Business Finance for Manager Assignment Sample

Business Finance for Manager Assignment 

Introduction of New Business: Baker for life

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It is a business producing organic bakery products. The objective of starting this bakery business is to providing organic or natural baking food to customers, which will be healthy for their bodies and delicious. Another main objective of this business is providing products at less cost. Baker for life offers various types of products such as organic cookies, cakes, pastries and pies, which is made only from organic or natural ingredients. Every baker produces their product using all-purpose flour but the uniqueness of bakers for life is using only natural ingredients and healthy ingredients.

Four types of product categories in this business are:

1. Cookies
2. Cakes
3. Pastries
4. Pies

All these categories have different varieties such as Chocolate Cookies, dry-fruit cookies, orange cookies, fruit cookies. In cakes – chocolate cake, wedding cake, fruit cake, red velvet cake, dry-fruit cake. In pastries – Vanilla pastries, red Velvet pastries, chocolate pastries, fruit pastries, cheese pastry and various types of pies. Organic or natural ingredients are used for making these bakery products such as grain or cereal flour, non-fat milk and fresh milk, sucrose sugar from cane and beet, honey, raisins, wheat gluten, starch, oil etc.

The objective of Business:

The main objective of this business is to providing only organic bakery products to customers which makes their life heathier (Drugova & Curtis, 2021)

Target Market:

People of all ages will attract to eat organic bakery products. Kids, youngsters, old age people all can have this type of healthy food. Most of the customers for these products are people have age between 15-40 as young people always want to look good and stay healthy so they attract towards organic food which is delicious so that customers will always stay and healthy and not gain weight. People who have age between 30-40 also attracts to organic foods. These people are mothers, the father who has a busy schedule, they do not have time to go gym for exercise, and they think that eating organic foods can make people's living more healthy so they choose to eat organic food in their daily life.

Why people prefer Natural bakery products:

People were not much aware of organic food before the COVID-19 pandemic but after this pandemic, everyone is aware of using natural food, natural beauty products, exercise, fitness. In this pandemic, people do not want to go for GYM because of the social-distancing restriction imposed by the government and now the mentality of people has changed they only want organic food which helps in balancing their immune system and there is no chance for any disease. Because of this, there is a greater scope of Organic baking products in the market.

Market size:

The global market of natural bakery products probability to increase from $9.7b to $11.61b in 2023 which means there is an expectation to increase the growth of 6% in 2023.

Key competitors of Baker for life are:

1. New horizon Food Incorporation
2. Soyfoods Limited
3. Nutri-Bake incorporation
4. Cress Spring bakery
5. Healthy Bake
6. Rudi’s Organic bakery
7. Flowers food
8. Manna Organics LLC
9. Hain Celestial
10. Taufayan Bakery Incorporation
11. Natures Bakery Cooperative
12. Alvarado street bakery

These are some main competitors of Baker for life as they also sell and manufacture organic bakery products.

Risks that ‘bakery for life’ can face:

1. Main threats and risk of stiff competition in similar products, now other bakers know that people like to prefer organic food so they also switch their product from unhealthy to the healthy baking product. It increases competitors which is a great threat.
2. Another risk is increasing the price of materials as the consumer wants to purchase good food at less cost. If the cost of raw material increases then manufacturer have to increase the product price so there will be a risk of losing some customer who cannot afford costly products (Gharia &Acharya, 2020)

Initial Funding for Business:

Loan and own money

And Total Initial Funding for this business is $10000

Cost of product: Appendix 1

There are two types of costs incurred in business, one is a variable cost and the other is a fixed cost. Variable cost fluctuates as per the quantity produced of a product and fixed cost is always fixed.

There are four types of organic bakery products manufacture or produces by bakers for life. The cost per unit of product 1 (cookies) is £34, Product 2(Cake) is £62.8, Product 3(Pastries) is £19.6 and Product 4(Pies) is £21.14. Fixed cost includes in this product are £10.30 per unit and total fixed cost in making these 4 products are £51900. Only 20% mark-up has added in the cost as in beginning we want the only sale in large quantity not high profit and people can afford these prices. Labour cost is the highest variable cost; it is highly volatile because the cost of labour is dependent on the quantity of making product (Abd Rahman et al, 2020)

