Glak Love Jewelry Design & Mfg.

Revenues

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

Second Month of Operations: 20,000 units sold. The first 10,000 at $10 per unit, and the second 10,000 at $8 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 Sold is 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 i.e. paid the next month after the month they are received.

Operating Expenses: the remainder of the companys 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 following tax rates are in affect for the purposes of calculating tax on taxable income:

Corporate Tax Rate: 30%

Individual Tax Rate: 40%

Dividend Tax Rate: 15%

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	100,000	0	56,500	180,000	100,000	78,000
Accounts Receivable			Direct materials	20,000	0	100,000	40,000	0	180,000
			Direct Labor	30,000	0		60,000	0
Total Assets	75,000	A	Machinery rent	10,000		156,500	10,000	0	258,000
Accounts Payable		=	Cost of Goods Sold	60,000		AP 60,000	110,000	(60,000)	AP 110,000
		L	Salary	10,000	(10,000)		10,000	(10,000)
Owners Equity		+	Advertising	3,000	(3,000)		3,000	(3,000)
Owners Capital	75,000		Office Rental	4,500	(4,500)	75,000	4,500	(4,500)	75,000
Retained Earnings			Insurance	1,000	(1,000)	21,500	1,000	(1,000)	73,000
Total Owners Equity	75,000	OE	Operating expenses	18,500		96,500	18,500		148,000
			Net Pre-tax Profit	21,500		156,500	51,500	21,500	258,000

			Third Month
		Income Statement		Cash Flow	Balance Sheet
Cash		Revenues	240,000	180,000	129,500
Accounts Receivable		Direct materials	80,000	0	240,000
		Direct Labor	80,000	0
Total Assets	A	Machinery rent	15,000	0	369,500
Accounts Payable	=	Cost of Goods Sold	175,000	(110,000)	AP 175,000
	L	Salary	10,000	(10,000)
Owners Equity	+	Advertising	3,000	(3,000)
Owners Capital		Office Rental	4,500	(4,500)	75,000
Retained Earnings		Insurance	1,000	(1,000)	119,500
Total Owners Equity	OE	Operating expenses	18,500		194,500
		Net Pre-tax Profit	46,500	51,500	369,500

	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 Breakeven for the first month at $10 per unit

Calculate for the Third Month:

Current Assets

Current Liabilities

Current Ratio

Owners Equity

Cost of Goods Sold

Gross Profit Margin