Managing Financial Resources Assignment Sample

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