Profit and Loss Account Balance Sheet Contribution and Breakeven Analysis
XYZ Juice Business
Profit and Loss Account for the year ended 31st Dec 20XX
BP                                    BP
Revenue (sales) [27×25×3.50×52]                                                           122,850
Cost of goods sold
Ingredients refill (2595×12)                                                                          (31,140)
Gross profit                                                                                                  91,710
Salaries (5100×12)                                           61,200
Lease payment (87×4×12)                                 4,524
Electricity (100×12)                                           1,200
Rent (650 × 12)                                                7,800                                   (74,724)
Profit before interest tax                                                                                16,986
Less Tax (20%)                                                                                           (2,203.20)
Profit after Tax                                                                                               14,782.80
The profit and loss account considered the cost of goods sold as the cost of refills made per year on the ingredients. Since there are no particular number of sales given for the juices, this profit and loss account used the example of 25 juices sold per week. Considering that there are 27 types of juices and that the average price per juice is 3.50 BP, this value was calculated per year in order to obtain the amount of sales revenue made from the sale of 25 juices of each type per week. Additionally, as the same example considers that if 25 juices of each type are sold per week, the amount collected can be able to pay for the fixed costs and the lease agreements, the profit and loss account only considered the fixed costs to be paid for using the sales proceeds to be rent, salaries, lease payment for the equipment and electricity payment. All the costs were considered annually. This was done by multiplying with 12 as most of these costs were incurred on a monthly basis. Considering that there are twelve months through which the business operates in a year, the costs were considered annually. In this regard, the revenue from sales and all the costs incurred were calculated per month basis.
The preparation of profit and loss account often puts into consideration numerous aspects of the trading transactions. Typically, the preparation of the trading, profit and loss account considers all the revenues collected from sales. The revenues are expected to be purely from the operating cycle of the business. It also considers all the costs incurred in raising the revenue collected from sales. This will involve various costs such as transportation costs, packaging costs, insurance costs, and costs of space, salaries, administration costs, electricity costs, insurance and other costs that directly affect the profits of the business firm. In this example, the numerous costs have not been included. Basically, the sales estimation undertaken in this case is only limited to costs considered fixed. Furthermore, there is no known value of the sales as it is estimation. The assumption here is that there are 52 weeks per year. Therefore, all the sales per week are multiplied by 52 to account for the whole year of operation.
XYZ Juice Business
Statement of financial position as at 31st Dec 20XX
                                             Cost (BP)                     Acc. Dep (BP)                     NBV (BP)
Non-current assets
Smoothing Kart                   9,500                             950                                       8,550
Equipment                           5,000                              500                                       4,500
Plant                                 80,000                            8,000                                       72,000
Current Assets
Lease prepayment                                                 10,005
Trade receivables                                                  30,000
Uniforms (360×6)                                                  2,160
Card reader (160 ×2)                                                 320
Recycling bins                                                        140                                 42,625
Cups (500×12)                                                       6,000
Napkins (150 ×12)                                                 1,800
Cutlery   (300×12)                                                 3,600
Plastic bags (20×12)                                                 240
Loyalty cards (45×12)                                               540
Business bank account (12×12)                               144                                    12,324
Working capital                                                                                                    139,999
Financed by
Long term liabilities                                           45,217
Equity                                                                 80,000
Retained Earnings                                               14,782
Total Equity                                                                                                           139,999
In the preparation of the statement of the financial position of the business, numerous assumptions have been made here. To start with, it has been assumed that the owner converted his house as the business premises. The business premise is estimated to be worth 80,000 BP. This amount is considered as the owner’s equity in the business. The business has also borrowed a loan from the bank worth 45,217 BP to finance the activities of the business. The net profit after tax during the year has been ploughed back into the business as part of the financing. Therefore, we have a balanced statement of financial position for the company. The assumptions above are necessary as most of the values needed for the preparation of the statement of financial position for the business as at the period of consideration are practically unavailable from the information given.
XYZ Juice Business
Contribution Statement
BP                   BP per unit     BP
Selling Price                                            3.5
Less: Variable Costs
Direct Material         0.5
Direct Labor             0.5
Direct Expenses        0.4
Less Total Variable Costs                       (1.4)
Contribution per Unit                             2.1
Total Contribution for the year (2.1x 27×25 x 52)            73,710
Less Fixed Costs                                                             (56,724)
Profit for the year                                                              16,986.
Breakeven Point analysis
Break-even point in juices per year = fixed expenses per year / contribution margin per juice
Break-even point in juices per year = 74,724 / 53
Break-even point in juices per year = 1,410 juices per year
In the analysis of contribution and break-even point, several assumptions have also been made. For instance, we have assumed that the variable costs in this case include both semi fixed and variable costs. Similarly, we have assumed that the only fixed are the semi-variable costs.
XYZ Juice Business
BP                                       BP
Operating profit                                                                                                          14,782.80
Add: depreciation                                                                                                           9,450
Less: closing inventory                                                                                                    0
Increase in debtors (receivables)                                    2000
Increase in creditors (payables)                                            0
Cash from operations                                                                                                    3500
Less: Taxation paid                                                                                                       (2,203.20)
Net Cash used in investing activities                                                                            (6,000)
Purchase of Fixed Assets                                                                                              (14,500)
Net Cash from financing activities                                                                                   5,000
Increase in cash and cash equivalents                                                                               3,000
Total Cash Flows                                                                                                          15,029.60

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