ACCOUNTING AND FINANCE

Introduction to Accounting and Finance



Introduction to Accounting and Finance

NEW ENERGY DRINK

Assumptions taken

Sale will be both cash and credit.

Debtors will pay us one month after the sales take place.

Creditor will be paid one month after the purchase and all the purchases will be on credit.

The wholesale price of the drink would be 50p to whole sellers to penetrate in the market.

Raw material required to produce the drink would cost us at 5p.

Variable overhead would cost us at 6p.

Direct labour would be 4p per bottle.

The manufacturing plant would be hired on a lease and lease rentals would be at £5,000 per month.

Rent of the building would be £2,500 per month.

Marketing cost would be £10,000 per month for the first three months.

Selling and distribution expected are likely to be 2p per bottle.

50% of sale is on cash and 50% on credit.

Admin and accounting fee is likely to be £2000 per month.

Building is £700,000 a down payment of £140,000 rest of that is in lease rent of £22,500.

Marginal Cost Statement of the Product

Marginal Costing Statement

 

$

$

Sales

 

306000

Less: variable Costs

 

 

Direct Material

30600

 

Direct Labor

24480

 

Variable Overhead

36720

 

Variable Cost of Production

91800

 

Opening Stock

0

 

Variable Cost of Goods Available for Sale

91800

 

Less: Closing Stock

0

 

Gross Contribution margin

91800

 

Variable Distribution Costs

12240

104040

Contribution Margin

 

201960

Less: Fixed Costs

 

 

Administration and Accounting Costs

24000

 

Interest Expense

76000

 

Manufacturing Plant Lease Expense

60000

 

Marketing Costs

30000

 

Cleaning and Repairs

12000

 

Rent

30000

232000

Net Loss

 

-30040

Break-Even Analysis for the product

Break Even Table

Net Units

Total Revenue

Fixed Cost

Variable Cost

Total Cost

Total Profit

£

£

£

£

£

0

0

490,000

0

460,000

-460000

10,000

20,000

490,000

21700

511,700

-491700

50,000

150,000

490,000

108500

598,500

-448500

150,000

450,000

490,000

325500

815,500

-365500

250,000

750,000

490,000

542500

1,032,500

-282500

400,000

1,200,000

490,000

868000

1,358,000

-158000

450,000

1,350,000

490,000

976500

1,466,500

-116500

500,000

1,500,000

490,000

1085000

1,575,000

-75000

590,361

1,771,083

490,000

1281083.37

1,771,083.4

0

600,000

1,800,000

490,000

1302000

1,792,000

8000

700,000

2,100,000

490,000

1519000

2,009,000

91000

800,000

2,400,000

490,000

1736000

2226000

174000

Break Even Chart

Breaking Even at 590,361 UnitsForecasted Financial Statements

Cash Budget

Months

1

2

3

4

5

6

7

8

9

10

11

12

Cash Inflow

Cash Sales ( Note 12)

20000

21000

22000

23000

24000

25000

26000

27000

28000

29000

30000

31000

Cash Received from debtors (Working 1)

20000

21000

22000

23000

24000

25000

26000

27000

28000

29000

30000

Loan Received

150000

Total Inflow

170000

41000

43000

45000

47000

49000

51000

53000

55000

57000

59000

61000

Cash Outflow

Equipment Rentals (Note 8)

5000

5000

5000

5000

5000

5000

5000

5000

5000

5000

5000

5000

Lease Rentals (Note 14)

2500

2500

2500

2500

2500

2500

2500

2500

2500

2500

2500

2500

Marketing Expense (Note 10)

10000

10000

10000

Selling and Distribution (Working 2)

800

840

880

920

960

1000

1040

1080

1120

1160

1200

1240

Payment to Creditors (Working 3)

2000

2100

2200

2300

2400

2500

2600

2700

2800

2900

3000

Direct Labor (Note 7)

1600

1680

1760

1840

1920

2000

2080

2160

2240

2320

2400

2480

Direct Overhead (Working 4)

2400

2520

2640

2760

2880

3000

3120

3240

3360

3480

3600

3720

Accountancy and admin (Note 13)

2000

2000

2000

2000

2000

2000

2000

2000

2000

2000

2000

2000

Building Down Payment (Note 14)

140000

Cleaning & Repairs

1000

1000

1000

1000

1000

1000

1000

1000

1000

1000

1000

1000

Interest Payment (Working 5)

7500

7500

7500

7500

7500

7000

6500

6000

5500

5000

4500

4000

Repayment of Loan

10000

10000

10000

10000

10000

10000

10000

Total OutFlow

172800

35040

35380

25720

26060

35900

35740

35580

35420

35260

35100

34940

Net Cash Flow

-2800

5960

7620

19280

20940

13100

15260

17420

19580

21740

23900

26060

Opening Balance

20000

17200

23160

30780

50060

71000

84100

99360

116780

136360

158100

182000

Closing Balance

17200

23160

30780

50060

71000

84100

99360

116780

136360

158100

182000

208060

Forecast Balance Sheet

Forecasted Balance Sheet

£

£

Assets

 

 

Building

 

170000

 

 

 

Current Assets

 

 

Cash

208060

 

Debtors

31000

 

 

239060

 

Current Liabilities

 

 

Creditors

3100

 

Working Capital

 

235960

Total Assets

 

405960

 

 

 

Long-term Liabilities

 

 

Outstanding Loan

 

90000

Capital

 

345960

Net Loss

 

-30000

Total Assets

 

405960

Forecasted Income Statement

Forecasted Income Statement

£

£

Sales

306,000

Less Cost of Goods Sold

Opening Stock

0

Cost of Goods Manufactured

104,040

Closing Stock

0

Cost of Goods Sold

104,040

Gross Profit

201,960

Less Operating Expenses

Administration and Accounting Costs

24,000

Interest Expense

76,000

Manufacturing Plant Lease Expense

60,000

Building Rent

30000

Marketing Costs

30000

Cleaning and Repairs

12000

232,000

Net Loss

-30,040

A 1,200 word 'pitch'

Introduction

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