H.W. LR Lawn Treatment, Inc
1) For the case study LR Lawn Treatments, please complete the blank spaces on the LR Lawn Treatment spreadsheet. Please also calculate the following for 2009.
Income Statement 2008 2009 % Inc
Decr 2009 Alt.
Total Market (lawns professionally treated) 45,000 43,000 43,000 a) Return on Assets: ______
LR Lawns Treated (unit volume) 11,000 12,000 b) Cu
ent Ratio: _______
Sales Revenue $ 860,000 $ 885,000 c) Debt/Equity Ratio: _______
Memo: Market Share d) Cash flow from Operations: _______
Memo: Avg. Revenue/Lawn e) Cash flow from Investing Activities: ______
f) Cash Flow from Financing Activities: _______
Less: Variable Cost of Sales Revenue g) Net Change in Cash for the year: _______
Chemicals $ 115,000 $ 125,000
1099 Workers * $ 175,000 $ 182,000 2) In a short essay (5-10 sentences), please compare the change in the financial results of the lawn business from 2008 to 2009.
Truck Running Costs $ 40,000 $ 40,000 In your essay, please provide plausible second tier explanations for the changes. Consider selling prices, volumes, market shares, fixed costs and variable costs. Use your imagination.
Total Cost of Sales Revenue $ 330,000 $ 347,000 For example, an increase in the market share might be due to a strong economy or a new housing development. Essay is worth 6 points and will be subjectively graded.
= Gross Profit Margin $ 530,000 $ 538,000
Memo: Gross Profit Margin %
3) The owner believes that if she would have had prices that were 5% lower in 2009, added another salaried salesperson (for $45,000) and increased advertising expenses to $60,000,
Less: Overhead (Other Operating) Expenses: the unit volume (lawns Treated) would have been 25% higher, and net income would have been higher in 2009.
Salaried Employees $ 190,000 $ 180,000 Please complete the column XXXXXXXXXXalt) income statement and see if she is co
ect. Use logical business assumptions in making this forecast.
Office and Warehouse rent $ 90,000 $ 90,000 Please also calculate the following based upon these new assumptions:
Depreciation of Trucks $ 30,000 $ 40,000
Advertising $ 30,000 $ 40,000 a) Market share: _________
Total Overhead Expenses $ 340,000 $ 350,000 b) Gross Margin %: ______
c) Profit Margin %: _______
= EBIT (net operating income) $ 190,000 $ 188,000
less: Interest Expense $ 23,000 $ 35,000 35,000
= Pretax Income (profit) $ 167,000 $ 153,000
less: Income taxes $ 40,000 $ 35,000
= Net Income (profit) $ 127,000 $ 118,000
Memo: Profit Margin %
Cash $ 5,000 $ 5,000
Accounts Receivable $ 25,000 $ 40,000
Inventories $ 8,000 $ 9,000
ent Assets $ 38,000 $ 54,000
Fixed Assets $ 500,000 $ 550,000
- Accumulated Depreciation $ 80,000 $ 120,000
= Net Fixed Assets $ 420,000 $ 430,000
Total Assets $ 458,000 $ 484,000
Accounts Payable $ 8,000 $ 20,000
Bank Loans $ 275,000 $ 300,000
= Total Liabilities $ 283,000 $ 320,000
Common Stock (Invested capital) $ 100,000 $ 100,000
Retained Earnings $ 75,000 $ 64,000
Total Liabilities and Owner's Equity $ 458,000 $ 484,000
* Workers are paid based upon the number of lawns treated (not hourly).
Emily runs a vineyard that produces wine that has a recommended retail sales price of $9.00. Her selling price to the retailer is $6.50
ottle and her variable costs of goods sold are $3.10
ottle. She has operating costs (overhead) of $140,000 per month and she sells, on average, 60,000 bottles per month. Calculate for an average month: please show your calculations.
a) Retail margin %: XXXXXXXXXX______
) Emily’s Gross margin %: _______
c) Breakeven point: __________
d) Operating Income: XXXXXXXXXX_______
e) Operating Income: XXXXXXXXXX_______ (if sales volume increases by 10%)
f) Operating Income: XXXXXXXXXX_______ (if selling price is increases by 10%)