing Strategy

Target Market

The company will target female consumers between the ages of 18 to 35. The target market will be the five metropolitan cities in the UAE that have already been mentioned. Since the company will focus on manufacturing stylish and affordable ladies shoes, it will target both lower and upper segment of the market. The market is characterized by large European and Asian brands. Nonetheless, there is no leading distributor of footwear products. This is attributed to a large number of players in the market. As a result, competition is very stiff.

Pricing Strategy

Hamdan Footwear will set prices, which reflect savings when compared to the actual value of the product. The company’s brand products will be priced at the upper edge to match the general positioning of the company as a high quality product and service provider. At the initial stage, the company will set prices, which will be 15% mark-up on the cost of production and later a mark-up of 25% on the cost of production. The setting of prices relative to those of competitors is expected to be effective since the target market for Hamdan Footwear’s brand are mostly middle-class city dwellers. In addition, low prices are associated with poor quality. These middle class city dwellers will be the largest consumers of the Hamdan Footwear in the five major cities in the UAE.

Promotional Strategy

In order to further the growth and development of the company’s brand, the activities of advertising, online marketing, discounting and publicity will be used to entice customers. Promotional strategies will be used in defining and locating the target audience for the product and clearly passing the specific message. The promotional strategies will be employed in creating awareness of the presence of the Hamdan Footwear brand in the UAE market. The promotional strategy to be used will ensure that the target customers get the right information about the Hamdan Footwear products by making use of the right medium and strategy. It will also ensure that the customers easily access the company’s products. By promoting the products, the level of visibility of the products will be maintained, and the volume of the demand for the products will be set to an applied margin.

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Direct sales could be made from the production center and through the company’s websites. Sales promotions will be implemented during special occasions, for instance, holidays and festive seasons. Discounts and rewards will be offered during sales promotions to increase sales volume. The company will also make use of the social media, which has become a very significant platform for marketing in this day and age.

Management and Staffing

Organization Structure

This simply describes the division, grouping, and coordination of tasks within the company. The organizational structure is well illustrated in the chart below.

Organization Structure

The company will be led by the owners, who will act as the managers, as well as the designers due to their vast experience and expertise in footwear design. They will be assisted by production supervisors, general supervisors and marketing executive. The production supervisor will be in charge of the production unit, whereas the general supervisor will be responsible for the general activities in the company. Last but not least, marketing executive will be in charge of the retail stores and distribution of the company’s products.

Staffing

According to Cunningham, it is easier to hire a squirrel to climb a tree than teach a turkey. He used this phrase to demonstrate competency based recruitment practices. (5). He defines competency as a principal characteristic of a person that fundamentally linked to effective or excellent performance at work. Therefore, competency is any individual characteristic that is assessable and can be used to differentiate a poor performer and greater performer (Cunningham, 6). The company’s recruitment and selection process are not only based on qualification, but also competency. The core competencies recognized by the company are; the capability of an individual to acclimatize promptly to external and internal changes, the ability to successfully influence and work through others, the ability to change mindsets and behaviors, leadership abilities, and the capacity to work with others. Others include objectivity, personality concepts, content knowledge, cognitive skills and behavioral skills. Additional training is also provided.

Financing the project

Description of initial budgets and financial needs

Start-up Capital

This project will be fully funded by the owners. The startup capital will be approximately 2095000 AED. The proceeds will be shared according to individual contribution. The fixed and working capital requirements for the project are shown in appendix 1.

Machinery and Equipments required

Description Quantity Unit Price (AED) Total Amount (AED)
Cutting Clicking Press and a Board
GP 4 Machine
Skiving Machine
Upper Stitching Flat Bed Machine
Upper Stitching Post Bed Machine
Bending Machine
Grinder
Sole Activator
Zigzag Machine
Scoring Machine
Finishing Machine
Lasts
Generator (50 KVA)
Canter
1
2
2
4
2
1
3
1
1
1
1
1
1
1
100000
350000
200000
37500
22500
25000
6000
400000
20000
30000
20000
300000
125000
752000
100000
70000
40000
150000
45000
25000
18000
400000
20000
30000
20000
300000
125000
752000
Total 2095000

