🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
HomeClass Notes1,200,000AU40,000

BLO 2205 Lecture Notes - Lecture 1: Mobile Phone

55 views1 pages
School
Victoria University
Department
BLO
Course
BLO 2205
Professor
Iris

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Mobile phone the real cost of a phone can be very confusing. There are often fixed fees, rates for different times of the day, connection fees and sms charges. Imagine you have been given the following details about the plan for a new mobile phone you are interested in purchasing. Before you do so you want to work out how much it will cost per month. You have a rough idea about your telephone usage (from your last phone) and so you should be able to work out an estimated monthly cost. Imagine that you will purchase the phone for and went onto a plan. 100 free" sms and worth of free calls. Hence the minimum monthly charge is but anything over the free" limits you have to pay on top of the . Connection cost per call (all types of calls)

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

CSE 2111
Final Exam
Study Guide
CSE 2111 Study Guide - Final Guide: The Features, Prime Time, List Of Major League Baseball Career Total Bases Leaders
turquoisegnu128
ECON 2030
Final Exam
Study Guide
ECON 2030 : ECON 2030 Spring Test 1
azuremammoth471
CMN 1160 Lecture Notes - Lecture 8: Freedom Mobile, Oligopoly, Virgin Mobile Canada
ultramarinegiraffe374

Related Questions

Scenario: Your team has been hired to provide financial analysis for a start-up company, Bobble in Style, which produces customized bobble heads. The bobble heads are made out of less rigid materials and are more true to life than those of competitors.

The company inventors, Mr. and Mrs. Lee, are going to pitch their idea to Shark Tank in a few months, but first they need to have a better understanding of the business financials. The Lee’s are already creating and selling their product from their home-based office and work area. They know what costs are involved with making the bobble heads on a small scale, but they don’t have an understanding of financial figures beyond basic costs. They need you to make sense of various financial figures for them. The Project: There are several financial analysis tasks involved with this project, which are outlined below (#1-8). Once you have worked through each task, you will need to produce a PowerPoint presentation to introduce and highlight your findings. Your PowerPoint presentation should include a title slide, an executive summary slide(s), subsequent slides that illustrate your findings, any additional recommendations that you would like to make, and a conclusion slide. The PowerPoint presentation should be approximately 15-25 slides in length. Include notes in the presentation as needed. You will also need to create a written executive summary (one page in length). Your final submission will include the PowerPoint presentation, the executive summary, and an Excel file with relevant calculations.

1. Financial Statements: Develop an Income Statement for 20XX, Cash Flow Statement for 20XX, and Balance Sheet as of the end of 20XX based on the data provided below for year 20XX. All sales are collected when the sale is made and all expenses are paid when the expense is incurred. Explain the purpose of each financial statement. a. Income Statement Data for 20XX: • Units produced and sold = 420 • Sales ($80 per unit selling price) = $33600 • Cost of goods sold ($30 per unit, all variable costs) = $12600 • Labor = $0 (Mr. and Mr. Lee were the only ones working and did not pay themselves) • Advertising fees =$2000 • Bank fees = $150 • Phone/internet = $1200 • Shipping ($3 per unit) = $1260 • Utilities = $900 • Office supplies = $800 • Interest expense on note payable = $350 • Depreciation expense (straight line) = $800 • Income tax rate = 26 %

b. Other Financial Data for 20XX: • Proceeds from sale of equipment = $3000. The equipment originally cost $1000 and had accumulated depreciation of $200. • Purchase of equipment = $1600 (The machine is purchased on the last day of 20XX so no depreciation expense is recorded.) • Repayment of note payable = $5000 • Consider any data relevant from the income statement.

c. Balance Sheet Data for Beginning of 20XX: • Cash and cash equivalents = $10000 • Accounts receivable = $0 (Cash is received at time of sale) • Raw materials inventory = $10500 • Equipment = $5000 (This includes the $1000 cost of the equipment sold in 20XX). • Accumulated depreciation = $1,000 (This includes the accumulated depreciation of 200 for the equipment sold in 20XX. • Accounts payable = $0 (Cash is paid at the time of purchase.) • Note payable = $5000 (This is the note payable which is repaid in 20XX) • Common stock = $15000 • Retained earnings = $4500 2. Financial Ratios: Calculate the following financial ratios and explain the meaning of the results.

a. Net Profit Margin

b. Quick Ratio c. Debt-to-Equity Ratio 3. Cost Classification: The Lee’s have provided you with the following costs and relevant information that are assumed for year 20XY. A. Classify each of the costs (a. through j.) below under C. as a variable cost or a fixed cost.