Cash Flow Forecast: Appendix 2

Cash flow states about inflow and outflow of cash in the business. The cash flow statement of Baker for life has made assumptions. It is assumed that 300 quantity of product 1 produces, 500 quantity of product 2 is produced, 400 quantity of product 3 is produced and 467 quantity of product 4 is produced in all the month. But in December month production quantity has increased due to Christmas festival. 20% Sale of the product will be increased in this month. So Total sales per annum would be £868334 and Total variable cost per annum would be £515043, Total start-up cost is £10000 and per annum fixed cost is £51900. If we talk about total net cash flow then start-up cost, variable cost and fixed cost have to exclude from total sales. The opening balance is 10000, So Net cash flow per annum would be £301391 and the Total contribution in the first year of sale will be £353291. It shows that baker for life will be earning good profit in the first year and there will be no negative balance of cash. In the end, the company will have good cash inflows (Hasnain et al, 2021)

Profit Forecast: Appendix 3

Profit forecast states about future earnings of business after considering all factors that affect the profit of business for example pricing and costing policy of a firm, depreciation policy etc. Profit forecast can be calculated by subtracting total variable cost and fixed cost from forecasted sales whatever profit remained after subtracting both the cost is known as forecasted profit. In the first year of business, the Total sales forecasted for each month would be £71176 but in December month it will increase to £85401 because of the Christmas festival so total sales per annum in year one is £868334. The cost of sales in each month is £42217 and in December it will increase to £50656 so the total variable cost per annum would be £515043. Gross profit in one year is £353291.49 which is 41% on sales. Net profit can be calculated by subtracting fixed cost from gross profit margin so net profit 301391 in the first year which is 35% on sale. It indicates that baker for life will be in profit in the first year. 35% can earn in the first year which is a great achievement. There is also a chance of expanding business in different areas and countries so that a huge market share can gain (Duarte et al, 2021)

Break-even point analysis: Appendix 4

A Break-even point is a point or that production level where revenue and cost of sales are equal or we can say no profit and no loss situation. If there is any difference between BEP and actual sales then it is called the margin of safety. It is a profit that a company earns from their sales. BEP can be calculated by dividing fixed cost by contribution. So the fixed cost that we have assumed before is £ 12975 for each product. Contribution in a unit of product 1 is 17.10, product 2 is 22.86, Product 3 is 14.22 and product 4 is 14.53. The Breakeven point of product one is 759, product 2 is 568, product 3 is 912 and product 4 is 893. It indicates that the company can achieve its break-even point by selling the above units of each product. Overall BEP of business can achieve by selling 2980 units. So total unit sales in business are 20337 and BEP in the unit is 2980 which means the margin of safety unit is 17357. The company will earn a profit by selling 17357 units.

Key Performance Indicators:

KPI measures the performance of the business. In every business, KPI's are set by the company so that they can measure their business performance for achieving its business objectives. It helps in measuring the performance of employees, measuring profit of every month, the efficiency of labour, the efficiency of management of company etc.

KPI for Baker for life:

1. Production capacity will be increased by 10% in next year: As it is a new business so we have to increase the level of production each year to gain the highest market share.
2. Reduction in the cost of Packaging by 15% next year: We are not setting the highest margin in the first year but from next year, the company wants to earn high profits so there is a chance of reducing cost.
3. Accuracy will be 99%: Accuracy should be 99% as we have to provide good quality food to our customers so each employee should maintain an accuracy level.
4. Wastage of resources decreases by 99%: As in the first year of business, there are chances of wastage of resources but from next year, it has to reduce by 99%.
5. Turnover should be reduced by 50% as high turnover indicate less growth for the company.
6. Employees have to achieve their target of producing product on time, there is no delay in the production.
7. Quality standards should maintain by each employee working in the business.
8. Increases the profit margin by 30% in next year as we have set only 20% margin 1^st year and we have to increase this margin to 30% from next year (Sintha, 2020)

Recommendation and Conclusion:

Baker for life is a business producing organic and healthy bakery products which make people live healthier. Now people are more aware of their health and fitness because of the COVID-19 pandemic. The mentality and buying habits of people have changed. People are moving from junk to healthy products, which is delicious also. So Baker for life met both criteria as they produce healthy products with great taste so there is a high chance of increase the growth of this business in future. It is recommended that this idea of business is good for people and good for the economy of the country. The initial cost of this business is very less and there is no need for a large no. of employees and materials in the beginning stage. But this business can earn high profits in just 2 or 3 years.

References:

Abd Rahman, N.A.N., Mokhtar, N.A., Ahmad Riathuddin, N.D.A., Mohamad Nasri, N.D. and Kamel Abdul Azem, M.N., 2021. Chocolate: Cookies & Scream BP.

Drugova, T. and Curtis, K.R., 2021. Bakery Organic Wheat Flour Quality and Quantity Requirements.

