Question
Business Start Up Project Business Type Lemonade Stand Location Mall Business Opening Date April 1 st Hours of Operation 10am 9pm Monday through Saturday, 12pm
Business Start Up Project
Business Type | Lemonade Stand |
Location | Mall |
Business Opening Date | April 1st |
Hours of Operation |
|
Weekly Mall Traffic | 100,00 patrons, including children |
Market Analysis |
|
Accepted Form of Payment | ALL SALES WILL BE CASH |
Monthly Rent |
|
Material Purchases | All material purchases will be paid for in cash; no trade credit will be used.
|
Employees |
|
Hourly Rate (attendants) | minimum wage in Ohio ($8.70 per hour) plus 30% for benefits (note: you will need to calculate the hourly wage rate as a single amount: minimum wage plus benefits costs) |
Hourly Rate (supervisor) | $21.00 per hour (this already includes benefits). The supervisors salary is for an employee other than yourself. |
Capital Equipment Cost | Setting up the stand is $250,000 which includes all equipment, counters, signage, refrigerators, ice-machine, and cash register.
Note: free loans where you do not have to make payments for X-years on the loan are not to be used. |
- Starting (opening) Balance Sheet (time zero)
- Create a Balance Sheet showing starting Assets, Liabilities, and Shareholder's Equity. The assets will include cash, equipment, inventory, etc. The long-term liabilities will include the bank loan.
- The shareholder's equity will include starting capital which must be sufficient to purchase starting inventory, pay employees and rent for the first 2 months, pay the $4500 rental deposit, pay $50,000 for the equipment, and make payments on the equipment loan for the first year.
- The equity is your cash investment in the business and may come from your personal savings, personal investments, from your family and friends, a second mortgage on your home, or your kids' piggy banks. It may also partially come from a partner or partners. The cash investment will be shown as Shareholder's Equity on the Balance Sheet. Some of this cash will be spent on equipment ($50,000), starting inventory, rent deposit ($4500), et The remainder will appear as cash on hand on the Balance Sheet to help cover the monthly expenses going forward.
- Projected Income Statement for First Month and End of Year 1
- Based on your sales estimates, calculate the cost of operating the business for the first month and then for the first 12 months of operation including materials costs, labor, accessories (straws and napkins), rent payments, interest payments, and depreciation. Note: Estimated sales are cyclical. For example, you will need to estimate a higher sales volume (greater than 20 cups per hour) during the summer season, etc. You must provide your monthly sales estimates.
- You will need to calculate the direct materials costs to make one cup of lemonade. Make sure to include the costs for the cup, lid, straw, and napkins.
- Based on the above calculated cost and the initial sales estimates, establish a projected selling price per cup with a minimum 20% profit.
- Prepare a Projected Income Statement for the first month of operations. Then, prepare a Pro Forma Income Statement as of the close of year 1.
- Cash Flow Analysis
- Calculate cash flows at start-up and then for each month. Cash flow is the most important financial data in a business, especially a start-up. Business happiness is positive cash flow.
- Projected Balance Sheet for First Month of Operations and End of Year 1
- Calculate a projected Balance Sheet at the close of month 1 using the starting Balance Sheet, the Projected Income Statement data, and the Cash Flow Analysis. Then prepare a projected Balance Sheet as of the close of year 1.
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