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Course Project Week 4 For this next part of the project you will build the Income Statement and Balance Sheet for the Bike Repair &

Course Project Week 4

For this next part of the project you will build the Income Statement and Balance Sheet for the Bike Repair & Maintenance Shop (BRMS) for 2018. Use the information below and add another sheet to your Excel Workbook.

BRMS Information for 2018

In 2017, the repair shop was opened in October and ended the year with a ($10,500) operating loss.

Supply Inventory of parts & supplies maintained

$3,000

Replacement parts are ordered as they are used.

Shop hours of operation: 52 weeks a year.

Monday - Friday 11am - 7pm

8 hrs

Saturday 9am - 7pm

10 hrs

Staff

FTEs

Salary

Manager

1

$ 40,000

bookkeeper/purchaser

0.8

$ 20/hr

Repairers

2.5

$ 18.50/hr

Employee benefits: 20% of salary for the manager; 17% of salary for all others.

Supply costs

$ 65,000

utility costs

$ 7,200

marketing costs

$ 10,000

other costs

$ 22,000

Services Provided:

Budgeted: Repair Services: $100 each for 2,600 repairs

New Packages being considered

Package A: Preventative maintenance service package $ 80

Package B: Basic inspection, lube, adjust & clean shifting braking system $ 90

Package C: Annual peak performance package $100

Package D: Basic inspection, + replace shifting cables & preventative maintenance package $250

Estimated Services Provided under the new options:

Package A: 25 per week

Package B: 15 per week

Package C: 10 per week

Package D: 5 per week

Bike Repair & Maintenance Shop

Budgeted Income Statement

For the Year Ended December 31, 2018

Revenue

Repair Fees

?

Other Income

?

Gross Revenues

?

Expenses

Salaries & Benefits

?

Wages & benefits

?

Utilities

7,200

Marketing costs

10,000

Supply costs

65,000

Other costs

22,000

Total Expenses

104,200

Operating Income

?

Income tax

?

Net Income

$(43,692)

Profit Margin

?

a) For the first full year of operations, BRMS was budgeted to lose over $40,000 performing repair services. These repairs have high fixed costs for the replacement parts in the repairs. If BRMS decided to expand their services to provide bicycle inspections and preventative maintenance, which use more employee time than supplies, what would the projected change in profit be?

b) If a decision is made to add more service oriented repairs is there a change in fixed and variable costs for repair services?

c) Complete a new ACTUAL Income Statement based on your decisions in a & b. Then complete the Balance sheet below.

Bike Repair & Maintenance Shop

Balance Sheet

December 31, 2018

Assets

Cash

$ 8,500

Investments

-

Accounts Receivable (net)

6,000

Prepaid Expenses

3,000

Inventory

?

Plant, Property & Equipment

5,000

Less: Accumulated Depreciation

(167)

Total Assets

$ 25,333

Liabilities

Accounts Payable

$ 4,500

Accrued Liabilities

700

Salaries Payable

4,000

Long-term liabilities

-

Total Liabilities

$ 9,200

Common Stock

?

Retained Earnings

?

Total Stockholders' Equity

?

Total Liabilities & Stockholders' Equity

?

Next Steps: Financial Analysis for both BRBS & BRMS.

Using the information below for BRBS complete the financial metric analyses as indicated in Chapter 9 of the textbook for both BRMS (above) & BRBS.

The Income Statement for the Buy-Right Bike Shop is provided below for 2017 and 2018.

BUY-RIGHT BIKE STORE

Income Statement

2018

2017

Sales - Online

$ 11,080,000

$ 6,240,000

Sales - In store

580,400

312,000

Sales returns

221,600

Gross Revenues

11,438,800

6,552,000

Cost of Goods sold

5,540,000

3,276,000

Contribution Margin

$ 5,898,800

$ 3,276,000

Expenses

Salaries & Benefits

$ 144,000

$ 139,206

Wages & benefits

391,880

274,997

Utilities

13,200

13,000

Marketing costs

200,000

200,000

Contributions & Community Involvement

58,040

31,200

Other costs

1,375,000

1,200,000

Operating Income

3,716,680

1,417,597

Income tax

1,077,837

411,103

Net Income

$ 2,638,843

$ 1,006,494

Profit Margin

23%

15%

Sales volume

Bike C - online

95,000

60,000

Bike A - online

4,800

-

Bike C - in store

5,100

3,000

Bike A - in store

200

-

total Sales volume

100,000

63,000

The Balance Sheet for Buy-Right Bike Store is provided below:

Buy-Right Bike Store

Balance Sheet

December 31, 2018

Assets

Cash

$ 1,500,000

Investments

225,000

Accounts Receivable (net)

1,250,000

Prepaid Expenses

30,000

Inventory

58,280

Plant, Property & Equipment

1,800,000

Less: Accumulated Depreciation

60,000

Total Assets

$ 4,923,280

Liabilities

Accounts Payable

83,250

Accrued Liabilities

4,414

Salaries Payable

7,913

Long-term liabilities

30,000

Total Liabilities

$ 125,577

Common Stock

1,152,366

Retained Earnings

3,645,337

Total Stockholders' Equity

$ 4,797,703

Total Liabilities & Stockholders' Equity

$ 4,923,280

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