Glak Love Jewelry Design & Mfg.

Revenues

First Monthof Operations: 10,000 units sold at $8 per unit.

Second Monthof Operations: 20,000 units sold. The first 10,000 at $8 per unit, and the second 10,000 at $7 per unit.

Third Monthof Operations: 40,000 units sold at $6 per unit.

Cash Flow characteristics: Goods are shipped at the end of the month are paid to the Company at the end of the following month by the customer.

Cost of Goods Soldis made up of three components:

Direct Materials- -$2 per unit

Direct Labor---$3 per unit, renegotiated to $2 in the third month with new pricing

Fixed Machinery and Mfg.machinery and space rental costs---$10,000 per month, $15,000 with new labor price in month 3

Cash flow characteristics: Mfg. is outsourced to a different organization and all costs are paid the next month following the month they are produced - Glak love receives trade credit from its subcontract manufacturer.

Operating Expenses: the remainder of the company's expenses includes the following:

Salaries for office staff and the Ownerare fixed at $120,000 per year or $10,000 per month. $50,000 of the total goes to the owner

Advertisingis a fixed rate contract with an internet services firm which provides the company with secure servers, web analytics and Search Engine Optimization services for $3000 per month.

Office Rentalis a fixed yearly rental contract for the administrative offices which costs the company $4500 per month.

Insuranceis a fixed rate contract for insurance on the plant property and equipment is $1000 per month.

Cash flow characteristics: All operating expenses are paid during the month that they are incurred.

Ownership and Taxation: The Company is owned by a single individual who is paid a salary of $50,000 per year. The Company is organized as an LLC and is taxed as a pass-through entity which means that the Owner is taxed on her combined salary and the pre-tax income of the business.

Appendix Continued:

	Opening			First Month				Second Month
	Balance Sheet		Income Statement		Cash Flow	Balance Sheet	Income Statement	Cash Flow	Balance Sheet
Cash	75,000		Revenues
Accounts Receivable			Direct materials
			Direct Labor
Total Assets	75,000	A	Machinery rent
Accounts Payable		=	Cost of Goods Sold
		L	Salary
Owners' Equity		+	Advertising
Owners Capital	75,000		Office Rental
Retained Earnings			Insurance
Total Owners Equity	75,000	OE	Operating expenses
			Net Pre-tax Profit

			Third Month
		Income Statement		Cash Flow	Balance Sheet
Cash		Revenues
Accounts Receivable		Direct materials
		Direct Labor
Total Assets	A	Machinery rent
Accounts Payable	=	Cost of Goods Sold
	L	Salary
Owners' Equity	+	Advertising
Owners Capital		Office Rental
Retained Earnings		Insurance
Total Owners Equity	OE	Operating expenses
		Net Pre-tax Profit

Instructions for your tutor:

just the 3 months because it does not make sense to post month 2 or 3 in a different question when you need the first month anyway.

Answer from your tutor:

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reinlejn0624Answered15 hours ago

Income Statement
	Month 1	Working
	Balance Sheet	Cash Flow
Units Sold	10,000.00
Revenues	80,000.00		10000 units @ 8 per unit
Direct Materials	20,000.00		10000 units @ 8 per unit
Direct Labor	30,000.00		10000 units @ 8 per unit
Machinery Rent	10,000.00
Cost of Goods Sold	60,000.00
Operating Expenses
Salary-Staff	5,833.33	5,833.33
Salary-owner	4,166.67	4,166.67
Advertising	3,000.00	3,000.00
Office Rental	4,500.00	4,500.00
Insurance	1,000.00	1,000.00
Operating Expenses	18,500.00	18,500.00
Pretax profits	4,500.00
Taxable amount
Salry of Owner	4,166.67
Add: Profit (1500-4167)	- 2,666.67
Balance Sheet
	Opening Balance	For 1st Month	At the end of 1st month
Assets
Cash	75,000.00	- 18,500.00	56,500.00
Accounts Receivable		80,000.00	80,000.00
Total Assets	75,000.00	61,500.00	136,500.00
Accounts Payable		60,000.00	60,000.00
Owner's Equity
Owner's Capital	75,000.00	4,167.00	79,167.00
Retained Earnings		- 2,667.00	- 2,667.00
	75,000.00	1,500.00	76,500.00
Equity and Liabilities	75,000.00	61,500.00	136,500.00

