Essay About Following Questions And Historical Rates

American Glass
Projection ExampleAmerican Glass is a manufacturer of low end glassware used in bars and restaurants. Their product is sold to wholesalers who act as a middleman. Most shipments consist of a full truck load. Most of their customers have been with them for years.Their CEO is currently contemplating expanding the operating capacity of their manufacturing and warehouse facilities to add a new production facilities for a line of general glassware to be sold in retail establishments through a wholesaler with which they have never done business. However, based on discussions with the wholesaler, they believe the wholesaler will be able to absorb their entire production from the new line.You are the CFO of American Glass.  The assumptions used in your projection will clearly have impact on the results.  Evaluate each of the following questions before you begin your actual calculations for the projection and analysis of this potential expansion.Below are four series of prior period sales.  Your projection for sales is to be based on historical rates.  Identify in each case what percent you would increase sales is subsequent periods.  Identify what other information you may want to evaluate before you make a final decision.Percentage Increase2012-20132013-20142014-20157.56%7.58%7.57%7.56%6.52%7.59%7.56%8.47%8.51%7.56%8.47%9.12%The CEO provided you the assumption that sales from the new line will be thirty-five percent of the sales of the old line in year one.  Evaluate this assumption.The CEO provided the assumption that sales from the new line will increase annually at six percent per year.  Evaluate this assumption.The historical cost of goods sold for the old line was a follows:201220132014201572.52%72.43%72.34%71.11%If the assumption to be used for cost of goods sold is historical rates, what rate would you use?  Identify what other information you may want to make before you make a final decision?The CEO provided the assumption that cost of goods sold will be seventy percent for the new line.  Evaluate this assumption.The assumption for salary for officer is unchanged.  Evaluate the assumption.The assumption for salary for office is unchanged.  Evaluate the assumption.Historical manufacturing salaries for the old line as a percentage of cost of goods sold are as follows:20122013201420155.43%5.44%5.43%5.43%If the assumption is to use historical rates, what factors may affect the validity of that assumption?Would it be better if manufacturing salaries were based on a percentage of sales rather than as a percentage of cost of goods sold?Manufacturing salaries for the new line will be seventy percent of the old line relative to the percent of cost of goods sold.  (70% of 5.43% or 3.81% if the line were in existence in 2015).Warehouse salaries for the old line as a percentage of cost of goods sold are as follows:20122013201420152.50%2.51%2.51%2.50%If the assumption is to use historical rates, what factors may affect the validity of that assumption?The assumption for payroll taxes is historical percent of salary and wages.  The historical rates were:20122013201420159.61%9.62%9.62%9.84%What might have caused the increase in 2015 and how does that affect which rate you might use?Bad debt expense as a percentage of sales are as follows:2012201320142015.61%.92%.62%.64%If the assumption is to use historical rates, what impact does the 2013 rate have on your decision?