Please help! I'm confused about how to make up results for the first quarter and then how to set up the financial statements.
It has been estimated that 50% of all new businesses fail within two years of their startup. As many as 80% fail within the first five years. The purpose of this case is to encourage you to critically consider the question What is it that business planners fail to include in their projections? John wants to sell pizza. He has a great recipe John has started to sell pizzas. His business is up and running but John lacks the expertise to analyze the results. He is not sure about the numbers. John has enlisted you as his consultant and trusted advisor to help him succeed. Your focus should be on the accounting side. You make up the numbers for the Static Budget and Actual Results and assume that those are John's results for the first quarter. 1. Make a list of all major recurring monthly costs an average person would consider in a budgeting assumption (for the first three months, January, February, and March--one quarter only). 2. Prepare a break-even analysis. Think about the average number of pizzas that need to be sold monthly to break even, and the sales in dollars required to break even. Consider the reasonableness of your answer. 3. Prepare a budget. Estimate the sales and estimate the expenses for each month of the first quarter. 4. Prepare a simple Income Statement (think of cash receipts and cash disbursements --you make up the actual numbers) for the first 3 months. Assume John needs a $2,000 per month personal living expenses (draw). It has been estimated that 50% of all new businesses fail within two years of their startup. As many as 80% fail within the first five years. The purpose of this case is to encourage you to critically consider the question What is it that business planners fail to include in their projections? John wants to sell pizza. He has a great recipe John has started to sell pizzas. His business is up and running but John lacks the expertise to analyze the results. He is not sure about the numbers. John has enlisted you as his consultant and trusted advisor to help him succeed. Your focus should be on the accounting side. You make up the numbers for the Static Budget and Actual Results and assume that those are John's results for the first quarter. 1. Make a list of all major recurring monthly costs an average person would consider in a budgeting assumption (for the first three months, January, February, and March--one quarter only). 2. Prepare a break-even analysis. Think about the average number of pizzas that need to be sold monthly to break even, and the sales in dollars required to break even. Consider the reasonableness of your answer. 3. Prepare a budget. Estimate the sales and estimate the expenses for each month of the first quarter. 4. Prepare a simple Income Statement (think of cash receipts and cash disbursements --you make up the actual numbers) for the first 3 months. Assume John needs a $2,000 per month personal living expenses (draw)
