Module 8 • The financial plan
4. Break-even point in sales. 5. Break-even units. 6. Draw up a cash-flow statement for four months (March – June).
Growing the business
The owners of Springbok Silencers got the shock of their lives when they saw all the calculations and realised that they would never make a decent profit if they did not grow and expand their business. One of the owners came up with the idea to start servicing vehicles.
They identified the following three categories of service: 1. “Checking” of: 2. “Topping Up” of: 3. “Replacement” of:
The all-inclusive price for this service is R450. The owners estimated that 40% of the business would come from this service side of the business. Market research has shown that they can expect to service 40 vehicles per month. Variable costs including labour and parts will amount on average to R200 per service. Half of these costs are labour.
Calculate: 1. The hours of labour they budgeted per service, if the labour costs per hour are R50. 2. The gross profit per service. 3. The weighted average gross profit percentage. 4. The mark-up percentage per service. 5. The net profit percentage of Springbok Silencers.
CASE STUDY – CD’S4AFRICA
To compile your forecast cash flow statement, you will have to determine the approximate figures of the following: • Your expected monthly sales volume (how many products you expect to sell)
• The percentage of cash sales and the payment patterns of debtors (people who owe you money).
• The cash payments you will need to make to your suppliers • Your fixed monthly costs, all those monthly payments such as rent and electricity
Example of a forecast cash flow statement CD’s4Africa is a cash business. Nobody can buy a CD or a DVD on credit or on lay-by. The business buys all its stock on a cash basis. All the other costs of the business are fixed costs and must be paid monthly.
The owner expects business to pick up after 3 months. Customers (in his target market) will then already know about his business. Also, in May 50Cent plans to visit South Africa and CD’s4Africa plans to run a big promotion on al 50Cent CDs and DVDs. For that month the owner expects his sales to be even higher.
CD’s4Africa got a loan of R1 000 from Khula to start the business. Instructions:
Compile a cashflow statement for CD’s4Africa for the period February – July. 163
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