B. Explain the importance of distinguishing between variable and fixed costs.

C. Prepare a budgeted income statement, assuming 600 units to be produced and sold, a per unit selling price of $85, an income tax rate of 28% and the following information. a. Cost of goods sold of $35 per unit b. Labor = $400/month •

One part-time employee will be hired to take care of packaging and shipping. This employee will be paid $10 per hour. He or she is estimated to work 40 hours total per month. c. Advertising fees = $3,000 d. Bank fees = $200 e. Phone/internet = $150 per month f. Shipping = $3 per unit g. Utilities = $100 per month h. Office Supplies = $900 i. Conference Exhibitor Fee = $3000 j. Travel Expenses for Conference (e.g. airfare, meals, taxi) = $1200

4. Net Present Value: The Lees are considering adding a new piece of equipment that will speed up the process of building the bobble heads. The cost of the piece of equipment is $42000. It is expected that the new piece of equipment will lead to cash flows of $17000, $29000, and $40000 over the next 3 years. If the appropriate discount rate is 12%, what is the NPV of this investment? Explain the findings.

5. Budget Preparation: The Lees believe that production and sales could double after being on Shark Tank which is scheduled in December of 20XY. They want to be prepared for this. Based on the budgeted income statement calculated above for 20XY, create a new budgeted income for 20XZ assuming that the production and sales is double the level of 20XY

. 6. Incremental Analysis: If production does increase dramatically after their presentation on Shark Tank, the Lees will need more space for production. They have two options. Option 1 is to rent out a spacious warehouse nearby. If they pursue this option, there rent will be $1200 per month and utilities are estimated to cost an additional $350 per month. Their second option, Option 2, is to rent a smaller storefront space that is also nearby. The storefront rent is $1350 per month. However, utilities will likely only cost an additional $150 per month. They want to compare their options over one year’s time (since each rental contract is a 1 year commitment). What is the incremental analysis if the Lees choose Option 1 over Option 2?

7. Break-Even Analysis: You have been asked to calculate how many units need to be sold to break even, based on the costs provided in task #3. Assume that only one conference will be attended and the estimated expenses associated with this conference are on target. Use the information in task #3 except do not consider taxes.)

8. Contribution Margin: Based on the Break-Even Analysis just performed, what is the contribution margin per unit and the total contribution margin?

Develop a high-level funding schedule for a new venture business concept that can be used to discuss cash requirements for the first year of operations with prospective investors. The schedule should be prepared on a monthly basis and should include the following specific details:

(1.) Headcount plan - including all personnel needed to carry out the critical operations of the business for the upcoming year.

(2.) Forecast general & administrative expenses, including office rent and related costs, utilities, communication expenses, insurance, filing fees, etc.

(3.) Estimate the cost of how you plan to market the company/product.

(4.) Develop your revenue model, including key assumptions and variables such as unit sales, sales growth, number of customers by the end of the year, product pricing, etc., Make the model flexible enough to enable you to change key variables and run “what if” analyses.

(5.) If the cost of delivering your product of service is significant, forecast the cost of goods sold based upon estimate costs and the product assumptions used in item 4 above.

(6.) After preparing the initial financial plan, critically review the plan and assumptions (including having advisors and other management team members review the plan for reasonableness). Adjust the month-to-month results to “normalize” the cash balance (and ensure it never runs below $0), adjusting discretionary expenses if necessary.

(It can be any business venture as in a resturant or a store)

Upon completion of the financial model, answer the following questions:

Question 1

How much cash do you need to raise to operate during the first 12 months of operations? Please include your numeric answer and an explanation of several sentences. (about 150 words)

Question 2

Does the amount of cash needed in item 1 above fall within the “reasonableness range” for an early stage company (i.e., up to $5 million)? Please include your numeric answer and an explanation of several sentences. (about 150 words)

Question 3

What is your monthly cash burn rate - both gross and net burn (gross burn is the average of total expenses each month; net burn is gross burn offset by the average monthly cash generated from revenues). Please include your numeric answer and an explanation of several sentences. (about 150 words)

Question 4

How long will you be able to operate at the end of the 12 months forecast before you need to raise additional funding? Please include your numeric answer and an explanation of several sentences. (about 150 words)

Question 5

Please attach a copy of the Financial Model that you created for this assignment.

EXAMPLE

How much cash do you need to raise to operate during the first 12 months of operations? Please include your numeric answer and an explanation of several sentences.

As I plan to operate a restaurant with a nice ambiance I would require premises, renovation and internal decor, furniture, electric setup, a couple of computers, staff, their uniforms, chefs, food supply, tables, chairs and couches, brochures and menu cards, marketing and advertising. Premises and land= $196.3K Renovation and internal decor= $49K Furniture, tables and chair= $20K Staff(2 waiters 1 on the counter 2 cooks)= $16K Uniforms, brochures, menu cards= $500 Food supply= Everyday return, so not included. Marketing and advertising= $20K


Does the amount of cash needed in item 1 above fall within the “reasonableness range” for an early stage company (i.e., up to $5 million)? Please include your numeric answer and an explanation of several sentences.

Total required amount is $301.8K which falls under the reasonable range.

What is your monthly cash burn rate - both gross and net burn (gross burn is the average of total expenses each month; net burn is gross burn offset by the average monthly cash generated from revenues). Please include your numeric answer and an explanation of several sentences.

