Session 5 Case studies and Solutions

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Session 5Case studies and Solutions

• Nursery ManagementUnderstanding and Managing
  Finance

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Mc Laney and Atrill 2.6 Original Balance Sheet
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Mc Laney and Atrill 2.6 Trans-actions
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Mc Laney and Atrill 2.6 Revised Balance Sheet
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Cost of Sales Example

• At the start of January, a small furniture
  retailer held 35,000 worth of stock. During the
  month, a further 12, 000 was bought in, and at
  the end of the month, the stock level was
  27,000.
• Calculate the cost of Sales for January.

Opening stock 35,000
Purchases 12,000 Total 47,000 less
Closing stock 27,000 Cost of
materials 20,000
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Cost of Sales (2)

• In service and some manufacturing industries, The
  cost of sales may also include other Direct
  Costs. These are costs directly incurred as a
  result of making the sale, manufacturing the
  item, or in carrying out the service.

• Direct Costs
• Cost of Materials
• Labour costs incurred
• Transportation costs
• Fuel and other costs

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P and L Example Spreadsheet
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P and L Example Solution Part 1
January Stock Take figure
Total of all Purchases for February
February Stock Take figure
Opening Stock Purchases - Closing Stock
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P and L Example Solution Part 2
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P and L Example Solution Part 2
Total of all Sales for February
Total of Wages, Gas/Electric, Rent/Rates,
Petrol for February
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Mc Laney and Atrill Ex 3.8 P and L Account
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Mc Laney and Atrill Ex 3.8 Points to note
Increase in Sales Value and Gross profit
Increase in Salaries and Distribution Costs
Increase in Bad debts
Decline in Net Profits
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Mc Laney and Atrill Ex 3.8 Analysis

• There has been an increase in turnover and Gross
  profits
• There has not been a corresponding increase in
  net profits because
• There has been a significant rise in overheads
• Increase in sales achieved only through greater
  marketing effort
• Increase in bad debt suggest that sales being
  offered to poor credit risk customers
• This seems to mark a sales policy shift from the
  previous year, and has not been successful.