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Anthony Orchards About Anthony's Orchard Anthony's Orchards is a...

In about 1000 words, review Anthony’s Orchard case study in the unit resources.

Consider the following:

  • The company, according to Anthony’s Orchard Strategic Plan, is hoping to purchase an apple press in order to start a new line of prepared apple products—apple juice.
  • The company estimates this new product offering will generate an additional $95,000 net income per year and estimated cash flows of $90,000 per year. The cost of the apple press will be $950,000 and this expenditure, as shown in the budgeted cash flow statement, is expected to take place in the fourth quarter of 2012.
  • The apple press is expected to have a seven-year life and no salvage value.
  • The company requires a 10% return on investment for new capital investments and the company uses a cost of capital of 8%.
  • The company’s revenue goal for 2015 is $25 million.
  • Assume a minimum 12% gross margin on revenue.

To complete this Individual Assignment, answer the following:

  • Do you think the company’s revenue goal of $25 million by 2015 is realistic?
  • Explain how purchase of the apple press might affect the company’s revenue goals. Based on this information, explain whether Anthony’s Orchard should invest in the apple press. Support your response with relevant information provided in the case study, the previous year’s financials for 2010, the current year’s financials for 2011 and the budgeted year’s financials for 2012.
  • Draft budgeted financial statements from 2012 to 2015 under both options that provide a realistic assessment of expected revenues and costs, and explain how you have arrived at these budgeted figures.


You should fully state and justify any assumptions that you make in relation to the financial data you use. Be sure to include all references as well.