Furniture and Fixture Requirements

Description Quantity Unit Price (AED) Total Amount (AED)
Executive Tables
Tables
Sofa
Store Racks/Shelves
Chairs
Stools
Work Tables
File Cabinet
Fire Extinguisher
Air Conditioner
5
10
1
5
10
3
2
2
7
7
1000
500
1994
2000
250
500
1000
3000
300
558
5000
5000
1994
10000
2500
1500
2000
6000
2100
3906
Total Cost 40000

Office Equipments

Description Quantity Unit Price (AED) Total Amount (AED)
Computers
Printers
Telephone
Fax Machine
10
2
5
2
1000
500
500
750
10000
1000
2500
1500
Total Cost 15000

Sales Budget

The production capacity will be around 800 pair of shoes per day, of which 60 percent will constitute sandals and sleeper, while the rest will be rubber shoes. Sandals and sleepers will be sold at 100 AED per pair, while the rubber shoes will be sold at 80 AED per pair. During the first year, the company production capacity will be 50 percent (400 pairs per day), while the optimal capacity will be 80 percent (640 pairs per day). The optimal capacity will be achieved in the fourth year. Therefore, there will be a 10 percent increase in production capacity per year. Assume the company will only be in operation for 300 days per year, the production capacity for the first, second and third year will be 7392000 pairs, 1267200 pairs and 15259200 pairs respectively. The sales budget is well illustrated in appendix 2. It is projected that 70 percent of sales will be made in the first year. The rest will be carried forward to the next year. The second and the third year will record 80 and 85 percent sales respectively.

Collection Budget

This is a schedule of anticipated cash collection (Aziz 3). 70 percent of sales are expected to be made in the first year. The second and the third year will record 80 and 85 percent sales respectively. Cash collection budget is shown in appendix 3.

Material Budget

It contains materials bought to meet the requirements of the production budget (Brewer 89). The materials used in the production of ladies shoes include: upper materials (textile and plastic and rubber fall), insole materials (shoe-textile, cellulose board, Bontex and Texon), outsole materials (PVC, thermoplastic rubber and polyurethane), grinderies (shoe laces, threads, tapes, rivets and hooks zip fastener among others), and auxiliary materials (adhesives and finishing chemicals). The material budget is shown in appendix 4.

Manufacturing Overhead Budget

It contains all the manufacturing cost incurred excluding direct material cost and cost of direct labor (Aziz 6). Manufacturing overhead budget is shown in appendix 6.

Cash Budget

It provides all sources and use of cash within a considerable period of time. It well illustrated in appendix 7.

Depreciation of assets

It shows the value of an asset after usage. Depreciation is calculated using a straight-line method, which considers the original cost, salvage value and useful life. Asset depreciation is shown in appendix 8.

Direct labor budget

It indicates the number of hours that will be used to produce a certain unit of output/product. It is well illustrated in appendix 9.

Operating Expenses Budget

It shows costs incurred in the value chain, excluding production cost. It is well illustrated in appendix 10.

Income Statement

It indicates the net income after deducting cost of goods sold and operating expenses. See appendix 11.

Owners equity

This is basically the net income plus the amount invested into the business, See appendix 12.

Budgeted Balance Sheet

It shows all the assets, liability and the owners’ equity. See appendix 13.

Projected Sales Revenue

This shows the amount of revenue to be acquired through sales in the next 3 years. More details are available in appendix 14.

Projected Cash Flow

It highlights the projected cash balance. See appendix 15.

Projected cost of sale

This is the projected aggregate cost of direct material, direct labor and manufacturing overhead. See appendix 16 for more details.

Projected operating expenses

These are projected annual operating expenses. See appendix 17.

Projected manufacturing overhead

These are the projected manufacturing overhead cost for the next three years. See appendix 18.

Projected direct labor cost

See appendix 19 for more detail.

Projected balance sheet

See appendix 20 for more details.

Works Cited

Aziz, Saqib. Preparing the Master Budget, Lille: Pearson Education, 2013. Print.

Brewer, Garrison. Management Accounting, New York: McGraw-Hill, 2012. Print.

Cunningham, Linsey. (2007). “Talent Management: making it real”. Development and Learning in Organisations 21.2 (2007):4-6. Print.

