Managing Financial Resources Assignment Sample

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Introduction of Managing Financial Resources Assignment 

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Task 1:PART 1- SALES

It is expected that the company will achieve an amount of 5000000 sales each month as per the population in Batley, West Yorkshire. Thus, the estimated or the expected amount for the sales is shows below:

MONTHLY NUMBER OF SALES

MONTHS

AMOUNT

%

MAY

817519500

17%

JUNE

327007800

7%

JULY

817519500

17%

AUGUST

490511700

10%

SEPTEMBER

654015600

14%

OCTOBER

817519500

17%

NOVEMBER

490511700

10%

DECEMBER

327007800

7%

TOTAL

4741613100

100%

Table 1: Expected monthly sales

(Source: Created by learner)

The above table indicates that the company might receive a major amount of sales in each month; however, it might fluctuate depending on the expenses that might be incurred in each month. It is assumed that the number of sales for each month may vary from 200 to 500 units. Further, it is expected that 30% of the population (5450130) will be achieved which states the number as 1635039.

Annual number of smoothie sales

ANNUAL NUMBER OF SMOOTHIE SALES

YEAR

AMOUNT

%

2022

6376652100

16%

2023

7014317310

18%

2024

7715749041

20%

2025

8487323945

22%

2026

9336056340

24%

TOTAL

38930098736

100%

Table 2: Annual number of smoothie sales

(Source: Created by learner)

The above table indicates the expected amount of sales that may be achieved in the coming 5 years, which is expected to be 38930098736 in total of 5 years.

Seasonality factors affecting the sales:

SEASONALITY FACTORS AFFECTING THE SALES OF MONTHS

MONTHLY NUMBER OF SALES

MONTHS

AMOUNT

%

MAY

654015600

19%

JUNE

327007800

10%

JULY

327007800

10%

AUGUST

490511700

14%

SEPTEMBER

817519500

24%

OCTOBER

490511700

14%

NOVEMBER

163503900

5%

DECEMBER

163503900

5%

TOTAL

3433581900

100%

Table 3: Seasonality factors affecting monthly smoothie sales

(Source: Created by learner)

SEASONALITY FACTORS AFFECTING THE ANNUAL SALES

ANNUAL NUMBER OF SMOOTHIE SALES

YEAR

AMOUNT

%

2022

3433581900

16%

2023

3776940090

18%

2024

4154634099

20%

2025

4570097509

22%

2026

5027107260

24%

TOTAL

20962360858

100%

Table 4: Seasonality factors affecting annual sales of the company

(Source: Created by learner)

The above table shows that the company might experience fluctuations in the amount of monthly as well as annual sales. Further, it is also expected that seasonal factors such as demand of the population of Batley, West Yorkshire might decrease in the month of July and August as well as in the winter season. Thus, the selling price of the smoothie will be 50 dollars, while the selling unit is expected to be 500 units each month.

Monthly sales with graphs

 Monthly sales expected

(Source: Created by learner)

 Expected seasonality factors affecting monthly sales

(Source: Created by learner)

PART 2: Fixed Costs and Fixed Costs per smoothie

It is identified that the Batley, West Yorkshire, has properties on rent which is in Simpsons Fold parking at Chandlers provided by Martin and Leeds and Zeno Properties. Further the rent is expected to be £ 130 PCM and £ 125 PCM respectively thus the rent will be affordable by Zeno properties (Rightmove, 2022).

Particulars

Amount

RENT

125

STAFFING COST

1000

TOTAL WAGE COST

10

TOTAL FIXED COST

1135

Table 5: Fixed cost

(Source: Created by learner)

HOURLY WAGES

10

NUMBER OF LABOURS

100

STAFF WAGES

1000

Table 6: Staff wages

(Source: Created by learner)

Other fixed costs to be incurred by the company:

OTHER FIXED COSTS

AMOUNT

Amortization

10000

deprecation

50000

Depreciation

3000

Insurance

1000

Interest expense

1000

Property taxes

20000

Salaries

50000

Utilities

2000

TOTAL

137000

Table 7: Other fixed costs

(Source: Created by learner)

It is assumed that all the fixed costs will not vary, however, it is also estimated that the fixed cost might increase 10% each year due to utilities, salaries and interest expense. 

