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Accounting for Decision Making - MAA103 - Deakin Business School

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646 Downloads 12 Pages 2987 Words

Background

a) Detailed description of business including product being sold

Cupcake is a niche market in the baking and culinary industry in Australia. New cupcake shop that is Crave cupcake has been open which is located in a shopping center in Sydney. To start up a business, Crave cupcake bakery shop expects to raise $20000 its own capital and rest of the cost will need to come from bank loan as a 12-month plan. There are different types of bakery items which will be offered by Crave cupcake shop. The bakery will provide freshly prepared flavors of cupcake and pastry products at all time while carrying out business operations. Company will bake and retail the cupcake of various designs, themes, and flavors.

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b) Business goals, strategy and vision

The goal of Crave cupcake shop is to offer high-quality bakery products at a competitive price in order to meet the demands of the middle level to higher income level people. There are various marketing strategies which will be used by the firm in order to grab the attention of a large number of customers (Swamidass, 2016). As a part of strategy, younger age people will be targeted by company who mostly prefer to buy bakery products occasionally and on daily basis. The vision of company is to become a number one choice for customers while making a purchase decision of cupcake.

c) Ownership and legal structure 

Crave cupcake shop is a sole proprietorship company because it is established and carried out by an individual. It is a small business that carries out all operational activities in an effective manner. All the decisions are made by the owner of the firm (Zimmerer,  Scarborough and Wilson, 2005).

Legal structure

Crave cupcake has established in Sydney a shopping center. There is only one owner of the firm who makes all decisions. Crave cupcake is a small company and so, it enjoys less tax rate and it also provides flexibility in time to its employees (Carrier, Raymond and Eltaief, 2004).

d) Funding Requirement

Crave cupcake is a start up company in which finance will be gathered from retained profit and a bank loan. To start a business, own money will be used which is $20,000. After establishing a business for extra cost, bank loan can be taken by the firm to carry out all the business operations in an effective manner (Maxwell,  Foley and Marty, 2015).

Financial Projections 

Projected profit and loss statement 

According to the given profit and loss statement of 12 months, Crave Cupcake expects to continue its steady growth in profitability in 12 months of operations. One of the important assumptions while calculating profit and loss is to enhance its sales monthly. The assumption is based of Crave cupcake is based on increase in sales from first month to 12 month. Below provided statement clearly shows continuous increase in the sales and profit.

Particulars

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

 

 

 

 

 

 

 

 

 

 

 

 

 

sales Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Sales from Products and services

14000

15120

16632

18128.9

20032.4124

22135.8

24460.1

27028.4

29866.4

33002.3

36467.578

40296.7

Less: COGS (10%)

1400

1512

1663.2

1812.89

2003.24124

2213.58

2446.01

2702.84

2986.64

3300.23

3646.7578

4029.67

Gross Profit

12600

13608

14968.8

16316

18029.17116

19922.2

22014.1

24325.5

26879.7

29702.1

32820.82

36267

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Utilities (Electricity/water/telephone)

1680

1814.4

1995.84

2175.47

2403.889488

2656.3

2935.21

3243.41

3583.96

3960.28

4376.1094

4835.6

Promotion and advertisement

1000

1050

1102.5

1158

1216

1276

1340

1407

1477

1551

1629

1710

Maintenance  

1500

1575

1653.75

1736.44

1823.259375

1914.42

2010.14

2110.65

2216.18

2326.99

2443.3419

2565.51

Insurance

300

300

300

300

300

300

300

300

300

300

300

300

salaries of personnel

1200

1320

1452

1597

1757

1933

2126

2338

2572

2830

3112

3424

Miscellaneous and other Expenses

1120

1209.6

1330.56

1812.89

1602.592992

1770.87

1956.81

2162.27

2389.31

2640.19

2917.4062

3223.73

Depreciation

300

300

300

300

300

300

300

300

300

300

300

300

Less: total operating expenses

7100

7569

8135

9080

9402

10150

10968

11862

12839

13908

15078

16359

Operating Profit

5500

6039

6834

7236

8627

9772

11046

12464

14041

15794

17743

19908

Less: Interest

400

560

420

280

140

140

140

140

140

140

140

140

PBT

5100

5479

6414

6956

8487

9632

10906

12324

13901

15654

17603

19768

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

5100

5479

6414.15

6956

8487

9632

10906

12324

13901

15654

17603

19768

Break even analysis

BREAK EVEN ANALYSIS

Amount (£)

Average selling Price

25

Variable Cost

8.09

Contribution

16.91

 

 

 

 

Total Fixed cost

45000

 

 

BEP (in units): Fixed cost / contribution

2661

Break even analysis helps in determining the things which need to sell monthly or annually in order to cover the cost of doing business. Further, it is calculated on the basis of variable and fixed cost as well as revenue per unit of sales. All these assumptions help in making aware of accurate risk which can be faced by company.

Balance sheet 

Here, below provided is balance sheet of Crave cupcake shop:

 

Month 1

Month 2

Month 3

Month 4

Month 5

 

 

 

 

 

 

 

 

 

 

 

 

cash

63500

56491

50568

45338

41828

 

 

 

 

 

 

Total current assets

63500

56491

50568

45337.6

41828

fixed assets

50000

49700

49400

49100

48800

less: Depreciation

300

300

300

300

300

Total fixed assets

49700

49400

49100

48800

48500

total assets

113200

105891

99668

94138

90328

Liabilities

 

 

 

 

 

Current liabilities

 

 

 

 

 

creditors

-8330

-7481.6

-6527

-4687

-3054

outstanding and other current liabilities

-3570

-3206.4

-2797

-3125

-3054

Total current liabilities

-11900

-10688

-9324.8

-7811.9

-6108.7

Long term debt

70000

56000

42000

28000

14000

 

 

 

 

 

 

capital

50000

55100

60579

66993

73950

add: NP

5100

5479

6414

6956

8487

Total capital

55100

60579

66993

73950

82437

 

 

 

 

 

 

Total liabilities and capital

113200

105891

99668

94138

90328

Sales forecast

Crave cupcake is established with the purpose of earning profit in the bakery industry. It is essential for the firm to state its sales forecast which is based on the collected information at the time of feasibility studies and survey. Along with this most of assumption are available in this field.

Conclusion statement

From the above business plan, it can be concluded that for business plan, it is important to collect information from different sources so that business can be established successfully. Along with this, loan is required to be taken from bank in order to carry out the business activities successfully. Through adopting proper marketing strategy, customers can easily come to know about new company and its products which help in increasing the sales and profit of firm. Further, it can be concluded that financial plan helps in identifying the expenses and extra cost that occur while carrying out business activities successfully. 

Reference 

  1. Carrier, C., Raymond, L. and Eltaief, A., 2004. Cyberentrepreneurship: a multiple case study. International Journal of Entrepreneurial Behavior & Research, 10(5), pp.349-363.
  2. Maxwell, E., Foley, M., Braman, J., Sopeth, J. and Marty, R., 2015. Rosemount Eco-Green Business Park Feasibility Study.
  3. Skoog, C. and Trosdahl, K., 2017. Strategic Business Plan for Christine's Sweet Confections (Doctoral dissertation, The College of St. Scholastica).
  4. Swamidass, P., 2016. Engineering Entrepreneurship from Idea to Business Plan: A Guide for Innovative Engineers and Scientists. Cambridge University Press.
  5. Zimmerer, T.W., Scarborough, N.M. and Wilson, D., 2005. Essentials of entrepreneurship and small business management. Upper Saddle River, NJ: Pearson/Prentice Hall.
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