Federal Research Division. Country Profile: United Arab Emirates (UAE), Washington, D.C.: Library of Congress, 2007. Print

ICCI. Footwear Market in UAE. Web. 2015.

Appendices

Appendix 1: Fixed and Working Capital

Description Cost (AED)
Capital Investment
Machinery Equipment
Furniture and Fixtures
Office Equipment
Pre-Operating Costs
Training Cost
400000
40000
15000
690000
50000
Total Capital Cost 795000
Working Capital Requirements
Raw Material Inventory
Upfront Building Rent
Cash
100000
250000
50000
Total Working Capital 1300000
Total Investment 2095000

Appendix 2: Sales Budget

Description Quarter 1
(AED)
Quarter 2
(AED)
Quarter 3
(AED)
Quarter 4
(AED)
Unit Sales (Sleepers and Sandals)
Price per unit
Unit Sales
Price per unit
11715
80
6248
100
10875
80
5800
100
11250
80
6000
100
22875
80
12200
100
1562000 1450000 1500000 3050000

Appendix 3: Collection Budget

Description Year 1 (AED) Year 2 (AED) Year 3 (AED)
Quarter 1 Sales 1562000 1260000 3000000
Quarter 2 Sales 1450000 1560000 3230000
Quarter 3 Sales 1500000 4500000 3127200
Quarter 4 Sales 3050000 40052800 5902000
Total Cash Collection 7392000 1267200 15259200

Appendix 4: Material Budget

Description (cost in AED) Quarter 1 (AED) Quarter 2 (AED) Quarter 3 (AED) Quarter 4 (AED)
Units to be produced
UPPER MATERIALS
Textile material (@1000 per roll)
Plastic and Rubber Fall (@ 1000 per bale)
Cost of Upper Materials
INSOLE MATERIALS
Shoe construction textile (@ 1500 per bale)
Cellulose board (@500 per 50m by 50m)
Bontex (@500 per 50m by 50m)
Texon (@500 per 50 by 50)
Cost of Insole Materials
OUTSOLE MATERIALS
PVC ( @300 per roll)
Thermoplastic rubber(@ 500 per 50m by 50m)
Polyurethane (@500 per gallon)
Cost of Outsole Material
GRINDERIES
Shoe laces (@1000 per bale)
Threads (@[email protected] per bale)
Tapes (@500 per dozen)
AUXILIARY MATERIALS
Adhesives (@ 500 per gallon)
Cost of Auxiliary Materials
30000

2000
4000
7000

1500
1500
1500
1500
6000

1500
1500
1000
4000

1000
1000
500
2500
2000
2000

30000
2000
5000
7000

1500
2000
1500
1500
6500

1500
1500
1000
4000

1000
1000
500
2500
2000
2000

30000
2000
8000
11000
3000
2000
1500
2000
8500

1500
2000
1000
4500

1000
1000
1000
3500
2000
2000

30000
2000
8000
11000

3000
2000
1500
2500
9500

1500
2500
1000
5000

1000
1000
1000
3000
2000
2000

Total Material Cost 20500 22000 28500 29000

Appendix 5: Material Disbursement budget

Description Quarter 1 (AED) Quarter 2 (AED) Quarter 3 (AED) Quarter 4
(AED)
Units produced (Sandals)
UPPER MATERIALS
Plastic and Rubber Fall (@1000 per roll)
INSOLE MATERIALS
Texon (@500 per 50 by 50)
OUTSOLE MATERIALS
Polyurethane (@500 per gallon)
AUXILIARY MATERIALS
Adhesives (@ 500 per gallon)
Units produced (Sleepers)
9000

2000

1500

1000

500

9000

2500

1500

1000

500

9000

4000

2000

1000

500

9000

4000

2500

1000

500

Total material cost of producing sandals 5000 5500 7500 8000
Units produced (Sleepers)
UPPER MATERIALS
Plastic and Rubber Fall (@1000 per roll)
INSOLE MATERIALS
Bontex (@500 per 50 by 50)
OUTSOLE MATERIALS
PVC (@300 per roll)
AUXILIARY MATERIALS
Adhesives (@ 100 per can)
Units produced (Sleepers)
9000

