Referencing Reid’s Ride’s Part I. It has been three years and Reid’s business has done very well. Sales have increased to 795 bikes. Expenses have been maintained at a 5% increase and cost of goods sold have also remained steady at a 3% increase. (Increases were compounded over the past three years. Rent did not change. Interest on the loan of $55,000 for 5 years is 6.5%) Reid’s business has expanded and he is receiving calls from all over the area. Reid expects sales for this next year to be 875 bikes. Because of the increased sales Reid has decided to hire two full time employees in addition to the part time employee he currently has this next year. The part time employee will maintain the web site, answer phone calls and assist with billing. One employee will be the assistant manager and assist Reid in building the bikes and a second will assist with inventory, and shipping. Reid believes that the salaries for the three people will be:
Employee 1: Part Time 20 hours per week at $11.00 per hour.
Employee 2: Inventory and shipping 40 hours per week at $12.00 per hour
Employee 3: Assistant manager 40 hours per week at $17.00 per hour
Assignment
1. Generate a Profit and loss statement that illustrates the profit or loss or the year ending sales of 795.
2. Generate a new profit and loss statement that reflects Reid’s projected sales of 875 bikes. Include the ending expenses you calculated in #1 above. Do not include the new employee’s salary. (NOTE you will need to calculate the loan balance at the end of the three year period as well as the interest paid during each of the previous years.
3. Generate a projected profit and loss statement that includes sales of 875 bikes and the new employees. In addition Reid expects a salary of $40,000. (Do Not include depreciation and taxes in this calculation)
4. Develop a break even analysis for Reid using the information in question number 2 above.(remember to use the most current expenses and cost of goods sold)
Part 1 info needed
Reid’s Rides sells high quality BMX bikes for $485 each. The cost to produce the bikes average $335.00 each. Depreciation expenses run $2,000 per year. Utilities average $1100 per month, Insurance is $2,475 per year, vehicle gas averages $85 per month, phone and internet is $255 per month and rent is $2,000 per. Vehicle license and other fees are $795 per year. In addition Reid has a budget for tools at $75 per month. Last year Reid sold 597 bikes. Part time help is $7,800. Reid has the following assets, miscellaneous parts $8,955, tools $4,600 delivery/service truck $22,000, office equipment, display racks, computers, phones equal $17,000 with an inventory of 80 bikes. The company has a five-year loan. The loan amount at the start of year was $55,000 with an Interest rate of 6.5%. Accumulated depreciation in the amount of $15,000. Operating Cash is $10,000, Cash in savings of 30,000. Their tax rate is 24%. Reid averages $4,500 in accounts receivable and $2,000 in accounts payable. Reid operates as a sole proprietorship.