Essay: Expense statement of Tesco Sausages

Sample Essay

Expense Statement
Tesco Sausages Co
For the Year Ending 201X
Projected/Realistic Optimistic Decrease by 10 % Pessimist Increase by 15%
Personal
Office £                 15,000.00 £                13,500.00 £             17,250.00
Store £                 12,000.00 £                10,800.00 £             13,800.00
Salespersons £                 11,500.00 £                10,350.00 £             13,225.00
Other £                   6,000.00 £                   5,400.00 £                6,900.00
Operating
Advertising £                 10,000.00 £                   9,000.00 £             11,500.00
Supplies £                   8,500.00 £                   7,650.00 £                9,775.00
Rent or Mortgage £                 20,000.00 £                18,000.00 £             23,000.00
Sales Expenses £                   5,850.00 £                   5,265.00 £                6,727.50
Taxes £               176,143.68 £              158,529.31 £           202,565.23
Utilities £                 14,000.00 £                12,600.00 £             16,100.00
Insurance £                 30,000.00 £                27,000.00 £             34,500.00
Interest £                 16,200.00 £                16,200.00 £             16,200.00
Maintainance & Repairs £                   5,600.00 £                   5,040.00 £                6,440.00
Depreciation £                 50,000.00 £                45,000.00 £             57,500.00
Storage £                 12,000.00 £                10,800.00 £             13,800.00
Total Expenses £               392,793.68 £              355,134.31 £           449,282.73

Using our budgeted analysis, the total expenses of the company account for 41.21% of sales. Using a revised strategy under the optimistic approach if the company reduces its expenses by 10%, it will have a positive impact on the profitability of the company. However, under the pessimistic approach, the total expenses would reach to a maximum of £464,031.44. The optimistic approach is feasible if the costs are decreased in the areas of operations

Tesco Sausages Co
Income Statement
For the Year ending 201X
Projected Optimistic +20 % Pessimist -10%
Sales €                880,718.40 €                1,056,862.08 €                          792,646.56
Less: Sales Tax €              (176,143.68) €                  (211,372.42) €                       (158,529.31)
Net Sales €                704,574.72 €                    845,489.66 €                          634,117.25
Less: Cost €              (497,285.91) €                  (447,557.32) €                       (547,014.50)
€                207,288.81 €                    397,932.35 €                            87,102.75
Other Income €                  15,000.00 €                      15,000.00 €                            15,000.00
€                222,288.81 €                    412,932.35 €                          102,102.75
Cost of Sales
Advertising €                (10,000.00) €                      (9,000.00) €                          (11,500.00)
Supplies €                  (8,500.00) €                      (7,650.00) €                            (9,775.00)
Rent or Mortgage €                (20,000.00) €                    (18,000.00) €                          (23,000.00)
Sales Expenses €                  (5,850.00) €                      (5,265.00) €                            (6,727.50)
Taxes €              (176,143.68) €                  (158,529.31) €                       (202,565.23)
Utilities €                (14,000.00) €                    (12,600.00) €                          (16,100.00)
Insurance €                (30,000.00) €                    (27,000.00) €                          (34,500.00)
Interest €                  16,200.00 €                    (16,200.00) €                          (16,200.00)
Maintainance & Repairs €                  (5,600.00) €                      (5,040.00) €                            (6,440.00)
Depreciation €                (50,000.00) €                    (45,000.00) €                          (57,500.00)
Storage €                (12,000.00) €                    (10,800.00) €                          (13,800.00)
Total €              (315,893.68) €                  (315,084.31) €                       (398,107.73)
Gross Profit €                (93,604.87) €                      97,848.03 €                       (296,004.99)
Selling, General and Administrative Expenses
Office €                (15,000.00) €                    (13,500.00) €                          (17,250.00)
Store €                (12,000.00) €                    (10,800.00) €                          (13,800.00)
Salespersons €                (11,500.00) €                    (10,350.00) €                          (13,225.00)
Other €                  (6,000.00) €                      (5,400.00) €                            (6,900.00)
Total €                (44,500.00) €                    (40,050.00) €                          (51,175.00)
Net Profit/Loss €              (138,104.87) €                      57,798.03 €                       (347,179.99)

As far as the income statement is concerned, Tesco incurs a loss of -£ 114,629.97 in the first year, but if we see the optimistic approach the profit for the year will be huge, amounting to £ 107,815.40. However, under the pessimistic approach, the loss would be a maximum of -£ 315,758.82. The major emphasis should be on cost reduction and increased production. This will require Tesco sausages to increase its production facilities by expanding its sales channels and increasing revenue engines, for which investments in government bonds can be an effective engine.

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