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New Slide Footwear Company - Assignment Example

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During the preparation of financial documents, there are several assumptions that must be used to establish business projections. These assumptions determine the inclination of the business’ operational costs, as well as sales revenue…
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New Slide Footwear Company
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New Slide Footwear Company

Download file to see previous pages... These are classified as fixed and variable cost: Where, fixed costs are those that remain constant regardless of production, while variable costs will vary with the production (Khan & Jain, 2008; Peavler, 2011). In practice, we have established all the fixed cost as rent and maintenance, while variable costs as wages, materials, utilities and other expenses. This will ensure that we make accurate decisions in preparing all the financial documents for New Slide Footwear Company (Shim & Joel, 2008). On the other hand, revenue assumptions for the proposed business include the pricing of the new product and potential sales during the operations. . As such, we arrived at our unit pricing through conducting an intensive market research that considered several factors such as, the potential target market, cost of materials, forecasted market share and other market pricing values used by existing competitors (FMAG, 2011). Therefore, these assumptions enabled us to prepare relevant financial documents as observed in the following sections. Marginal Costing Cost Statement. Marginal costing cost statement is a document used in marginal costing to create a platform for making all the cost and revenue assumptions (Globusz, 2001). It is a basic document that is useful in preparing financial documents such as the cash flow budget, forecast income statement, and forecast balance sheet....
It is a basic document that is useful in preparing financial documents such as the cash flow budget, forecast income statement, and forecast balance sheet (Kotler, 2000; Shim & Joel, 2008). Table 1 below represents the cost statement for the proposed business venture. Table 1: Marginal Costing Cost Statement for New Slide Footwear Company. Particulars Per Unit Per 12 Months Sales ? ? ? ? Number of Units 100,000 Sales 22.00 2,200,000 Variable Costs Direct Materials 5.06 506,000 Direct Labor 1.12 112,000 Direct Overheads 3.06 306,000 Total Marginal Cost 12.76 1,276,000 Contribution 9.24 924,000 Fixed Costs 5.06 506,000 Net Profit 4.18 418,000 The costing statement shows that the venture will have a contribution margin of ?9.24 per unit of New Slide sports shoes, which reflects to ?924,000 for the first 12 months of operation. The business will generate ?418,000 worth of net profit, after selling the first 100,000 units, which is 19% of the sales value for the whole year. After adjustments, the fixed costs for the venture will amount to approximately ?506,000. 3.0 Break Even Analysis. Breakeven analysis is an efficient method used in by business managers in making appropriate decision for shaping the future of a business venture (Globusz, 2001). Precisely, breakeven analysis establishes the breakeven point (BEP), which is the point where an investment recovers its investment but does not incur any profits or losses (Frongello, n.d; Kotler, 2000). The following table gives the breakeven data for the proposed venture. Table 2: Break Even Table for New Slide Footwear Company. Sales Sales Variable Contribution Fixed Total Net Units Revenue ? Cost ? Margin ? ...Download file to see next pagesRead More
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