Duarte, B.P., Gonçalves, A.M. and Santos, L.O., 2021. Optimal Production and Inventory Policy in a Multiproduct Bakery Unit. Processes, 9(1), p.101.

Gharia, R. and Acharya, S., 2020. Maestro Bakery to New Venture Backerei-Issues and Challenges. Journal of Case Research, 11(1).

Hasnain, S., Ingram, J. and Zurek, M., 2020. Mapping the UK Food System.

Sinha, L., 2020. Importance of Break-Even Analysis for the Micro, Small and Medium Enterprises. International Journal of Research-Granthaalayah, 8(6).

Appendix:

Costing of Product:

Product 1	COST
Cookies	Total Costs			Selling Price
Description	No of hours	Material kg	£ Rate per Hour/kg	Total Variable Cost/unit £	Fixed Cost/Unit	Total Cost/Unit	Mark-up 120%	Selling Price
Kg	£	120%
Labour	2	10	20
Grain Flour	0.3	3	0.9
Sucrose Sugar	0.2	2	0.4
Pure Butter	0.1	5	0.5
Fruits	0.2	3	0.6
Eggs	0.1	3	0.3
Pure Milk	0.20	5	1.00
23.70	10.30	34.00	6.80	40.80

Product 2
Cakes	Total Costs
Description	No of hours	Material kgs	£ Rate per Hour/kg	Total Variable Cost/unit £	Fixed Cost/Unit	Total Cost/Unit	Markup 120%	Selling Price
Kg	£	120%
Labour	3	15	45
Cereal Flour	0.6	5	3
Sugar	0.3	3	0.9
Butter	0.2	5	1
Pure Milk	0.4	3	1.2
Egg	0.3	4	1.2
Flavour	0.1	2	0.2
52.5	10.30	62.80	12.56	75.36

Product 3
Pastries	Total Costs
Description	No of hours	Material kgs	£ Rate per Hour/kg	Total Variable Cost/unit £	Fixed Cost/Unit	Total Cost/Unit	Markup +50% or 100% Up to you	Selling Price
kg	£	120%
Labour	1	8	8
Grain Flour	0.2	3	0.6
Sucrose Sugar	0.1	2	0.2
Pure Butter	0.1	5	0.5
Fruits	0.2	3
Eggs	0.1	3
Pure Milk	0.1	5
9.3	10.30	19.60	3.92	23.52

Product 4
Pies	Total Costs
Description	No of hours	Material kgs	£ Rate per Hour/kg	Total Variable Cost/unit £	Fixed Cost/Unit	Total Cost/Unit	Markup +50% or 100% Up to you	Selling Price
kg	£	120%
Labour	1	10	10
Cereal Flour	0.15	2	0.3
Sucrose Sugar	0.12	2	0.24
Pure Butter	0.1	3	0.3
Flavour	0.1	2
Eggs	0.12	3
Pure Milk	0.1	5
10.84	10.30	21.14	4.23	25.37

Fixed Costs	Per Annum	Per month
Salary	24,000	2000
Rent	4,200	350
Marketing	10,200	850
Electricity and Gas	1,500	125
Accountant	12,000	1000
Total Fixed Costs	51,900	divide by number of units	20,000	2.60
Each product will get an even share
51,900	£12,975.00
4	Departments

Cash Flow Forecast:

January	February	March	April	May	June	July	August	September	October	November	December	Totals	Total Sales
Receipts
Sales Product 1-Units	300	300	300	300	300	300	300	300	300	300	300	360	3,660	3,660	Units
Cash Sales Product 1- £Price/Unit	40.80	40.80	40.80	40.80	40.80	40.80	40.80	40.80	40.80	40.80	40.80	40.80
Sub Total Cash Sales Product 1	12,240	12,240	12,240	12,240	12,240	12,240	12,240	12,240	12,240	12,240	12,240	14,688	£1,49,328
Sales Product 2-Units	500	500	500	500	500	500	500	500	500	500	500	600	6,100	6,100
Cash Sales Product 2- Price/Unit	75.36	75.36	75.36	75.36	75.36	75.36	75.36	75.36	75.36	75.36	75.36	75.36
Sub Total Product 2	37,680	37,680	37,680	37,680	37,680	37,680	37,680	37,680	37,680	37,680	37,680	45,216	£4,59,696
Sales Product 3-Units	400	400	400	400	400	400	400	400	400	400	400	480	4,880	4,880
Credit Sales Product 3- Price/Unit	23.52	23.52	23.52	23.52	23.52	23.52	23.52	23.52	23.52	23.52	23.52	23.52
Sub Total Credit Sales Product 3	9,408	9,408	9,408	9,408	9,408	9,408	9,408	9,408	9,408	9,408	9408.00	11289.60	£1,14,777.60
Sales Product 4-Units	467	467	467	467	467	467	467	467	467	467	467	560	5,697	5,697
Credit Sales Product 3- Price/Unit	25.37	25.37	25.37	25.37	25.37	25.37	25.37	25.37	25.37	25.37	25.37	25.37
Sub Total Credit Sales Product 3	11,848	11,848	11,848	11,848	11,848	11,848	11,848	11,848	11,848	11,848	11847.79	14207.20	£1,44,532.89
TOTAL Receipts from Sales	71,176	71,176	71,176	71,176	71,176	71,176	71,176	71,176	71,176	71,176	71,176	85,401	8,68,334
CUMULATIVE Receipts from Sales	71,176	1,42,352	2,13,527	2,84,703	3,55,879	4,27,055	4,98,231	5,69,406	6,40,582	7,11,758	7,82,934	8,68,334	20,337
Payments
Cost Of Sales/Variable Costs
Cost of Sales Product 1-Units	300	300	300	300	300	300	300	300	300	300	300	360	3,660
Cost of Sales Product 1- Price/Unit	24	24	24	24	24	24	24	24	24	24	24	24
Sub Total Direct Costs 1	7,110	7,110	7,110	7,110	7,110	7,110	7,110	7,110	7,110	7,110	7,110	8,532	86,742
Cash Sales Product 2-Units	500	500	500	500	500	500	500	500	500	500	500	600	6,100
Cash Sales Product 2- Price/Unit	52.50	52.50	52.50	52.50	52.50	52.50	52.50	52.50	52.50	52.50	52.50	52.50
Sub Total Product 2	26,250	26,250	26,250	26,250	26,250	26,250	26,250	26,250	26,250	26,250	26,250	31,500	3,20,250
Cash Sales Product 3-Units	400	400	400	400	400	400	400	400	400	400	400	480	4,880
Cash Sales Product 3- Price/Unit	9.30	9.30	9.30	9.30	9.30	9.30	9.30	9.30	9.30	9.30	9.30	9.30
Sub Total casht Sales Product 3	3,720	3,720	3,720	3,720	3,720	3,720	3,720	3,720	3,720	3,720	3,720	4,464	45,384
Cash Sales Product 4-Units	467	467	467	467	467	467	467	467	467	467	467	560	5,697
Cash Sales Product 4- Price/Unit	11.00	11.00	11.00	11.00	11.00	11.00	11.00	11.00	11.00	11.00	11.00	11.00
Sub Total Cash Sales Product 4	5,137	5,137	5,137	5,137	5,137	5,137	5,137	5,137	5,137	5,137	5,137	6,160	62,667
Total Variable cost	42,217	42,217	42,217	42,217	42,217	42,217	42,217	42,217	42,217	42,217	42,217	50,656	5,15,043
CUMULATIVE Variable cost	42,217	84,434	1,26,651	1,68,868	2,11,085	2,53,302	2,95,519	3,37,736	3,79,953	4,22,170	4,64,387	5,15,043	5,15,043	5,15,043

Start- up Cost
New machine	5,000
Equipment	2,000
Licencing	500
Display Area	1,000
Staff uniform	200
Miscellaneous	1,300
Total Start Up Costs	10,000

Fixed Costs
Salaries(Fixed)	2,000	2,000	2,000	2,000	2,000	2,000	2,000	2,000	2,000	2,000	2,000	2,000	24,000
Rent	350	350	350	350	350	350	350	350	350	350	350	350	4,200
Marketing	850	850	850	850	850	850	850	850	850	850	850	850	10,200
Electricity	125	125	125	125	125	125	125	125	125	125	125	125	1,500
Accountant	1,000	1,000	1,000	1,000	1,000	1,000	1,000	1,000	1,000	1,000	1,000	1,000	12,000
Total Fixed Costs	4,325	4,325	4,325	4,325	4,325	4,325	4,325	4,325	4,325	4,325	4,325	4,325	51,900
Total Payments (V.C + Fixed+ Equipment/Start Up Costs)	56,542	46,542	46,542	46,542	46,542	46,542	46,542	46,542	46,542	46,542	46,542	54,981	5,75,743
CUMULATIVE PAYMENTS	56,542	1,03,084	1,49,626	1,96,168	2,42,710	2,89,252	3,35,794	3,82,336	4,28,878	4,75,420	5,21,962	5,76,943	5,76,943

