Assignment: You were responsible for the proposal of the Desk Corp's Expansion. The building was built, equipment installed, staff hired and began operations in Q$1.$ After $4$ quarters of operations, you are responsible for putting together a financial analysis of how the year went.

Use the techniques learned in the prior module$($s$)$ to analyze the income statement.

What were the Operating Margins, Gross Profits, Profit Margins by product line?

Assume equal allocation of all non$-$lumber expenses for each desk $($hardware$,$ salary, benefit, utility, depreciation, etc$).$

What are is the most profitable type of desk to sell?

Why is it more profitable than the other two types?

What risks do you see within the operating income when you can now see it at this level of detail?

What financial metrics will help you understand the financial risk within the organization?

The Desk Corp

Income Statement

Revenue $8,000,000$

COGS

Lumber $1,900,000$

Hardware $200,000$

Finishing supplies $300,000$

Cost of Goods Sold $2,400,000$

Gross Profit $5,600,000$

Administrative Expenses $100,000$

Salary & Benefits $1,100,000$

Utility Expenses $300,000$

Depreciation $1,933,000$

Total Operating Expenses $3,433,000$

Income From Operations $2,167,000$

Net Income Before Tax $2,167,000$

Corporate Income Tax Expense $650,100$

Net Income $($Loss$)1,516,900$

YEAR $1$

Price Per Desk Q$1$ Volume Q$2$ Volume Q$3$ Volume Q$4$ Volume Y$1$ Volume

Oak Desks $$2,500165265245235910$

Walnut Desks $$3,0003353654054251,530$

Cherry Desks $$3,500115185210205715$

$6158158608653,155$

Historic Revenue

Revenue IRR$/$NPV Analysis Q$1$ Q$2$ Q$3$ Q$4$ Y$1$ Actual Y$1$ Variance

Oak Desks $2,000,000412,500662,500612,500587,5002,275,000275,000$

Walnut Desks $4,000,0001,005,0001,095,0001,215,0001,275,0004,590,000590,000$

Cherry Desks $2,000,000402,500647,500735,000717,5002,502,500502,500$

Total Revenue $$8,000,0001,820,0002,405,0002,562,5002,580,000$ $$9,367,500$ $$1,367,500$

Lumber

Oak $650,000150,000250,000250,000250,000900,000(250,000)$

Walnut $800,000201,000216,832235,922242,857896,611(96,611)$

Cherry $450,00089,444147,159159,783159,444555,831(105,831)$

Total Lumber $$1,900,000440,444613,991645,705652,302$ $$2,352,442$ $$(452,442)$

Hardware

Drawer Slides $40,0009,22512,22512,90012,97547,325(7,325)$

Knobs & Handles $125,00027,67536,67538,70038,925141,975(16,975)$

Electrical & Cable management $35,0007,99510,59511,18011,24541,015(6,015)$

Total Hardware $$200,00044,89559,49562,78063,145$ $$230,315$ $$(30,315)$

All other Expenses

Salary Wages $200,00050,00050,00050,00050,000200,000-$

Hourly Wages $600,000150,000145,000145,000150,000590,00010,000$

Benefit Expenses $300,00075,00073,12573,12575,000296,2503,750$

Total Salary & Benefits $$1,100,000275,000268,125268,125275,000$ $$1,086,250$ $$13,750$

Utility Expenses $300,00068,88091,28096,32096,880353,360(53,360)$

Depreciation $1,933,000483,250483,250483,250483,2$