Part 3 - Variable Costs and Variable Cost per smoothie

PARTICULARS

AMOUNT

cost per cup

(Thegrocer, 2022)

100

ingredients costs

(Thegrocer, 2022)

5000

raw materials

(Thegrocer, 2022)

3000

Commissions

(Coachmag, 2022)

5000

delivery costs

(Coachmag, 2022)

4000

packaging supplies

(Coachmag, 2022)

3000

Total

20100

Table 8: Variable costs

(Source: Created by learner)

It is assumed that the variable cost of some of the particulars may vary in each month with 10%. Further, it is also estimated that increase in the production or decarse in the value of production might affect the costs of variables.

Part 4 - Total Cost per Smoothie and Selling Price 

Total cost per smoothie

PARTICULARS

FIXED COST

VARIABLE COST

TOTAL

SMOOTHIE 1

137000

20100

157100

SMOOTHIE 2

150000

20000

170000

SMOOTHIE 3

1510000

21000

1531000

SMOOTHIE 4

1600000

25000

1625000

SMOOTHIE 5

1650000

30000

1680000

TOTAL

5047000

116100

5163100

Table 9: Total costs of smoothie

It is expected that the value of smoothie will be 100 pounds, which might vary the amount of fixed as well as variable costs.

Two selling price for smoothie

Selling price at 10% mark up price

PARTICULARS

AMOUNT

Material

5

labour

10

overhead costs

2

total amount

17

mark up price is estimated to be 10%

18.7

selling price at 10% mark up price

35.7

Table 10: Selling price at 10% mark up price

PARTICULARS

AMOUNT

Material

5

labour

10

overhead costs

2

total amount

17

mark up price is estimated to be 15%

19.55

selling price at 10% mark up price

36.55

Table 11: Selling price at 15% mark up price

(Source: Created by learner)

Smoothie prices by competitors

Competitors

Amount

Tesco groceries

£6

Crush and shake

£5.95

Pret a manger

£3.95

Table 12: Smoothie prices of competitors

(Source: Created by learner)

Thus, it is assumed that the market price is lower than that of company, since it is expected that the company might acquire higher prices in terms of expenses and hence the company needs to reduce its prices.

Task 2 – Break-even point and scenario analysis

  1. a) Calculation of break even point

 Break even point

(Source: Created by learner)

  1. b)Margin of safety

MARGIN OF SAFETY

Sales

 $ 3,433,581,900

Variable Expenses

3433581900

Contribution Margin

 $ 52.00

Fixed Expenses

6867163852

Break Even Point

 $ 787

Margin of Safety

100.0%

Table 13: Margin of safety

(Source: Created by learner)