Anthony Orchards htp://±/0021/02/mm/websiTe/abouT_us.hTm About Anthony's Orchard Anthony's Orchards is a 3rd-generation, family-owned 6,000-acre orchard situated in Wenatchee Valley, the heart of apple producing in Washington State. Surrounded by gently rolling mountains Anthony's Orchard has been growing apples in the valley for over 60 years. Our waterfront orchards line the region's rushing rivers. The nutrient-rich soil and our advanced growing practices provide the right mix for producing some of the world's top-quality apples. Washington State has been known for its apples and produces a wide variety. At Anthony's Orchard, we have focused on two varieties of apples: Braeburn and Honeycrisp. Mission Statement Our mission is to continually enhance consumers' awareness of apples and apple orchards. Vision Statement Our vision is to provide the best apple products and services to our customers and generate returns for our shareholders, while enhancing the well being of our community. Careers at Anthony's Orchard Looking for a fulfilling career in apples? It may not be the Big Apple, but in addition to a great benefits package, Anthony's Orchard offers all the clean air and fresh fruit you could ever want. I nvestor Information Crunch into the financial information on our Investor Relations page. You'll find the data as crisp and fresh as this morning's harvest. Our Apples Because Anthony's Orchard is a family run orchard, we grow every apple to be delicious and healthy for you and your family just like we would for ours. We choose only the highest-quality trees and carefully select varieties that thrive in Wenatchee Valley. Anthony's Orchard currently features: Braeburn These beautiful red-orange apples burst with flavors that are both sweet and crisp. One bite is all you'll need to discover that Braeburn apples make a perfect snack for you or the kids. A hybrid descended from the Granny Smith variety, they also retain some of that apple's signature tartness and are ideal for cooking in desserts and applesauce. Chomp or cook: perfect for both! Season: October - July
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Honeycrisp Intense flavors and unique colors combine in this versatile apple. A mix of green and red colors complement the mix of sweet and tart flavors. Although small in size, Honeycrisp lives up to its namesake with a sweet and crunchy experience waiting in every bite. The tart flavors and dense texture also work great in your favorite pies or applesauce. All Anthony's Orchard apple pies feature fresh and delicious Honeycrisp apples right from our orchard. Chomp or cook: perfect for both! Season: October - May Prepared Apple Products Just Like Mom's At Anthony's Orchard, we use time-honored family recipes to make all of our apple products. The result? Simply amazing pies and applesauce made with fresh and natural ingredients. The only thing missing is mom's oven. Apple Pie Filling Treat your family to a hot, fresh apple pie without the hassle using our prepared apple pie filling. We start with our freshly picked Honeycrisp apples; wash, core, and dice them; and prepare the filling with our secret family recipe, all in our own kitchen. Available now in our orchard store and at local retailers. Applesauce Hot or cold, applesauce is a year-round treat. Our Braeburn and Honeycrisp apples give just enough sweet and tart flavors for a refreshing applesauce that's perfect for breakfast, lunch, dinner, or dessert. Available now in our orchard store and at local retailers. Where to Find Our Apple Products Anthony's Orchard works with a several national retail outlets. Just look for our logo next time you're in the apple aisle at your local market! Pick Your Own Apples
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Interview With Anthony’s Orchard CEO Bob Frost CEO Bob Frost discusses the general financial health of the company. Anthony’s Orchard is a third-generation, family-owned orchard. We’ve been in business well over 60 years, having been established in the years following World War II. Throughout our history, the company has experienced periods of tremendous growth, as well as a few very lean years. I think our longevity can be attributed to a number of factors. In agriculture, so much is dependent on production. We have always enjoyed a geographic advantage, as our orchards are located in some of the best regions in the world for growing apples. However—and I think this is vitally important to note—we have never been satisfied to rely on that single advantage alone. Historically, our corporate culture has always been one of fostering innovation to support our inherent advantages. We have repeatedly shown a willingness to invest in technology aimed at improving the quality and volume of our products. Since I joined the company in 1990, we have made it a priority to invest in technologies aimed at improving our growing practices. I think this practice has proven to be an invaluable tool in helping us address fluctuations in weather conditions, competition, and a variety of other threats to our market and our organization. We are excited about our future, and have aggressive plans for it. Among these plans is expansion into a new product line. We hope to be producing and distributing Anthony’s Orchard apple juice within the next 3 to 5 years. Ultimately, these and other strategic plans will depend on current and projected business conditions. We must remain mindful of cash flow, operating costs, and the threats associated with the natural environmental factors that affect our product line. We feel good about business conditions, but it is also very important to continually monitor those conditions and to consider them when developing and executing strategic plans.
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Budgeted Income Statement Prepared Apple Products Pick your own apples Community Events $ $ $ Net Revenue 8,749,250 3,248,700 2,499,695 Less Cost of Goods Sold (7,692,215) (2,682,356) (1,536,073) Gross margin 1,057,035 566,344 963,622 12% 17% 39% Less Admin Costs Interest on debts Net Income before taxes Income taxes (40%) Net Income *Includes CSA, EducaTonal programs and fesTvals Budgeted Cash Flows Quarter 1 Quarter 2 Quarter 3 $ $ $ Sales in the Quarter 3,624,411 ### 3,624,411 75% collected in this quarter 2,718,308 ### 2,718,308 25% collected from last quarter 950,000 906,183 ### Cash from sales 3,668,308 3,624,491 3,624,491 Less: Apple purchases 8,617,033 - ### Direct Labour 304,380 304,380 ### Other ingredients 31,433 ### 31,433 Variable Overhead 513,000 ### 513,000 Fixed Factory overhead 181,250 ### 181,250 Admin Costs 351,250 ### 351,250 Income taxes 86,586 ### 86,586 ±otal Cash Expense Before Interest 10,084,933 1,467,900 ### Cash ²ow from operaTons (6,416,624) 2,156,512 ### Beginning Cash Balance 1,750,000 500,000 ### Less: minimum cash reserve 500,000 ### 500,000 Cash available for operaTons 1,250,000 - - New Short term borrowings 5,166,624 - - Repayment of loan and interest - 2,156,512 ### Outstanding loan balance 5,166,624 3,010,112 853,601 Interest at 3.5% per quarter 180,832 105,354 29,876 Capital exp* - ### - Ending Cash balance 500,000 ### 500,000
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*Company is planning to purchase an apple press, which is expected to have a seven year life and no slavage va COGS Budget Prepared Apple Products Pick your own apples Community Events Beginning Inventory 1,100,000 750,000 180,170 Cost oF goods processed Direct Labour cost 913,140 Direct material cost 4,522,575 2,657,856 1,530,903 ±actory overhead cost 2,264,000 - Total Cost oF processing 7,699,715 2,657,856 1,530,903 Available For sale 8,799,715 3,407,856.00 1,711,073 less: Ending Inventory (1,107,500) (725,500) (175,000) 7,692,215 2,682,356 1,536,073 Budgeted Balance Sheet YE 9/30/11 $ Cash 1,750,000 Accounts receivable 950,000 Inventory: Prepared Apple Products 1,100,000 Pick your own apples 750,000 Community Events 180,170 Total Inventory 2,030,170 ±ixed Assets 2,830,000 Total Assets 7,560,170 Accounts Payable 1,475,000 Long term debt 2,150,000 Total Liabili²es 3,625,000 Shareholder equity 3,935,170 Total Liabili²es & Equi²es 7,560,170 *Note that Anthony's Orchard has long term debt For 30years, which it has not begun to pay back AdministraTve Budget Technology 430,000.00 Marke²ng 300,000.00 Execu²ve Team 300,000.00 ±inance 175,000.00 ±acili²es 125,000.00 Procurement 75,000.00 1,405,000.00
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Anthony's Orchard 1.xlsx

Anthony's Orchard
2011 Budgeted Income Statement Net Revenue
Direct labor
Direct material
Factory overhead
Available for sale
Less: Ending Inventory
Cost of Goods Sold
Gross Margin Prepared...

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