The North Central Water Company has finalized its financial statements for the 2019 financial year. The Company's board of directors has asked you, their cost accountant, to look at the financial results and to compare the financial performance for the 2019 fiscal year to the results of the 2018 financial year. The board would also like you to project the revenues and expenses for the 2020 financial year based on several key assumptions. They have asked you to submit an excel file containing the financial results and budget projections as well as a one-page memorandum of your findings.

Financial Results:

Total Number of Customers 26,000 25,000

2019 % of Total Revenues 2018 % of Total Revenues

Revenues:

Water Sales $1,162,000  $1,200,000 

Late Fees 87,000  68,000 

Fire Hydrant Fees 114,500  122,000 

Total Revenues $1,363,500 100% $1,390,000 100%

Expenses:

Cost of Water Sold $512,000 $278,000 

Payroll Expense 608,000 450,000 

Overhead Expense 292,050 200,000 

Miscellaneous Expenses 64,075.  78,000 

Total Expenses $1,476,125  $1,006,000 

Net Income (Loss) <$112,625>  $ 384,000 

I. Excel Analysis (Please submit your answers with the excel file provided for you in I learned entitled "North Central Financial Results- Student Copy".

Based on the financial results provided above, complete the excel spreadsheet file provided to you and submit your file in I learned. Please include your name in the filename.

Required:

1. Calculate each revenue and expense item as a percentage of total revenues in 2019 and 2018 (show percentages out to TWO decimal places for all revenues and expenses, but round total revenue's percentage to ZERO decimal places- see examples in the spreadsheet).

2. Calculate the water sales per customer for 2019 and 2018 (show number out to TWO decimal places- see example in the spreadsheet).

3. Calculate the company's budgeted financial performance for 2020 based on the assumptions listed below for each revenue and expense item. Then calculate each item as a percentage of total revenues just like you did for 2019 and 2018. Then calculate the water sales per customer for 2020 just as you did for 2019 and 2018- see examples in a spreadsheet.

4. Finally, calculate the differences in each revenue and expense item between 2020 and 2019, and 2019 and 2018- see the example in the spreadsheet. This will provide you with some insight into the year-to-year changes and help you with your business memo which is the second part of this project.

You must use formulas in the excel spreadsheet rather than typing-in calculated numbers to get

full credit. You will also run into rounding errors unless you use formulas. Some formulas

and calculated numbers have already been included in the spreadsheet to help you. YOU SHOULD HAVE AN ANSWER WHEREVER YOU SEE A QUESTION MARK 

ASSUMPTIONS:

Assume that the water company expects that in 2020:

a. The number of customers will increase by 5%.

b. Water sales will increase by 4% and late fees will increase by 1% due to increased customer demand.

c. Hydrant fees will decrease by 1% because several older hydrants will be taken out of service.

d. The cost of water sales will increase by 8% because of higher chemical costs.

e. Payroll expenses will increase by 5.5% due to wage increases and higher medical insurance expenses.

f. Overhead expense will decrease by 4% because of efforts to reduce costs.

g. Miscellaneous expenses are expected to double because of the purchase of building supplies in anticipation of a major waterline project in 2020.

Here are some check figures to help you out:

2020 Total Revenue=1,409,705

2020 Total Expense=1,602,918

2020 Water Sales per customer= $44.27

Total Income 2020 vs 2019= <$80,588>

Total Income 2019 vs 2018=<$496,625>

Total Income as a percentage of total revenue in 2020=-13.71% Total Income as a percentage of total revenue in 2019=-8.26%