Managing Financial Resources for Smoothie Business Assignment Sample

Financial Resource Management for Smoothie Business: Sales, Costs & Profit Analysis

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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 expected amount for the sales is shown 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 a 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

PART 2: Fixed Costs and Fixed Costs per Smoothie

It is identified that 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% markup 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

a) Calculation of break-even point Break-even point (Source: Created by learner) 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) 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

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(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.

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  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 by 10%, while the fixed costs 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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