Income Statement
	Month 2	Working
	Balance Sheet	Cash Flow
Units Sold	20,000.00
Revenues	150,000.00	80,000.00	10000 units @ 8 per unit + 10000 units @ 7 per unit
Direct Materials	40,000.00	20,000.00	20000 units @ 2 per unit
Direct Labor	60,000.00	30,000.00	20000 units @ 3 per unit
Machinery Rent	10,000.00	10,000.00
Cost of Goods Sold	110,000.00	60,000.00
Operating Expenses
Salary-Staff	5,833.33	5,833.33	70000/12 months
Salary-owner	4,166.67	4,166.67	50000/12 months
Advertising	3,000.00	3,000.00
Office Rental	4,500.00	4,500.00
Insurance	1,000.00	1,000.00
Operating Expenses	18,500.00	18,500.00
Pretax profits	21,500.00
Taxable amount
Salry of Owner	4,166.67
Profit	21,500.00
Balance Sheet
	Opening Balance	For 2nd Month	At the end of 2nd month
Assets
Cash	56,500.00	1,500.00	58,000.00
Accounts Receivable	80,000.00	70,000.00	150,000.00
Total Assets	136,500.00	71,500.00	208,000.00
Accounts Payable	60,000.00	50,000.00	110,000.00
Owner's Equity
Owner's Capital	79,167.00	4,166.67	83,333.67
Retained Earnings	- 2,667.00	17,333.33	14,666.33
	76,500.00	21,500.00	98,000.00
Equity and Liabilities	136,500.00	71,500.00	208,000.00

Income Statement
	Month 3	Working
	Balance Sheet	Cash Flow
Units Sold	4,000.00
Revenues	240,000.00	80,000.00	40000 units @ 6 per unit
Direct Materials	80,000.00	20,000.00	40000 units @ 2 per unit
Direct Labor	80,000.00	30,000.00	40000 units @ 2 per unit
Machinery Rent	15,000.00	10,000.00
Cost of Goods Sold	175,000.00	60,000.00
Operating Expenses
Salary-Staff	5,833.33	5,833.33	70000/12 months
Salary-owner	4,166.67	4,166.67	50000/12 months
Advertising	3,000.00	3,000.00
Office Rental	4,500.00	4,500.00
Insurance	1,000.00	1,000.00
Operating Expenses	18,500.00	18,500.00
Pretax profits	46,500.00
Taxable amount
Salry of Owner	4,166.67
Profit	46,500.00
Balance Sheet
	Opening Balance	For 3rd Month	At the end of 3rd month
Assets
Cash	58,000.00	21,500.00	79,500.00
Accounts Receivable	150,000.00	90,000.00	240,000.00
Total Assets	208,000.00	111,500.00	319,500.00
Accounts Payable	110,000.00	65,000.00	175,000.00
Owner's Equity
Owner's Capital	83,333.67	4,166.67	87,500.33
Retained Earnings	14,666.33	42,333.33	56,999.67
	98,000.00	46,500.00	144,500.00
Equity and Liabilities	208,000.00	111,500.00	319,500.00

	Breakeven
Income Statement
Revenues
Direct materials
Direct Labor
Machinery rent
Cost of Goods Sold
Salary
Advertising
Office Rental
Insurance
Operating expenses
Net Pre-tax Profit

Calculate for the Third Month:

Current Assets

Current Liabilities

Current Ratio

Owners' Equity

Cost of Goods Sold

Gross Profit Margin