Rogers Party Planners

You are the sole proprietor of a small party planning company that specializes in small community and company events (average of 200 people per event). You have one employee who you pay $200 per party. You are also responsible for paying payroll taxes. You rent a small storage unit which you use for storing party materials and supplies. You have to pay for liability insurance. Because of the Seasonal Nature of Party planning, you may increase advertising during specific seasons. The advertising expense is based on an average throughout the year. The number of parties per month is also an average throughout the year.

You are concerned that you might have cash flow issues during slow months and want to analyze how the different seasons may affect your income. You also want to see how increasing you're pricing during busy seasons may affect your income. You are thinking about hiring a second employee and perhaps taking on larger parties. You decide to explore all these different avenues by using the tools provided by Excel. You are also considering purchasing or building a facility that can be used for your events and parties.

Part 1. Use the data file Rogers.xls

Add a documentation sheet with author, date and purpose of workbook.

MAke an Income Statement with the following data: Enter formulas to calculate amount in cells with asterisks.

In the same worksheet as your income statement, make a single variable data table to analyze how the net income per month would change based on the number of parties per month. Use the range of parties from 1 per month to 16 per month. You can refer to the PDF and Word doc to check your table results. These are posted in D2L under the content area and named monthly income data table.

make a CVP Chart using the results of your data table. Save this in the same worksheet at your data table and income statement. Format according to the rubric on the last page of this Item

Use Goal Seek to determine the break-even point for Net Income (Net Income will be equal to zero) with the current values for revenue and expenses by changing the monthly number of parties. Indicate the solution in the documentation worksheet labeled: Break-Even Point Sales by Party Size. Please note the breakeven point in the documentation worksheet, and return the income statement back to the original values. Note that your data table should return to the original values as well.

d.) Create the following four scenarios based on the make a Scenario Summary with Total Monthly Revenue, Total Monthly Expenses and Net Monthly Income as the results cells. Please also name the Total Monthly Revenue, Total Monthly Expenses and Net Monthly Income cells accordingly. Name the cells used as changing cells and results cell in the scenario summary so that their names (and not the cell reference) will appear in the scenario summary. Use the names, Size of Party, Number of Employees, Number of Parties, and Price per Head. Save the summary worksheet as Alternative Scenarios.

Set up four scenarios as follows: (use these names for each of the scenarios)

1) Average Operations (Status Quo)

2) Reduced Number of Parties, Normal Price

3) Larger Parties, Additional Employee

4) More Parties, Additional Employee, Increased Pricing

Which Scenario do you recommend and why? Include your recommendations in the scenario summary worksheet.

Part 2. Loan Analysis Scenario

As another scenario you are considering building a facility in which you could hold parties and receptions. After researching your options, you realized that you would need to take out a loan for $500,000, which youwould like to repay over a ten year period. This includes kitchen equipment, furniture, and additional licensures. The kitchen equipment and furniture will cost you 25% of your total investment. The current interest rate is the prime rate plus 3%. The prime rate is currently 3.25%, this means your annual interest rate would be 6.25%. You will use Straight Line Depreciation over a 6 year period to determine the cost of your depreciation. The estimated salvage value of your equipment is $75,000.

make a Loan Analysis worksheet and Depreciation Worksheet using the following information:

1. What would your monthly payments be under the above scenario?

2. What is the future value of your loan after five years assuming you pay $2,500 per month?

3. How many total payments would it take to pay off this loan in years if you pay $3,000 per month?

4. How much could you borrow if you wanted to pay $3,000 per month over a 10 year period?

Revised Income Statement and Analysis

make a revised income statement using the payment amount that you determined in step 1 above AND depreciation. Only interest payments would be included in the income statement. Does this scenario seem feasible given your estimated monthly net income? Determine how depreciation affects your net income and cash flow? Remember depreciation is an expense, but it is a non-cash expense that you can add back in to increase your cash flow. Hint: see tutorial 9.

Another hint regarding depreciation and the income statements: you want to make a new income statement under each loan scenario and make sure to include depreciation The amount that you will use for depreciation is going to be 25% of $500,000 with a salvage value of $75,000.

What are some other considerations to take into account if you wish to own your facility? How might that affect your analysis? Please save your responses to this section a.), b.) and c.) to a worksheet named Solver Model.

b.) Interpreting Solver Models

Using your original income statement use solver model to make an answer report for the following, return your original income statement to 8 parties per month.:

How many parties can you have per month that minimizes your monthly material costs and returns no less than $4,000.00 per month. Than Save as ITEM 2