Net Cash Flow	14,634	24,634	24,634	24,634	24,634	24,634	24,634	24,634	24,634	24,634	24,634	30,420
Opening Bank Balance	10,000	24,634	49,268	73,901	98,535	1,23,169	1,47,803	1,72,437	1,97,070	2,21,704	2,46,338	2,70,972
Closing Balance	24,634	49,268	73,901	98,535	1,23,169	1,47,803	1,72,437	1,97,070	2,21,704	2,46,338	2,70,972	3,01,391
Calculate CONTRIBUTION by subtracting SALES RECEIPTS-COST OF SALES
CONTRIBUTION	28,959	28,959	28,959	28,959	28,959	28,959	28,959	28,959	28,959	28,959	28,959	34,745
CUMULATIVE CONTRIBUTION	28,959	57,918	86,876	1,15,835	1,44,794	1,73,753	2,02,712	2,31,670	2,60,629	2,89,588	3,18,547	3,53,291

Profit forecast:

Profit Forecast
January	February	March	April	May	June	July	August	September	October	November	December	Totals
Sales	71,176	71,176	71,176	71,176	71,176	71,176	71,176	71,176	71,176	71,176	71,176	85,401	8,68,334
Less
Cost of sales/	Variable	(42,217.00)	(42,217.00)	(42,217.00)	(42,217.00)	(42,217.00)	(42,217.00)	(42,217.00)	(42,217.00)	(42,217.00)	(42,217.00)	(42,217.00)	(50,656.00)	(5,15,043.00)
Wages (Variable)
Gross Profit/Contribution	28,958.79	28,958.79	28,958.79	28,958.79	28,958.79	28,958.79	28,958.79	28,958.79	28,958.79	28,958.79	28,958.79	34,744.80	3,53,291.49
Less
Fixed Costs
Salaries	(2,000.00)	(2,000.00)	(2,000.00)	(2,000.00)	(2,000.00)	(2,000.00)	(2,000.00)	(2,000.00)	(2,000.00)	(2,000.00)	(2,000.00)	(2,000.00)	(24,000.00)
Rent	(350.00)	(350.00)	(350.00)	(350.00)	(350.00)	(350.00)	(350.00)	(350.00)	(350.00)	(350.00)	(350.00)	(350.00)	(4,200.00)
Marketing etc	(850.00)	(850.00)	(850.00)	(850.00)	(850.00)	(850.00)	(850.00)	(850.00)	(850.00)	(850.00)	(850.00)	(850.00)	(10,200.00)
Electricity/Gas	(125.00)	(125.00)	(125.00)	(125.00)	(125.00)	(125.00)	(125.00)	(125.00)	(125.00)	(125.00)	(125.00)	(125.00)	(1,500.00)
Accountant	(1,000.00)	(1,000.00)	(1,000.00)	(1,000.00)	(1,000.00)	(1,000.00)	(1,000.00)	(1,000.00)	(1,000.00)	(1,000.00)	(1,000.00)	(1,000.00)	(12,000.00)	(51,900.00)
Net Profit	24,633.79	24,633.79	24,633.79	24,633.79	24,633.79	24,633.79	24,633.79	24,633.79	24,633.79	24,633.79	24,633.79	30,419.80	3,01,391.49
GPM %	41%	41%	41%	41%	41%	41%	41%	41%	41%	41%	41%	41%	41%
NPM%	35%	35%	35%	35%	35%	35%	35%	35%	35%	35%	35%	36%	35%

Break Even Point Analysis:

Break-Even Point
Product 1	Product 2	Product 3	Product 4
Selling Price	40.80	75.36	23.52	25.37
Variable Costs	23.70	52.5	9.3	10.84
Contribution/Unit	17.10	22.86	14.22	14.53
Fixed Costs divided evenly	12,975	12,975	12,975	12975	51,900
B.E.P	Fixed Costs	12,975	12,975	12,975	12,975
Contribution/Unit	17.10	22.86	14.22	14.53
Breakeven Point/ Product	759	568	912	893

Breakeven Point For Company
Step 1	Calculate Total Contribution
SALES	Cont/Unit	Total Contribution	Average Cont..
Product 1	3,660	17.10	62,586.00
Product 2	6,100	22.86	1,39,446.00
Product 3	4,880	14.22	69,393.60
Product 4	5697	14.53	82,777.41
Total Sales	20,337	3,54,203.01	17.42	per Unit

Breakeven Point
Total Fixed Costs	51,900
Average Contribution £	17.42
Breakeven Point Overall	2,980	units
Margin of Safety	17,357