Calculate the break-even point for number of sandwiches to be sold. Construct a table which clearly shows the costs, revenues and profit/loss at various levels of sales You need to show clearly that the numbers link directly to all previous tasks.

2. Calculate the margin of safety.

3. Calculate the number of sales to generate a profit of £1,000,000

4. Produce a breakeven chart. This need to be labelled clearly for full marks and include axis data from your table in part a.

N.B. For both parts a and b, assume you are renting the premises.

1. Prepare a cash budget for the first year of trading showing receipts and payments month by month for the sandwich shop. This should incorporate the sales and cost data from the previous tasks (using formulae to link to the appropriate cells). You are required to display an overall cash position. You should then identify the initial and ongoing financing requirements of the business and identify appropriate financing mechanisms to support this.

2. You are in negotiations with a number of established local food retailers to supply sandwiches to sell to their customers. This is an exciting opportunity to change the focus of the business. Should you win the contract to supply sandwiches, you would stop selling them in your shop and sell only directly to these retailers, this would increase the number of sandwiches sold (calculated in task 1) to 30% in each month. As part of the deal, you have offered the local organizations a 30-day credit period to make payment. If you are to go ahead with this, you need to revisit all of your assumptions about the fixed and variable costs associated with the business. This is a different business model and your costs should be updated to reflect that.

Prepare a revised cash budget for the first year of trading showing receipts and payments month by month for the revised business model.

Show your decision – running your own sandwich shop or selling your sandwiches via contracts with established retailers

Task 4 – Capital Investment Appraisal (10 marks)

You plan is to run this business for 10 years, then sell it to focus on other opportunities. A friend has suggested that renting premises is “dead money” and that you should consider purchasing instead. You have discussed this with your family and they have agreed to provide an interest free loan of £20,000 to cover the costs of legal fees, conveyancing, property taxes etc. This loan will be paid back over 10 years as an annual payment on 1^st January each year (commencing 1^st January 2023).

N.B. You need to ensure that the premises suit your purpose which depends upon your decision at the end of task 3.

Task 4 a – Research the cost of buying premises for your business in the town you have been allocated. This cost will be treated as your initial outlay.

• In terms of purchasing the premises you need to assume you will be securing a long-term bank loan for 10 years. You need to research the monthly and annual repayments, which will include interest.
• You can use Barclays Business Loan Calculator and show your working on the spreadsheet for the annual cost:

https://www.barclays.co.uk/business-banking/borrow/loans/

Please note: The maximum loan amount using the free calculator is £25,000. You will therefore need to make appropriate assumptions about the amounts you would need to pay based on a larger loan amount.

Alternatively, you could use the calculator here: https://www.experian.co.uk/blogs/latest-thinking/small-business/business-loan-calculator/ You will need to research an appropriate interest rate to use with this one.

Task 4b - You need to calculate the Payback Period, Net Present Value and Internal Rate of Return. Use a discount factor of 10% for the Net Present Value and 20% for IRR.

• You need to bring in the cash inflows and outflows used to create your one of your cash budgets, depending upon whether you are supplying local food retailers (cash budget with credit task 3b) or not (cash budget task 3a).
• Use the following assumptions: Your business will occupy the same building for 10 years. Selling prices and variable costs will increase by 2% a year. All fixed costs will increase by 5% a year.

Answer rating: 100% (QA)

a The table below shows the breakeven point for number of sandwiches to be sold Costs Fixed costs Rent 3000 Utilities 200 Insurance 100 Total fixed costs 3300 Variable costs Bread 050 Butter 020 Chees... View the full answer