Accounting: Generally Accepted Accounting Principles and Energy Drink Essay

Submitted By Agalupe
Words: 2450
Pages: 10

Introduction to Accounting and Finance

Contents | Page | Costing Assumptions | 3 | Marginal Cost Statement | 4 | Break-Even Analysis | 5 | Break-Even Table | 5 | Break-Even and Margin of Safety Graph | 6 | Cash Budget Statement | 7 | Forecast Income and Loss Statement | 8 | Forecast Balance Sheet | 9 | Salsabil Energy Drink: Pitch for Investors | 10 | Bibliography | 14 |

Costing Assumptions and Sources of Information
The energy drink firms compete in a monopolistic market structure. This is where suppliers differentiate their products in order to have some kind of power and share in the market. Therefore it is very important for me to consider the market structure of energy drinks when deciding the costs and selling price of my new energy drink.
I used the costing guidelines document from Visual Learning Environment to set the different costs for my energy drink. These are the costs that I decided to use: * Variable costs = 60% of sales figure * Gross profit margin = 40 % of sales figure * Net profit margin = 20 % of sales figure * Fixed costs= 20% of sales figure (difference between gross profit margin and net profit margin)
On the other hand I had to research the selling price of other energy drinks currently available in the market and I found out that on average each cost around £1. Therefore I decided to sell each unit of my “Salsabil” energy drink for £1 and I have also decided to produce it in 500ml bottles. These are the relevant sources I used to conduct my research: http://www.ocado.com/webshop/getCategories.do?tags=|20001|20977|20978|20981 http://www.lifehack.org/articles/lifehack/165-energy-drinks-reviews.html http://tutor2u.net/blog/index.php/economics/comments/battle-of-the-energy-drinks/ http://energydrinks.factexpert.com/898-energy-drink-prices.php http://www.crunchgear.com/2008/01/10/skyrocketing-energy-drink-prices-make-gas-look-cheap/ http://www.healthyplanetdiet.com/energy-drink-ingredients.html http://www.thecoca-colacompany.com/presscenter/nr_20081006_monster_energy_drink.html http://www.lucozadeshop.com/ http://news.bbc.co.uk/sport1/hi/health_and_fitness/4289704.stm (All references available in the bibliography)

Click-click Shoes 2011: Marginal Cost Statement | | Units | £ | Sales Revenue | 10,000 | £400,000 | | | | Less variables costs | Variable cost 60% | £240,000 | | | | Contribution | Gross profit margin 40% | £160,000 | | | | Less fixed costs | Fixed cost 20% | £80,000 | Profit | Net profit margin 20% | £80,000 | Month | Units Sold | £ | January | 500 | £20,000 | February | 500 | £20,000 | March | 500 | £20,000 | April | 700 | £28,000 | May | 800 | £32,000 | June | 1000 | £40,000 | July | 1500 | £60,000 | August | 1500 | £60,000 | September | 1100 | £44,000 | October | 900 | £36,000 | November | 500 | £20,000 | December | 500 | £20,000 | Total | 10,000 | £400,000 | Margin of safety | 5,000 | 50% | % of total sales budget | | 50% |

Salsabil Energy Drink 2011: Break Even Analysis | Price per unit | | £40.00 | Variable cost per unit | | £24 | Contribution per unit | | £16 | Fixed costs | | £80,000 | Units to break-even | | 5000 |

Break Even Table | Output | Fixed Cost | Variable Cost | Total Cost | Total Revenue | Profit | 0 | £80,000 | 0 | £80,000 | £0 | -80,000 | 3000 | £80,000 | £72,000 | £152,000 | £120,000 | -32,000 | 3500 | £80,000 | £84,000 | £164,000 | £140,000 | -24,000 | 4000 | £80,000 | £96,000 | £176,000 | £160,000 | -16,000 | 4500 | £80,000 | £108,000 | £188,000 | £180,000 | -8,000 | 5000 | £80,000 | £120,000 | £200,000 | £200,000 | - | 5500 | £80,000 | £132,000 | £212,000 | £220,000 | 8,000 | 6000 | £80,000 | £144,000 | £224,000 | £240,000 | 16,000 | 6500 | £80,000 | £156,000 | £236,000 | £260,000 | 24,000 | 7000 | £80,000 | £168,000 | £248,000 | £280,000 | 32,000 | 7500 | £80,000 | £180,000 | £260,000 | £300,000…