Glak Love Jewelry Design & Mfg.

Revenues

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

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

Third Month of 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 Owner are fixed at $120,000 per year or $10,000 per month. $50,000 of the total goes to the owner

Advertising is 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 Rental is a fixed yearly rental contract for the administrative offices which costs the company $4500 per month.

Insurance is 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