Financials

Financial Plan

Sources and Uses of Funds

The total start up cost is estimated to be $60,000. A bigger portion of the cost will go towards payroll, acquiring machinery and equipment as well as raw materials and inventories. The total cost for administrative functions is expected to be $10,800 during the first year of operation. The total cost for machinery and equipment is reported to be $4,000, while that of raw materials is expected to be $10,000. More than $1,400, $1,720 and $1,200 will go towards marketing and promotion, utilities and insurance respectively. Additional start up costs of $30,880 is expected in the form of working capital. The owner will contribute $10,000 and borrow the rest from a financial institution. The loan is expected to be fully repaid within 5 years.

Key Financial Plan Assumptions

· It is assumed that the selling price per bottle of beverage will be $10

· The bank loan interest will be at 10.00% per annum

· The income tax rate will be 30.00 per annum

· The variable cost per unit is $4.5

· The organization uses a straight line depreciation which is at 10% of the total value of machinery and equipment

Break Even Analysis

Tsorakidis et al. (2011) define break even analysis as a point at which the total cost equates the total revenue. Break-even point analysis helps in determining the number of units or amount of revenue required to cover the total costs- fixed costs and variable costs. Fruity Surprise’s break even analysis indicates that the business will have to sell 2,824 units of beverages to cover its total costs. At the break-even point of 2,824 units the total revenue equates the total costs at $28,240. Fixed costs stand at $15,530 while variable cost amounts to $12,708.

Break Even Table

Reference

Tsorakidis, N., Papadoulos, S., Zerres, M., & Zerres, C. (2011). Break-even analysis. London, LN: Bookboon.

Number of Units

Dollars