ASSIGNMENT

Assignment: Dew fresh Flower Delivery



Assignment: Dew fresh Flower Delivery

About the business

The delivery service will be initiated from the homes of Jane and Micheal. Who lives in Surbiton. The target market for the business is the wealthy homes of Weybridge and Esher to whom the 'Dew fresh Flower Delivery' will offer door-to-door service. The company estimates to get the 100 bunches of daffodils for only £20 which becomes 0.5 costs per bunch. Moreover, it will be sold to the customers with 90 pence.

Cash flow Forecast

Further estimates used in the forecasting of cash flows are:

The sales turnover will increase at varying growths which will be driven by two main factors.

Regular Growth of the business

Promotional effect

Special events which includes, Valentines, Fathers Day, Mothers Day, Friendship, weddings, rose day, etc.

The average selling price assumed in the cash flow forecasting is £ 5. The receipts are calculated by the product of volume and average selling price.

Variable cost associated with each order is £ 3 while the business will incur a fixed cost of £ 1000 each month.

On the basis of this, we have forecasted following cash flows for the one year.

The cash flow forecast shows that the company will not be able to generate profitability until the fourth month while it will break even in the third month. Reason being, in the initial two months, the business will grow and promotion will be conducted to increase awareness among the target market about the presence of this business. As soon as a significant proportion of customers will get to know about it, orders will start coming in which will also increase during the special events and holidays like weddings, valentine's day, father's day, mother's day, friendship.

Jan

Feb

Mar

Apr

May

Jun

Jul

Sept

Oct

Nov

Dec

Receipts

500

1500

2500

3750

7500

8750

11000

12500

12500

12500

12500

Volume

100

300

500

750

1500

1750

2200

2500

2500

2500

2500

Growth

 

200%

67%

50%

100%

17%

26%

14%

0%

0%

0%

Selling Price

5

5

5

5

5

5

5

5

5

5

5

Payments

1300

1900

2500

3250

5500

6250

7600

8500

8500

8500

8500

Variable Costs

3

3

3

3

3

3

3

3

3

3

3

Fixed Cost

1000

1000

1000

1000

1000

1000

1000

1000

1000

1000

1000

Net Cash Flow

-800

-400

0

500

2000

2500

3400

4000

4000

4000

4000

Break Even

In the context of the finance, the notion of Break Even is rendered as the point, where the cost or expenses tends to be come equal to revenue. This signifies that there is no loss or gain and the individual has been able to break even. It further implies to the idea that the neither profit nor loss has resulted rather the opportunity costs has been paid instead. The idea further develops into the concept of capital adjustment and an expected return. However, many experts tends to define it as the point where the income received is equal to total costs associated with the sale of a product (TR = TC). An equilibrium point is commonly used in businesses or organizations to determine the potential profitability of selling a certain product. To calculate the breakeven point is necessary to have clearly identified the behavior of costs, otherwise it is extremely difficult to determine the location of this point. Plus, the notion of the Break Even tends to be linked to fixed costs and its payment

For our business, Break even is calculated using the following formula

Break Even = Fixed Costs / (Selling price - Variable )

Break Even = 1000 / (5 - 2)

Break Even = 1000 / (3)

Break Even = ...