Three workers at $200 per month and two workers of $300 per month (That's what the salaries are where I live). $1,200 salary, $300 for the electric, maintenance, gas and marketing etc every month. If in the starting months 20 people visits the restaurant and spends at least 7$ per person on food on average, they would bring $140 revenue everyday and in 30 days, $4,200, which is the revenue generated including 60% profit that the food items would generate. $2625 on the food that is being sold. A total of $4,125 is expected to be spent in the first few months, which is the gross burn. The $2,625 food that is sold will at least give 60% profit, that's calculated to be $1575. So the revenue earned each month for a first few months would be $4,200. This estimates that the net burn would be something around (4,125-4200) viz "-$75" every month for a first few months. The negative sign shows it's a profit, and that even at the estimated value their would be some room (of $75) for the accounts to balance and the venture to not fall off into loss. This is the minimum sale calculation which shows no loss. 20 people to visit in one day is a very small figure. Such a business offers an everyday recovery.

How long will you be able to operate at the end of the 12 months forecast before you need to raise additional funding? Please include your numeric answer and an explanation of several sentences.


As we will start gaining more costumers due to marketing and best quality provided, we will start making wholesome profits. At the rate of 50 costumers per day shopping at the average of $8 per costumer, we would make a revenue of $400 per day and $12,000 per month, which after deduction of food cost and other bills would give a profit of $3,000 every month, and hopefully at the end of the 12th month we will be making $6000 per month. Such a profit will help recovering the amount invested and in a few more months the business will be able to recover all the investment except the cost of the land and premises, which will of course be there as an asset.

A cash-flow budget uses the same format as a cash-flowstatement. It is prepared on a monthly basis and it reflectsbudgeted income and expenses.

In addition to the cash-flow statement, Deon and May made a listof budget assumptions, listed for you here:

• Deon’s income will increase by 5%, effective January 1. Hisbonus is generally 10% of his income in the previous year, and hereceives it in January.
• May’s raise will be 3%, effective January 1.
• Interest and dividend income will conservatively be the same in2017 as it was in 2016 and will be received on a monthlybasis.
• Mortgage payments will be the same in 2017 as they were in2016.
• Federal income taxes are estimated at 20%, state income taxesat 6%, and social security taxes at 7.65% of wages, includingDeon’s bonus.
• Property insurance and property taxes are paid every sixmonths, in June and December. The amount is expected to be the samein 2017 as it was in 2016.
• May will contribute $60 per week for the employee portion oftheir medical insurance. According to her pay schedule, April andJune are five-week months.
• Auto insurance is paid at the end of each calendar quarter andshould not be more than it was in 2016.
• Deon and May would like to purchase a new car in the next fewyears and will put $500 a month away specifically for thatpurpose.
• Deon and May don’t expect the amount of variable expenses tochange in 2017 except that they would like to double theircharitable contributions and go on a vacation to Ireland in June.The vacation will cost $6,000.
• Gift purchases are made mostly around the holidays, so Deon andMay are planning to pay half of the gift expense in December andhalf in January when the credit card bill comes in.
• Water and sewer is billed quarterly, in January, April, July,and October. The cost of heat should be spread over six months fromNovember to April.
• All other variable expenses can be spread evenly every month at2016 amounts.

Use the information from their cash-flow statement (listed inthe first column of the following annual budget) and their budgetassumptions to fill in the missing amounts for the first six monthsof Deon and May’s monthly budget for 2017. Note: Be sure to fill inevery blank space with a value.

Annual Budget

Cash-Flow Statement

2017

Name: Deon and May Daley
2016 Jan. Feb. Mar. Apr. May Jun.
INCOME
Deon’s salary 59,000
May’s salary 53,100
Deon’s Bonus 5,000
Interest and dividends 150
Total Income $117,250
EXPENDITURES
Fixed Expenses
Mortgage 14,976
Deon’s federal income taxes 12,800
Deon’s state income taxes 3,840
Deon’s social security taxes 4,896
May’s federal income taxes 10,620
May’s state income taxes 3,186
May’s social security taxes 4,062
Property taxes 4,100
Property insurance 1,200
Medical insurance 2,400
Automobile insurance and registration 700
Savings for auto purchase
Total Fixed Expenses $62,780
Variable Expenses
Food 1,620
Entertainment 3,000
Dining out 4,700
Electric 350
Water and sewer 800
Heat 1,250
Cable TV 3,000
Telephone 600
Cell phone 900
Gifts 2,000
Personal care 600
Medical expenses 3,700
Vehicle gas and maintenance 2,530
Charitable contributions 1,500
Vacation
Total Variable Expenses $26,550
Total Expenses $89,330
SURPLUS (DEFICIT) $27,920

Deon and May have an emergency fund of $40,000. They would liketo start saving for retirement, but they have not signed up fortheir companies’ 401(k) plans. Neither company matches 401(k)contributions.

What do you suggest for Deon and May based on their goals andthe budget that they have put together?

The $40,000 that the Daleys have saved for an emergency is___three months of expenses. They have not, however, takenadvantage of the employer 401(k) plans that are available to them.If an employer does not match contributions, it is ____advantageousto contribute to a company-sponsored retirement savings planbecause the contributions to the plan are invested with___earnings. If the Daleys invest part of their surplus in their401(k) plans, they will save the designated amount plus another___of that amount because of the tax savings.