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Introduction to Accounting and Finance: Hair silk- financial plan and pitch - Essay Example

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Introduction to Accounting and Finance: Hair silk- financial plan and pitch

The procedure for taking orders would be first come, first serve basis. As the orders increase, production would also be adjusted so it can come up with the volume. For the time being, credit transactions would not be entertained for the first two to three years of operations to avoid debtors. The concept of jus-in-time production by the Japanese would be adapted so there is no need for an inventory. The following is a summary of cost break up for our product. Total Sales (in ?) 445962 Total Units sold 63709 Selling cost per unit (in ?) 7 Variable Cost Direct materials ( in %) 25% of selling cost Direct Labour ( in %) 25% of selling cost Direct expenses (in %) 10% of selling cost Variable selling cost 7.5% of selling cost QN 2 MARGINAL COST STATEMENT One of the fundamental concepts that should be understood is Marginal Cost. According to Investopedia, marginal cost is “ the change in total cost from making or producing one additional item.” Any business is interested in determining the marginal cost because it has positive effects on economies of scale. Producers or manufacturers often make calculations that would help them arrive at the best production level. If a business would like a more concrete calculation of marginal cost, they can prepare a Marginal Costing Statement. The cost of raw materials along with labour is 25% of sales. Expenses would reach as much as 10% of the selling cost. Since the business would be utilizing a sales force, the commission and packaging cost will amount to 7.5%. As aforementioned, the selling cost is ? 7,yet the variable cost per unit is ? 4.8 per bottle. Production would entail fixed cost that would amount to ? 154100. Based on these figures,please refer to Table 1 for the Marginal Cost Statement. Table 1: Marginal Cost Statement of Hairsilk QN 3 BREAK EVEN ANALYSIS Almost all people doing business know the relevance of a break-even analysis. Having a reliable break-even analysis can help a business owner make sound decisions that would affect the financial health of his business. In a break-even analysis, production costs are classified into two categories, namely, Fixed and Variable. These two major types of costs are usually compared with the income generated from sales. By doing so, the volume of sales needed to incur no profit nor no loss state is determined. Hence, when production reaches a certain point where gains is equivalent to losses or revenue equals expenses, it is called a Break Even point ( This particular point is called Break-even point. Table 2 illustrates the Break even analysis of Hairsilk Sales = Variable expenses + Fixed expenses + Profit (Atrill & McLaney, 2008) Total number of units= 63709 Selling price/unit= ?7 Variable cost/unit= 4.8/bottle Fixed costs= 154100 7Q= 4.8Q+154100+0 2.2Q=154100 2.2Q=154100 Therefore, Q= 70046 The break- even point is attained at that point where profit is ‘zero’ Table 2: Break-even analysis of Hairsilk QN 3 CASH FLOW FORECAST Cash, as what business owners know, is the lifeblood of the business. Without cash, the business would simply fail. It is therefore crucial to project the movement of cash over a certain time period. This can be done through cash flow forecasting or cash flow management. The estimate of the timing and amount of cash moving in and out of the organization over a specific time period is called Cash ...Show more


Hair silk- financial plan and pitch
The business aims to manufacture 63,709 shampoo bottles during the first year of operations. Each unit would be priced at £ 7/bottle. The projections for sales revenue would be around 30% monthly…
Author : bergstromcathar
Introduction to Accounting and Finance: Hair silk- financial plan and pitch
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