2000

1500

1500

500

9000

2500

1500

1500

500

9000

4000

1500

1500

500

9000

4000

1500

1500

500

Total material cost of producing sleepers 8000 8000 10000 10000
Units produced (Rubber shoes)
UPPER MATERIALS
Textile material (@1000 per roll)
INSOLE MATERIALS
Shoe construction textile (@ 1500 per bale)
Cellulose board (@500 per 50m by 50m)
OUTSOLE MATERIALS
Thermoplastic rubber(@ 500 per 50m by 50m)
GRINDERIES
Shoe laces (@1500 per bale)
Threads (@[email protected] per bale)
Tapes (@500 per dozen)
AUXILIARY MATERIALS
Adhesives (@ 500 per can)
16000

2000

1500
1500

1500

1000
1000
500

1000

16000

2000

1500
2000

1500

1000
1000
500

1000

16000

2000

3000
2000

2000

1000
1000
1000

1000

2000

3000
2000

2500

1000
1000
1000

1000

Total material cost of producing rubber shoes 10000 10500 13000 13500

Appendix 6: Manufacturing Overhead Budget

Description Quarter 1 (AED) Quarter 2 (AED) Quarter 3 (AED) Quarter 4
(AED)
Variable MOH Cost:
Indirect labor-variable(1.5 AED per direct hour)
Total Variable MOH
Fixed MOH Costs:
Total fix MOH
Total Manufacturing Overhead
450

3000
3750

750

3000
4250

1050

4000
5750

1200

6000
8000

Appendix 7: Cash Budget

Description Quarter 1 (AED) Quarter 2 (AED) Quarter 3 (AED) Quarter 4
(AED)
Cash received
Total Cash Available for use
Less: Cash Disbursements
Direct Material
Manufacturing Overhead expenses
Total Disbursements
1562000
1562000

20500
3750
24250

1450000
1450000

22000
4250
26250

1500000
1500000

28500
5750
34250

3050000
3050000

29000
8000
37000

Ending Cash Balance 1537750 1423750 1465750 3013000

Appendix 8: Depreciation of Assets

Description Quarter 1 (AED) Quarter 2 (AED) Quarter 3 (AED) Quarter 4
(AED)
Cutting Clicking Press and a Board
GP 4 Machine
Skiving Machine
Upper Stitching Flat Bed Machine
Upper Stitching Post Bed Machine
Bending Machine
Grinder
Sole Activator
Zigzag Machine
Scoring Machine
Finishing Machine
Lasts
Generator (50 KVA)
Canter
Computers
Printers
Telephone
Fax Machine
Air Conditioner
16000
12000
6000
22000
8000
4000
2800
4000
5000
2800
3600
4000
24990
110400
1800
180
150
200
501
12800
9600
5200
14000
6400
3000
2240
3000
4000
2240
3200
3000
20002
88602
1400
140
130
100
481
10240
7680
5120
12560
5800
2000
1680
2000
3000
1680
3000
2000
16001
73400
1200
120
110
50
384
8192
6144
4096
11200
4900
1000
1120
1000
2000
1120
2800
1000
12801
68400
1000
100
90
25
308
Total Depreciation 228421 179535 148025 127296

Note: Straight-line method was used.

Appendix 9: Direct Labor Budget

Description Quarter 1 (AED) Quarter 2 (AED) Quarter 3 (AED) Quarter 4
(AED)
Unit to be produced
Direct labor hours per unit
×Total hours required
Direct labor cost per hour
30000
×0.05
1200
×22
30000
×0.05
1120
×22
30000
×0.05
1300
×22
30000
×0.05
1500
×22
Total Direct labor cost 26400 24640 28600 33000

Appendix 10: Operating Expenses Budget

Description Quarter 1 (AED) Quarter 2 (AED) Quarter 3 (AED) Quarter 4
(AED)
Sales Units (from sales budget
Fixed Operating Expenses
Salaries
Office rent
Depreciation
Telephone
Fixed operating expenses
1562000

80000
20000
228421
1500
329921

1450000

88000
20000
179535
2500
290035

1500000

96800
20000
148025
1500
266325

3050000

106480
20000
127296
1500
255276

Total operating expenses 329921 290035 266325 255276

Appendix 11: Income Statement Budget (1st Year)

Description Amount (AED)
Sales
Cost of goods sold
Gross profit
Operating Expense
Operating Income
Less: Provision for income tax
7392000
(234374)
7157626
(1141557)
6016069
36000
Net Income 5980069

N/B: Cost of goods sold=Direct Materials + Direct Labor + Manufacturing Overhead

Appendix 12: Owners Equity (1st Year)

