Introduction to Accounting and Finance Essay Example | Topics and Well Written Essays - 1250 words

Introduction to Accounting and Finance - Essay ExampleA mixing, filling, and labeling machine would greet me 45.000 pounds to purchase and install and I would need to invest 20.000 pounds in advertising. Initial stock of supplies would cost 6.000 pounds and I would have to employ two workers at 2.000 pounds/ month each to cover two shifts with the machine. My gross salary is position at 4.000 pounds per month as I will be responsible for management and sales. We would start working immediately to set things up so our salary, accountant, and learn would include two additional months, i.e January through August in 2011 instead of 6, while other cost and revenues are calculated on the basis of six months. I would have to pay accountant 200 pounds a month and that includes end year financial and tax statements. Marginal Costs Statements Our fringy costs are variable costs of supplies and marketing costs for selling additional products. The formula is Cost per additional jar = variab le costs (or in our causal agency costs of supplies for a jar) but in reality we cannot purchase supplies in such small quantities so increments should be set per 100 jar package. Our marginal costs per unit between anticipated 15.000 unit sales and maximum capacity of 20.000 units are 50 pennies per jar or 2.500 pounds per month. ... Quantities over 20.000 units per month would probably cost more to make than quantities around 15.000 as I plan. If we were able to sell 20.000 units per month i.e. 5.000 more than we anticipated, and there would be no bottlenecks in end product, we would besot additional income of 10.000 pounds per month that would cost only 2.500 pounds per month. Our pretax profits would rise for 90.000 pounds a year. 3) Breakeven Point Breakeven predict is a level of sales where revenues equal expenses. To calculate this point we have to divide our fixed costs on enough units. Formula is Breakeven Production = Fixed Costs / (Selling Price Variable Costs) Brea keven Production = 13.200 L per month/1,5L per unit = 8.800 units per month In our case everything except supplies represent fixed costs. Our rent is set regardless of the products we make and sell, we have to pay salaries regardless of production and sales, we have to pay the accountant, advertising, and amortization and miscellaneous is completely detached from sales we make. The only real variable cost of producing additional unit is therefore the cost of supplies. From the graph below we can see that we anticipate to reach Breakeven point in second month of production and by fourth month we stipulate to reach our sales target that will remain constant until and if we decide to add capital investment and labor. 4) Proformance Financial Reports a) Proforma Cash work out Proforma Cash Budget January February March April May June July August September November December Inflows 50,000 20,000 32,455 60,221 15,822 13,122 9,122 4,233 2,445 2,124 3,600 Investment for 40% stake in the c ompany 4,300 10,324 9,800 5,787 6,458 5,457 9,500 3,100 1,200 2,457 3,000 Net Sales 12,122 12,000 12,800 14,500 10,300 8,000 16,000