Income Statement as per the Level Production

Jan
Net Sales
Cost of Goods Sold
Gross Profit
Operating Expenses
Interest Expense
Interest Income
Profit(loss) before taxes
Income Taxes
Net Profit

Operating Expenses For Level Production

Operating Expenses For Seasonal Production
Storage and Handling Cost
Saving in Labour Cost
Direct
Overtime
Total Operating Expense
Monthly Operating Expense

120.00
78.12
41.88
209.58
9.25
1.44
(175.52)
(59.68)
(115.84)

Feb

Mar
140.00
91.14
48.86
209.58
3.61
2.38
(161.95)
(55.06)
(106.89)

2,400,000.00
115,000.00
(225,000.00)
(265,000.00)
2,025,000.00
168,750.00

160.00
104.16
55.84
209.58
3.61
1.67
(155.68)
(52.93)
(102.75)

Apr
140.00
91.14
48.86
209.58
4.47
0.67
(164.52)
(55.94)
(108.59)

May
140.00
91.14
48.86
209.58
9.35
0.67
(169.40)
(57.60)
(111.81)

Jun
140.00
91.14
48.86
209.58
13.85
0.67
(173.91)
(59.13)
(114.78)

Jul
160.00
104.16
55.84
209.58
18.79
0.67
(171.87)
(58.44)
(113.43)

Aug
1,620.00
1,054.62
565.38
209.58
23.52
0.67
332.94
113.20
219.74

Sep
1,840.00
1,197.84
642.16
209.58
26.93
0.67
406.31
138.15
268.17

Oct
2,140.00
1,393.14
746.86
209.58
31.68
0.72
506.32
172.15
334.17

Nov
2,285.00
1,487.54
797.47
209.58
26.90
0.83
561.81
191.01
370.79

Dec
1,115.00
725.87
389.14
209.58
18.94
0.92
161.53
54.92
106.61

Total
10,000.00
6,510.00
3,490.00
2,515.00
190.90
11.96
796.06
270.66
525.40

given
65.1% of sales
Sales - COGS
24% of 10,000 + 115 = 2515/12
Interest for ST and LT loans
from cash flow
34% of PBT
PBT - Tax

65.1% of sales
Sales - COGS
24% of 10,000 + 115 = 2515/12
Interest for ST and LT loans
from cash flow
34% of PBT

Jan
200.00

Feb
Mar
Apr
May
621.10
807.79
200.00
200.00

Op. Bal.
Cash Outflows
Purchases
Other COGS(Wages and Over Heads)
Other Operating Exp.
Interest on Loans
S.T.
L.T.
Loan Repayments
Long Term loan Repayment
Tax
Total

282.00
292.50
209.58

250.00
292.50
209.58

250.00
292.50
209.58

250.00
292.50
209.58

250.00
292.50
209.58

5.64
3.61
752.00
1,545.33

3.61
755.69

3.61
88.00
843.69

0.86
3.61
114.23
35.00
905.78

5.74
3.61
765.11
1,526.54

Cash Inflows
Cash receipts
ST Loans
Interest on cash surplus
Closing balance

1,965.00
1.44
621.10

940.00
2.38
807.79

120.00
114.23
1.67
200.00

140.00
765.11
0.67
200.00

160.00
1,365.88
0.67
200.00

Assumptions
Level purchases throughout the year
Equipment Purchases included in other operating expenses
Loan Repayment at Month End
Interest on Short term Loan Paid in same month
Loan drawdown/repayment is done on last day of the month
Penal interest @12% for loan in excess of $2mn

Jun

er operating expenses

n last day of the month

Jul

Aug
Sep
Oct
200.00
20.00

0.00

Nov
Dec
200.00
200.00

200.00

200.00

250.00
292.50
209.58

250.00
292.50
209.58

250.00
292.50
209.58

250.00
292.50
209.58

250.00
292.50
209.58

250.00
292.50
209.58

10.24
3.61
1,365.88
25.00
35.00
2,191.82

15.38
3.41
2,051.15
2,822.03

20.11
3.41
2,681.36
3,456.96

23.52
3.41
3,136.29
35.00
3,950.30

28.27
3.41
3,769.64
4,553.40

23.50
3.41
3,132.68
3,911.67

15.53
3.41
2,070.84
25.00
35.00
2,901.86

9% of ST Loans of previous month / 12

9.625% of LT loans (including current portion) / 12
ST Loan repayment taken in previous month
paid in June and Dec
paid to govt in Mar, Apr, Jun, Sep, Dec

140.00
2,051.15
0.67
200.00

140.00
2,681.36
0.67
200.00

140.00
3,136.29
0.67
20.00

160.00
3,769.64
0.67
0.00

1,620.00
3,132.68
0.72
200.00

1,840.00
2,070.84
0.83
200.00

2,140.00
760.94
0.92
200.00

Sales of (n-2)th month collected

Loan taken to ensure min op. exp of 200 for month
(Opening Cash Bal + Closing Bal) / 2 * 4% /12
Op Bal + Cash inflows - cash outflows

250.00 3 million / 12
292.50 (6515 - 3000) / 12 [65.1% of 10,000]
209.58 24% of 10,000 + 115 (Extra holding costs) /12

6515 - 3000) / 12 [65.1% of 10,000]

