Course Project Week 4
For this next part of the project you will build the Income Statement and Balance Sheet for the Bike Repair & Maintenance Shop (BRMS) for 2018. Use the information below and add another sheet to your Excel Workbook.
BRMS Information for 2018
In 2017, the repair shop was opened in October and ended the year with a ($10,500) operating loss.
Supply Inventory of parts & supplies maintained |
$3,000 |
|
Replacement parts are ordered as they are used. |
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Shop hours of operation: 52 weeks a year. |
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Monday - Friday 11am - 7pm |
8 hrs |
|
Saturday 9am - 7pm |
10 hrs |
|
Staff |
FTEs |
Salary |
Manager |
1 |
$ 40,000 |
bookkeeper/purchaser |
0.8 |
$ 20/hr |
Repairers |
2.5 |
$ 18.50/hr |
Employee benefits: 20% of salary for the manager; 17% of salary for all others.
Supply costs |
$ 65,000 |
utility costs |
$ 7,200 |
marketing costs |
$ 10,000 |
other costs |
$ 22,000 |
Services Provided:
Budgeted: Repair Services: $100 each for 2,600 repairs
New Packages being considered
Package A: Preventative maintenance service package $ 80
Package B: Basic inspection, lube, adjust & clean shifting braking system $ 90
Package C: Annual peak performance package $100
Package D: Basic inspection, + replace shifting cables & preventative maintenance package $250
Estimated Services Provided under the new options:
Package A: 25 per week
Package B: 15 per week
Package C: 10 per week
Package D: 5 per week
Bike Repair & Maintenance Shop |
|
Budgeted Income Statement |
|
For the Year Ended December 31, 2018 |
|
Revenue |
|
Repair Fees |
? |
Other Income |
? |
Gross Revenues |
? |
Expenses |
|
Salaries & Benefits |
? |
Wages & benefits |
? |
Utilities |
7,200 |
Marketing costs |
10,000 |
Supply costs |
65,000 |
Other costs |
22,000 |
Total Expenses |
104,200 |
Operating Income |
? |
Income tax |
? |
Net Income |
$(43,692) |
Profit Margin |
? |
a) For the first full year of operations, BRMS was budgeted to lose over $40,000 performing repair services. These repairs have high fixed costs for the replacement parts in the repairs. If BRMS decided to expand their services to provide bicycle inspections and preventative maintenance, which use more employee time than supplies, what would the projected change in profit be?
b) If a decision is made to add more service oriented repairs is there a change in fixed and variable costs for repair services?
c) Complete a new ACTUAL Income Statement based on your decisions in a & b. Then complete the Balance sheet below.
Bike Repair & Maintenance Shop |
|
Balance Sheet |
|
December 31, 2018 |
|
Assets |
|
Cash |
$ 8,500 |
Investments |
- |
Accounts Receivable (net) |
6,000 |
Prepaid Expenses |
3,000 |
Inventory |
? |
Plant, Property & Equipment |
5,000 |
Less: Accumulated Depreciation |
(167) |
Total Assets |
$ 25,333 |
Liabilities |
|
Accounts Payable |
$ 4,500 |
Accrued Liabilities |
700 |
Salaries Payable |
4,000 |
Long-term liabilities |
- |
Total Liabilities |
$ 9,200 |
Common Stock |
? |
Retained Earnings |
? |
Total Stockholders' Equity |
? |
Total Liabilities & Stockholders' Equity |
? |
Next Steps: Financial Analysis for both BRBS & BRMS.
Using the information below for BRBS complete the financial metric analyses as indicated in Chapter 9 of the textbook for both BRMS (above) & BRBS.
The Income Statement for the Buy-Right Bike Shop is provided below for 2017 and 2018.
BUY-RIGHT BIKE STORE |
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Income Statement |
||
2018 |
2017 |
|
Sales - Online |
$ 11,080,000 |
$ 6,240,000 |
Sales - In store |
580,400 |
312,000 |
Sales returns |
221,600 |
|
Gross Revenues |
11,438,800 |
6,552,000 |
Cost of Goods sold |
5,540,000 |
3,276,000 |
Contribution Margin |
$ 5,898,800 |
$ 3,276,000 |
Expenses |
||
Salaries & Benefits |
$ 144,000 |
$ 139,206 |
Wages & benefits |
391,880 |
274,997 |
Utilities |
13,200 |
13,000 |
Marketing costs |
200,000 |
200,000 |
Contributions & Community Involvement |
58,040 |
31,200 |
Other costs |
1,375,000 |
1,200,000 |
Operating Income |
3,716,680 |
1,417,597 |
Income tax |
1,077,837 |
411,103 |
Net Income |
$ 2,638,843 |
$ 1,006,494 |
Profit Margin |
23% |
15% |
Sales volume |
||
Bike C - online |
95,000 |
60,000 |
Bike A - online |
4,800 |
- |
Bike C - in store |
5,100 |
3,000 |
Bike A - in store |
200 |
- |
total Sales volume |
100,000 |
63,000 |
The Balance Sheet for Buy-Right Bike Store is provided below:
Buy-Right Bike Store |
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Balance Sheet |
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December 31, 2018 |
||
Assets |
||
Cash |
$ 1,500,000 |
|
Investments |
225,000 |
|
Accounts Receivable (net) |
1,250,000 |
|
Prepaid Expenses |
30,000 |
|
Inventory |
58,280 |
|
Plant, Property & Equipment |
1,800,000 |
|
Less: Accumulated Depreciation |
60,000 |
|
Total Assets |
$ 4,923,280 |
|
Liabilities |
||
Accounts Payable |
83,250 |
|
Accrued Liabilities |
4,414 |
|
Salaries Payable |
7,913 |
|
Long-term liabilities |
30,000 |
|
Total Liabilities |
$ 125,577 |
|
Common Stock |
1,152,366 |
|
Retained Earnings |
3,645,337 |
|
Total Stockholders' Equity |
$ 4,797,703 |
|
Total Liabilities & Stockholders' Equity |
$ 4,923,280 |
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