  1. c) Break even chart

 Break even chart

  1. d) Scenario analysis

Increase in fixed cost with 10%

 break even cost when fixed cost increases by 10%

BE analysis when variable increases by 5%

 BE analysis when variable increases by 5%

BE when sales are reduced by 5%

Task 3 – Cash Budget

Budget

Budget

Budget

Budget

Budget

Budget

Budget

Budget

Budget

Budget

Budget

Budget

Budget

Total

CASH FLOW BUDGET

Jan

Feb

Mar

Apr

May

Jun

July

Aug

Sep

Oct

Nov

Dec

Jan - Dec

Cash In from Sale of Goods/Services

smoothie

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

24,000,000

Total Cash In from Goods/Services

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

24,000,000

Cash Out on Expenses

cost per cup

100

100

100

100

100

100

100

100

100

100

100

100

100

ingredients costs

5000

5,500

5,550

5,555

5,556

5,556

5,556

5,556

5,556

5,556

5,556

5,556

5,556

raw materials

3000

3,300

3,300

3,300

3,300

3,300

3,300

3,300

3,300

3,300

3,300

3,300

3,300

commissions

5000

5,500

5,500

5,500

5,500

5,500

5,500

5,500

5,500

5,500

5,500

5,500

5,500

delivery costs

4000

4,400

4,400

4,400

4,400

4,400

4,400

4,400

4,400

4,400

4,400

4,400

4,400

packaging supplies

3000

3,300

3,300

3,300

3,300

3,300

3,300

3,300

3,300

3,300

3,300

3,300

3,300

Amortization

10000

11,000

11,000

11,000

11,000

11,000

11,000

11,000

11,000

11,000

11,000

11,000

11,000

Depreciation

50000

50000

50000

50000

50000

50000

50000

50000

50000

50000

50000

50000

50000

Insurance

3000

3000

3000

3000

3000

3000

3000

3000

3000

3000

3000

3000

3000

Interest expense

1000

1000

1000

1000

1000

1000

1000

1000

1000

1000

1000

1000

1000

Property taxes

1000

1000

1000

1000

1000

1000

1000

1000

1000

1000

1000

1000

1000

Salaries

20000

20000

20000

20000

20000

20000

20000

20000

20000

20000

20000

20000

20000

Utilities

50000

50000

50000

50000

50000

50000

50000

50000

50000

50000

50000

50000

50000

Total Cash Used in Investing

155100

158100

158150

158155

158155.5

158155.55

158155.555

158155.5555

158155.5556

158155.5556

158155.5556

158155.5556

158155.5556

Total Increase/Decrease in Cash

(1,844,900)

(1,841,900)

(1,841,850)

(1,841,845)

(1,841,845)

(1,841,844)

(1,841,844)

(1,841,844)

(1,841,844)

(1,841,844)

(1,841,844)

(1,841,844)

(23,841,844)

Table 14: Cash budget

(Source: Created by learner)

  1. b) Revised cash budget

 Revised cash budget

(Source: Created by learner)

Task 4 – Forecast Profit Statements

Profit&Loss Statement

PARTCULARS

amount

 Revenue

 Sales Revenue

 £ 50,000.00

 Service Revenue

 £ - 

 Interest Revenue

 £ 1,000.00

 Gain of Sales of Assets

 £ 30,000.00

 Total Revenue & Gains

 £ 81,000.00

 Expenses

 Advertising

 £ 3,000.00

 Delivery/Freight Expense

 £ 2,000.00

 Depriciation

 £ 10,000.00

 Insurance

 £ 1,000.00

 Interest

 £ 1,000.00

 Office Supplies

 £ 1,000.00

 Rent/Lease

 £ 1,000.00

 Maintenance and Repairs

 £ - 

 Travel

 £ -

 Wages

 £ 1,000.00

 Utilities/Telephone Expenses

 £ 1,000.00

 Other Expenses

 -

 Total Expenses

 £ 21,000.00

 Income before tax

 £ 60,000.00

 Income tax expense

Net Profit (Loss)

 £ 60,000.00

Table 13: Profit and loss account

(Source: Created by learner)

Task 5: Presentation

  1. a) Introduction
  • The location will be Batley, Wek Yorkshire
  • Local competitors will be Tesco groceries and Pret a manger (Thegrocer, 2022)
  • Focus on all age groups and people following healthy lifestyle

The particular area will be focused since it has limited number of smoothie providers, however, expenses will be reduced to grab the demographic population

  1. b) Rationale
  • Rent is affordable (Rightmove, 2022)
  • Demand for smoothie in the area
  • Profit+markup price is 35.7 pounds

A mark up price of 10% is estimated to gain a profit of 35.7 pounds and since the rent is affordable in the area, Batley is expected to be the appropriate place for the business.

  1. c) BE analysis
  • The fixed cost is estimated to be 137000 pounds
  • Variable cost is estimated to be 20100 pounds

The break even is calculated to be 18500 while it is expected that the expenses will be reduced which will decrease variable cost.

  1. d) Supplier contract
  • Non-acceptance of contract
  • Consideration of work motivation and employee morale

The supplier contract will not be accepted since it will increase the variable cost and might not help in increasing the salaries or wages, which might affect the employee’s motivation.

  1. e) Assumptions
  • Variable cost might vary depending on the expenses
  • Fixed cost will increase in the next year

It is assumed that the value of expenses will increase with 10%, while fixed cost will increase in the next year.
References

Rightmove 2022. RIGHTMOVE PROPERTIES. https://www.rightmove.co.uk/property-to-rent/find.html?minBedrooms=0&propertyTypes=other&keywords=&includeLetAgreed=false&channel=RENT&index=0&maxBedrooms=0&sortType=6&minPrice=100&viewType=LIST&maxPrice=700&radius=0.0&maxDaysSinceAdded=14&locationIdentifier=REGION%5E787&showSuggestionFeedback=true

Thegrocer 2022. Smoothie operator: juices & smoothies report 2018 https://www.thegrocer.co.uk/category-reports/smoothie-operator-juices-and-smoothies-report-2018/563631.article

Coachmag 2022. The Best Smoothie Recipes - Coach Mag. https://www.coachmag.co.uk/nutrition/smoothies

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