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Essay Available:
Pages:
2 pages/≈550 words
Sources:
2 Sources
Style:
APA
Subject:
Business & Marketing
Type:
Essay
Language:
English (U.S.)
Document:
MS Word
Date:
Total cost:
$ 8.64
Topic:

How the Increase in Sales Volume Affects Income and Expenses

Essay Instructions:

Go to Tim’s Coffee Shoppe and look in the back office. Inside the file drawer labeled “Business” is Tim’s Coffee Shoppe’s income statement for the most recent year. This is the most recent record Tim has. This year, several large businesses are moving in around his coffee shop and he expects business to increase. Tim needs to create a pro forma profit and loss (income) statement for this year, and you need to help him.
In this assignment, discuss whether each area in the pro forma income statement will increase, decrease, or stay the same due to large businesses moving into the neighboring buildings and explain your rationale for why that line item will increase, decrease, or stay the same. Remember, Tim serves coffee to many people who work in the area, so he would certainly expect a major increase in his business volume.
This assignment is not looking for dollar figures, but primarily your justification for why the line items will change and what direction they will change, if any. You may make assumptions based on the increased sales volume and how it will affect income and expenses; if and when you do make these assumptions, please describe them and their effects on each line item.
Search the Internet for videos about financial statements for assistance.
These are the line items:
Income earned:
Expenses include:
Salaries
Rent
Depreciation
Supplies
Lease (on a refrigerator)
Tax
Interest (on loans currently held)
Insurance
Checklist:
If you made assumptions based on the increased sales volume and how it will affect income and expenses, please describe them and their effects on each line item.
Given what you have assumed and projected, will the total expenses increase or decrease? Why?
Given what you have assumed and projected, will the net profit increase or decrease? Why?
In a minimum 4-page paper (which includes the title and reference pages) in current APA format and citation style, please respond to the line items above and the questions provided.
Access the assignment grading rubric attached.
Here is the link to Tim’s Coffee Shoppe:
https://kapextmediassl-a(dot)akamaihd(dot)net/business/Media/MT299/2007D/simulation/story.html

Essay Sample Content Preview:

Impacts on the profit and loss statement
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Impacts on the profit and loss statement
According to Omoruyi & Mafini (2016), an increase in customer numbers for any business will increase sales revenue. Other reasons a business can experience an increase in sales are; the expansion of product lines, an increase in prices of outputs, and increased repeat orders from existing customers. Tim’s Coffee Shop is projecting a business boom due to increased customers. This business phenomenon will affect the items of Tim’s Coffee Shop’s financial statement as follows.
Income earned
Income earned for Tim’s Coffee shop will be the total revenue earned from the sale of coffee. Income earned will increase due to increased customer orders. As the population of the working class increases, Tim’s Coffee Shop will experience a surge in customer orders. Despite the rise in revenue, the growth rate will be determined by different factors. For example, people tend to take more coffee during the cold season than during the hot season. Tim’s Coffee Shop may experience minimal revenue growth if the new businesses provide their staff with coffee.
Salaries
Salaries are the rewards paid to company employees for the services rendered to the company. Most of the time, salaries behave as step fixed costs. This means that salaries remain constant for a certain income range before increasing. Companies pay salaries as a sales commission in a few instances, resulting in a positive correlation between revenue and salaries (Kräkel & Schöttner, 2016). Since Tim’s Coffee Shop is expecting a boom in business, it will need to increase delivery personnel and baristas to deliver customer orders quickly. However, the percentage increase in salaries will be lower than the increase in revenue if employees are paid a fixed salary.
Rent
Rent is the amount of money a business pays for occupying a rental space. The amount of rent paid varies based on the location and area covered. For Tim’s Coffee Shop, this will remain constant. Rent will remain fixed as Tim will not need to acquire extra space.
Depreciation
Depreciation is a non-cash expense provision for wear and tear of plant and machinery. Tom’s Coffee Shop will strive to use the current machines to their maximum capacity in order to satisfy the surge in demand. Since no addit...
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