“Summer Dreaming Frozen Treat Co.”
Mid-Term Case Analysis Report
Raymond Liang (020783064)
June 23, 2009
Prepared for: John Miller
Table of Contents
Executive Summary 3
Context/Background Information 4
Overview of Procedures 4
Profit and Financing Analysis 4
Revenue Analysis 4
Cost Analysis 5
Financing Activities 5
Action and Implementation 7
Appendices and Exhibits 9
Summer Dreaming Frozen Treat Company (SDFT Co.) is a company that sells frozen products across the city using pedal-powered carts. The company is planning for another year of operations, ...view middle of the document...
Overview of Procedures
To ensure that the budget for April and May will provide the best results, Microsoft Excel will be used to forecast revenues, expenses, profits, and volume. Additionally I will create a worksheet that will allow end-users to explore their options and display scenarios, based on different prices, costs, volume, and other manufacturing factors.
I will first determine the amount of revenues that is expected to be generated. Second I will calculate the costs, I will then determine if we have enough financing required to pay suppliers according to their credit terms. With the calculations from the three areas I will prepare a cash budget for the month of April and May. Lastly, I will create an analysis of profits if the company chose to run advertisements.
Profit and Financing Analysis
Based on the forecasted monthly demand, cash collections for the month of April and May come to $115,200 and $230,400 (see Appendices 1). Since all sales are in cash, there are no bad debts or accounts receivable to be collected on following months.
Cost of goods is $0.40 per treat and they are sold to SDFT Co. in 144 treats per case, since we predicted 1,000 cases for April it would come to $57,600 and $115,200 for 2,000 cases in May (see Appendices 2). The cost of goods is payable in the following month, so there will be no cash payment necessary in the month of delivery.
The wages for the cyclist would be $36,000 for April and $72,000 for May. The wages depends on the projected sales as each cyclist can sell 800 treats per month, since the amount of sales have doubled in May, and we would need to hire twice as many cyclist. For April we need 180 cyclist and for May we require 360 cyclist, since we need to sell 144,000 treats in April and 288,000 treats in May (see Appendices 3).
Warehouse cost is a fixed cost, so the cost for April and May are $100 per month. Warehouse cost is on a six-month contract and monthly payments are required to be made at the beginning of each month.
Cart rental cost is based on the number of cyclist we need to hire each month. The cart rental cost for the month of April comes to $9,000 and May comes to $18,000 (see Appendices 4). The cart rental cost is also on a monthly contracted and required to be paid at the beginning of the month.
Total cash payment for costs for the month of April would be $51,870 and repayment of the $10,000 loan. The total cash payment for costs for May would be $169,965, including interest from the loan.
Since we are starting the month with no cash available and we are required to pay warehouse and cart rental costs at the beginning of April, we would need to borrow $10,000. The $10,000 can be easily repaid at the end of the month, and we would still have sufficient cash on available. In addition to the principal repayment, there is a 1% monthly interest that is required to be paid...