4% of 10,000 + 115 (Extra holding costs) /12

% of ST Loans of previous month / 12

.625% of LT loans (including current portion) / 12
T Loan repayment taken in previous month

aid to govt in Mar, Apr, Jun, Sep, Dec

ales of (n-2)th month collected

oan taken to ensure min op. exp of 200 for month start
Opening Cash Bal + Closing Bal) / 2 * 4% /12
Op Bal + Cash inflows - cash outflows

Jan

Feb

Mar

Apr

May

Jun

Cash
Accounts Receivable
Inventory

621.10
1,060.00
1,050.38

807.79
260.00
1,501.74

200.00
300.00
1,940.08

200.00
300.00
2,391.44

200.00
280.00
2,842.80

200.00
280.00
3,294.16

Current Assets
Net Plant and Equipment

1,176.00

1,176.00

1,176.00

1,176.00

1,176.00

1,176.00

Total Assets

3,907.48

3,745.53

3,616.08

4,067.44

4,498.80

4,950.16

250.00
1,365.88
(316.21)
50.00

250.00
2,051.15
(410.34)
50.00

Accounts Payable
Notes Payable
Accrued Taxes
Long Term Debt, Current Portion

250.00
28.32
50.00

250.00
(26.74)
50.00

250.00
114.23
(167.67)
50.00

250.00
765.11
(258.61)
50.00

Current Liabilities
Long Term Debt
Share Holders Equity

400.00
3,179.16

400.00
3,072.27

400.00
2,969.52

400.00
2,860.94

400.00
2,749.13

375.00
2,634.35

Total Liabilities and Equity

3,907.48

3,745.53

3,616.08

4,067.44

4,498.80

4,950.16

Inventory
Opening
Purchases
COGS
Closing

586.00
542.50
78.12
1,050.38

1,050.38
542.50
91.14
1,501.74

1,501.74
542.50
104.16
1,940.08

1,940.08
542.50
91.14
2,391.44

2,391.44
542.50
91.14
2,842.80

2,842.80
542.50
91.14
3,294.16

Currents Assets
Cuurent Liabilities
Net Working Capital ( Level)

2,731.48
328.32
2,403.16

2,569.53
273.26
2,296.27

2,440.08
246.56
2,193.52

2,891.44
806.50
2,084.94

3,322.80
1,349.67
1,973.13

3,774.16
1,940.81
1,833.35

Seasonal
Net Working Capital ( Seasonal )

2407.46

2303.18

2203.52

2099.24

1994.3

1864.36

Jul

Aug

Sep

Oct

Nov

Dec

200.00
300.00
3,732.50

20.00
1,780.00
3,220.38

0.00
3,460.00
2,565.04

200.00
3,980.00
1,714.40

200.00
4,425.00
769.37

200.00 cash flow statement

3,400.00 Sales of current month + Prev month
586.00 Inventory bal at end of month

1,176.00

1,176.00

1,176.00

1,176.00

1,176.00

1,176.00 depreciation, constant

5,408.50

6,196.38

7,201.04

7,070.40

6,570.36

5,362.00

250.00
2,681.36
(468.77)
50.00

250.00
3,136.29
(355.57)
50.00

250.00
3,769.64
(252.42)
50.00

250.00
3,132.68
(80.28)
50.00

250.00
2,070.84
110.74
50.00

375.00
2,520.91

375.00
2,740.66

375.00
3,008.82

375.00
3,342.99

375.00
3,713.79

350.00 400 start, 25 paid in June and Dec

3,820.40 Prev month + Current month's Profit

5,408.50

6,196.38

7,201.04

7,070.40

6,570.36

5,362.00

3,294.16
542.50
104.16
3,732.50

3,732.50
542.50
1,054.62
3,220.38

3,220.38
542.50
1,197.84
2,565.04

2,565.04
542.50
1,393.14
1,714.40

1,714.40
542.50
1,487.54
769.37

769.37
542.50
725.87
586.00

4,232.50
2,512.59
1,719.91

5,020.38
3,080.72
1,939.66

6,025.04
3,817.22
2,207.82

5,894.40
3,352.40
2,541.99

5,394.36
2,481.58
2,912.79

4,186.00
1,191.60
2,994.40

27,100.94

1761.38

1947.5

2172.56

2453.72

2763.59

2818.28

26789.09

250.00 3 million / 12
760.94 from cash flow statement, ST loans taken to ensure op. cash of 200
130.66 Prev month+Taxes of current month-Payments done to Govt
50.00

Prev month closing

from cash flow, purchases and other overheads
Used goods, 65.1% of sales
Opening + purchases - Goods sold

ST loans taken to ensure op. cash of 200k

nt month-Payments done to Govt

and other overheads

Net Sales
Cost of Goods Sold
Gross Profit
Operating Expenses
Interest Expense
Interest Income
Profit(loss) before taxes
Income Taxes
Net Profit

Seasonal
10000
7000
3000
2400
95
28
533
181.22
351.78

Level
10000
6510
3490
2515
190.90
11.96
796.06
270.66
525.40

Comparison
490
-490
-115
-95.90
16.04
-263.06
-89.44
-173.62

-49%

Under level production

Net income increases by almost 49%

Requires much more bank financing
Required bank borrowing from June to November is above the $2 million limit set by the bank
Hence, loan renogitation is needed. Need to convince the bank that firm can repay loans
Higher risk, if sales forecasts are not accurate. Unsold inventory would increase holding costs and at same time will need to p
On the other hand, level production utilizes the capacity better throughout the year and postpones additional investment for

and at same time will need to pay larger loan

pones additional investment for capacity expansion