1. Prepare three years of monthly cash budgets, yearly income statements, and yearly balance sheets for the jewelry business Daisy & Company.
General Information:
1. This is a family-run jewelry store.
2. Assume it is a sole proprietorship, so there are no corporate taxes. The income of the business is taxed as personal income to the business owner.
3. The physical location of the business is inside a shopping mall. The company does not pay additional property taxes or any other associated fees except for monthly rent.
Financial Information:
1. Sales forecasts for 2011 are listed below.
|
Month
|
Sales [in thousands]
|
|
January
|
$120
|
|
February
|
$200
|
|
March
|
$180
|
|
April
|
$200
|
|
May
|
$200
|
|
June
|
$210
|
|
July
|
$210
|
|
August
|
$220
|
|
September
|
$250
|
|
October
|
$280
|
|
November
|
$300
|
|
December
|
$350
|
2. Assume sales are forecast to decrease by 5% annually from 2012 - 2013 due to the current economic climate. The seasonal sales pattern will still apply.
3. An equity contribution of $100,000 cash was made at the start of the jewelry store.
4. Employee Related Expenses: Assume that the jewelry store is open 12 hours each day X 363 days [4, 356 hours]. Daisy & Co. also employs individuals to work part-time at 6 hours each day X 363 days each year [2,178 hours]. Other employee related expenses are 5% of salaries and wages. Assume the total salaries and wages are paid on an equal monthly basis.
|
Owner's Salary
|
$125,000
|
|
1 Floor Manager
|
4,356 x $22.75 = $99,099
|
|
1 Purchasing Manager
|
4,356 x $17.25 = $75,141
|
|
2 Full-Time Sales Clerks
|
4,356 x $11.00 x 2 = $95,832
|
|
2 Part-Time Sales Clerks
|
2,178 x $9.75 x 2 = $42,471
|
|
1 Part-Time Purchasing Clerk
|
2,178 x $12.50 = $27,225
|
|
1 Cleaning Lady
|
$8,000
|
|
Total Salaries & Wages
|
$472,768
|
5. Daisy & Co. was issued a $500,000, 15-year loan, issued at 12.65% interest that required monthly payments. The loan proceeds were used for:
|
Rental space remodel
|
$180,000
|
|
Initial inventory purchase
|
$320,000
|
6. The rental space remodel is attributed to furniture and fixtures that are being depreciated on a 5-year, straight-line basis.
Other Information:
1. Daisy & Co. wishes to maintain a $35,000 minimum cash balance.
2. Advertising and marketing related expenses are 2% of sales.
3. COGS are 35% of sales. The company pays cash for inventory in the month of sale.
4. Insurance expense is 1.5% of sales.
5. Administrative expenses are 1.75% of sales
6. Utilities and telephone are included in the monthly rent of $9,000.
7. Bank charges are 1% of sales.
8. Daisy & Co. has a 60-day credit policy. Approximately 30% of their customers pay on credit and the remainder pay in cash. Assume half of all of the customers who purchased on credit will pay within one month and the remainder will pay the following month.
9. Additionally, operating expenses are 4.5% of sales.