Description Amount (AED)
Net Income
Paid up capital
5980069
2095000
Owners Equity 8075069

Appendix 13: Budgeted Balance Sheet (Year 1)

Description Amount (AED) Amount (AED)
Current Assets
Cash (from cash budget)
Raw Material Inventory (from direct material budget)
Finished goods inventory
Upfront rent
Total Current Assets
Intangible Assets
Pre-operating cost
Amortized Training cost
Total intangible assets
Fixed assets
Equipments and machineries furniture and fixtures
Office equipments
Total fixed assets
Less: Depreciation
Total Assets
Liabilities
Income tax
Account payables
Total liabilities
Owners equity
Total liabilities + Owners Equity
7440250
100000

120000
80000

690000
10000

2095000
40000
15000

(683277)

7740250

700000

2150000

9982973

36000
1871904
1907904
8075069
9982973

Appendix 14: Projected Sales Revenue

Description 1stYear (AED) 2ndYear (AED) 3rdYear (AED)
Unit Sales (Sleepers and Sandals)
Price per Unit
Unit Sales (Rubber Shoes)
Price per Unit
50400
80
33600
100
69120
80
42624
100
85680
80
53285
100
Total Revenue 7392000 1267200 15259200

Appendix 15: Projected Annual Cash Flow

Description Year 1 Year2 Year3
Operating Activities
Net Profit
Add: Depreciation
Amortization of training cost
Finished goods inventory
Raw material inventory
Pre-paid rent
Account Payable
Differed income Tax
Cash provided by operation
Investing Activities
Capital Expenditure
5980069
683277
10000
(120000)
(100000)
(80000)
1871904

(2095000)

6720000
683277
10000
(150000)
(126477)
(80000)

7350000
683277
10000
(230000)
(156876)
(80000)

Net Cash 5456973 7056800 7576401

Appendix 16: Projected Cost of Sale

Description 1stYear (AED) 2ndYear (AED) 3rdYear (AED)
Direct Materials
Direct Labor
Manufacturing Overhead
100000
112640
21750
123000
132300
24452
153200
147520
29578
Total Cost of Sale 234390 279752 330298

Appendix 17: Projected Operating Expenses budget

Description 1stYear (AED) 2ndYear (AED) 3rdYear (AED)
Sales Unit (from sales budget)
Fixed Operating Expenses
Salaries
Office rent
Depreciation
Telephone
7562000

371280
80000
683277
8000

111744

408408
80000
683277
8000

15259200

449248
80000
683277
8000

Total operating expenses 1142557 1179685 1220525

Appendix18: Projected Manufacturing Overhead budget

Description 1stYear (AED) 2ndYear (AED) 3rdYear (AED)
Variable MOH Cost:
Indirect labor-variable(1.5 AED per direct hour)
Fixed MOH Costs:
Total fix MOH
3450

21750

3800

26570

4320

28470

Total Manufacturing overhead 25200 30370 32790

Appendix 19: Projected direct labor budget

Description 1stYear (AED) 2ndYear (AED) 3rdYear (AED)
Unit to be produced
Direct labor hours per unit
×Total hours required
Direct labor cost per hour
120000
×0.05
5120
×22
120000
×0.05
6013.6
×22
120000
×0.05
6705.5
×22
Total direct labor cost 112640 132300 147520

Appendix 20: Projected Balance Sheet

Description Year 1 (AED) Year 2
(AED)
Year 3
AED)
Assets
Cash (from cash budget)
Raw Material Inventory (from direct material budget)
Finished goods inventory
Upfront rent
Pre-operating cost
Amortized Training cost
Equipments and machineries furniture and fixtures
Office equipments
Less: Depreciation
Total Assets
Liabilities
Income tax
Account payables
Total liabilities

Paid up capital
Retained earnings
Total equity

7440250
100000

120000
80000
690000
10000
2095000
40000
15000
(683277)
9982973

36000
1871904
1907904

2095000
5980069
8075069

1267200
126477

150000
80000
553000
10000
375900
37200
12900
(683277)
1929400

39300
2234000
2273300

2095000
6720000
8815000

15259200
156876

230000
80000
421400
10000
416000
10000
15820
(683277)
16167896
42400
2432000
2474400

2474400
7350000
9824400

Total Capital and liability 9982973 11088300 12298800

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