KIN OLIVE OIL COMPANY

KIN Olive Oil Company is a Turkish olive oil company founded in 2016 and aims to become a trusted household brand for those who value simplicity by making the best extra virgin olive oil made from natural and pure resources.

Since its inception, it has garnered success all over Europe and America as it offers premium Turkish extra virgin olive oil to the world. A big factor on why they are so successful is also because they take pride in promoting eco-friendly and sustainable practices in their craft. From here on out, they can only look to expand the brand.

In 2020, they are targeting ASEAN (South East Asia) countries as part of their expansion plan and Malaysia is the main focus. The reason is simple, Malaysias climate is unable to grow olives, and seeing that the reception for premium olive oil is amazing, it is a no-brainer that KIN should spread its wings to Malaysia.

KINs main focus for Malaysia is Kuala Lumpur and its neighbouring states first before reaching out to the whole country, and soon the neighbouring countries right after. KIN has teamed up with a few prominent supermarket brands (Giant, AEON, Jaya Grocer) to become their main distributors of their products.

Product

KIN Extra Virgin Olive Oil will be sold in 500ml glass bottles, and its retail price will be at RM45 per bottle.

The cost price of each bottle is RM21.

Estimated sales (units):

Per day: 400 bottles RM18,000 Per month: 12,000 bottles RM540,000 Per year: 144,000 bottles RM6,480,000

Since the product will be imported, KIN plans to set up their warehouse in Subang Jayas Industrial Park due to it being close to Port Klang, Malaysias main trading gateway via sea. Plant and machinery is kept at minimal as the product is already packaged in Turkey.

Capital

Land & land development 750,000 Building and civil works 400,000 Plant & Machinery 100,000 Vehicles 250,000 Working capital 500,000

Total assets 1,500,000 Capital cost 2,000,000

Capital will be 100% invested by KIN Olive Oil Company.

Fixed cost (month/year)

Warehouse rent 5,000 60,000 Salary 32,000 384,000 Utilities 3,000 36,000

Total fixed cost 40,000 480,000

Variable cost (RM per unit)

Extra Virgin Olive Oil 500ml 21.0 Import Fees 1.5 Labor 1.5 Overhead 1.0

Total variable cost 25.0

Estimated variable costs per:

Month: RM 300,000 Year: RM 3,600,000

Contribution Margin = Price - Variable Cost = RM45 - RM25 = RM20 = 44.44%

Breakeven point = Fixed Cost - Contribution Margin = 480,000/20 = 24,000 units

Margin of safety = ([144,000 - 24,000]/144,000) x 100 = 83.33%

Buying/Paying terms

Sales should be received by distributors by the middle of the month, 70% cash and 30% accounts payable

Maintenance fees shall be paid with 50% cash and 50% credit KIN has rented a commercial advertisement sign board in the middle of KL for marketing that needs to be paid middle of the year. Annual distributor consignment fees also need to be paid in the middle of the year

Day-to-day expenses for the month of June 2020:

1 - Paid Maintenance fees for labelling machines, RM 4,000 1 - Paid Labor Day bonus salary to workers, RM6,400 by cash 3 - Paid AEON and Giant annual distributor consignment fee of RM 32,000 paid by cash 5 - Last months remaining 30% of distributor sales received by cash, RM 162,000 6 - Electrical expenses RM2400, paid by cash 10 - Paid full refunds to distributors for faulty/broken bottles, RM3,600 on accounts payable 14 - Annual sign board advertisement fee, RM 36,000 by cash 17 - Paid Jaya Grocer annual distributor consignment fee, RM10,000 on account 18 - Internet and phone bills on accounts payable, RM600 22 - Paid social media (Facebook, Instagram) advertising boost, RM2000 cash 25 - Received 70% sales from distributors, RM 378,000 by cash 28 - Paid worker salary by cash, RM 32,000

Question: Record a double-entry journal, a statement of profit or loss, statement of changes in equity and statement of financial position with the information provided.

ASAP please.