Her predicted sales are as follows Jan Feb Mar April May June July 300 350 350 450 500 550 600 The candles cost $5 to make, and sell for $12. Roxy buys in the raw materials the month before she sells the candles. She pays a deposit of 20% when she orders and the rest the following month At the start of the year she owed $1,000 to supplier for the previous month Her customers pay 75% in the month of purchase and 25% the following month She pays rent of $1,000 on the shop in cash during the month before it is due She pays cash wages of $500 a month during the month Her other running costs are $900 a month, but this includes $200 for depreciation of the candle making machine In month 4 in the forthcoming year she intends to invest $5,000 on a new machine At the start of the year she has a Bank balance of $3,500 and is owed $600 from sales from the previous year, all of which will be collected in month 1 1. Calculate her cash flow for the first 6 months of the year, and advise her 2. Using Scenario planning (under data), calculate what happens if a) all sales are cash sales b) the price of the candles is increased to $12.50 c) The cost of the raw materials is reduced by 10% d) Using a simple percentage increase sales by 10% and decrease sales by 10% e) Takes out a loan for $5,000 during month 2, repayable at $500 a month for 12 months (including interest)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Her predicted sales are as follows	Jan	Feb	Mar	April	May	June	July
	300	350	350	450	500	550	600



The candles cost $5 to make, and sell for $12.
Roxy buys in the raw materials the month before she sells the candles. She pays a deposit of 20% when she orders and the rest the following month
At the start of the year she owed $1,000 to supplier for the previous month
Her customers pay 75% in the month of purchase and 25% the following month
She pays rent of $1,000 on the shop in cash during the month before it is due
She pays cash wages of $500 a month during the month
Her other running costs are $900 a month, but this includes $200 for depreciation of the candle making machine
In month 4 in the forthcoming year she intends to invest $5,000 on a new machine
At the start of the year she has a Bank balance of $3,500 and is owed $600 from sales from the previous year, all of which will be collected in month 1
1. Calculate her cash flow for the first 6 months of the year, and advise her
2. Using Scenario planning (under data), calculate what happens if
a) all sales are cash sales
b) the price of the candles is increased to $12.50
c) The cost of the raw materials is reduced by 10%
d) Using a simple percentage increase sales by 10% and decrease sales by 10%
e) Takes out a loan for $5,000 during month 2, repayable at $500 a month for 12 months (including interest)

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