delia's donuts accounting summary

Delia!s D nuts

LisaScottiJeremyParedesAshleighBlumer

DannyShepelwichEmilyGentry

Delia!s D nuts

Executive Overview

After reviewing Delia’s financial situations, we have come to conclusions that will help her in the present and the future. First, we recommend that Delia should purchase four donut machines. This will produce excess capacity and

reduce her overall expenses. Next, Delia should follow through with the computer equipment purchase. This decision will increase productivity and help

will her financial bookkeeping. Considering the South side store, we do not recommend opening one until we lower sales commission and raise charitable

price per unit. This will make the North side store profitable. Based on our projections and analysis, we also suggest that Delia begin selling donuts at

C-stores. Selling donuts at 40 C-store accounts will provide a 37% net profit margin. In conclusion, Delia’s health-care costs will be reduced based on the

recommendations we have suggested.

Delia!s D nuts

Question 1

Should Delia’s proceed with the purchase of the donut making machinery?

Why or why not?

Should Delia’s proceed with the purchase of the donut making machinery? Why or why not?

• Yes, Delia should proceed with the purchase of the donut making machinery.• We suggest that Delia fire all 30 bakers. • Delia should replace the bakers by purchasing 4 machines (1 machine

working at 25% capacity; all others at full capacity).• With 4 machines, Delia will be able to make enough donuts based on actual

2009 sales (retail and charitable).• Key numbers:

o Total Cost (3.25 machines; includes annual depreciation for 4 machines, salary for 9 machine operators, operators insurance, operators workmen’s comp, COGS, warranty cost for one year for 3 machines, maintenance cost for one machine for one year, property and casualty insurance) = $2,067,219

• See Exhibits 1-10:o 1: How many donuts were sold in 2009?o 2: How many machines do we need to make in 2009?o 3: How much is health insurance and workman’s compensation?o 4: How much do machine maintenance and warranty cost per year?o 5: What will the COGS be if we use machines?o 6: What will Property & Causality Insurance cost if we use machines?o 7: How much do 3.25 machines cost?o 8: How much does it cost to run a machine at 25% capacity?o 9: How much would it cost to pay 7 bakers in 2009?o 10: Is it less expensive to purchase machines or hire bakers?

Delia!s D nuts

Delia!s D nuts

Exhibit 1How many donuts we sold in 2009

2009 Total Retail Donuts Sold2009 Total Retail Donuts Sold

Total 2009 Retail Sales $775,500

Frosted Percentage 60%

Frosted Retail Sales $465,300

Frosted Retail Unit Price $0.625

Frosted Retail Total Units Sold 744,480

Filled Percentage 40%

Filled Retail Sales $310,200

Filled Retail Unit Price $0.75

Filled Retail Total Units Sold 413,600

Total Retail Units Sold 1,158,080

2009 Total Charity Donuts Sold2009 Total Charity Donuts Sold

Total 2009 Charity Sales $3,033,071.00

Charity Price Per Dozen $6.50

Charity Price Per Unit $0.54

Total Charity Units Sold 5,616,798

TOTAL 2009 UNITS SOLD 6,774,878

Delia!s D nuts

Exhibit 2How many machines do we need to make donuts in 2009?

Calculations for # of machines for Retail/CharityCalculations for # of machines for Retail/Charity

donuts sold in 2009 6,774,879

# of donuts (1) machine can make 2,085,610

machines needed to make 2009 donuts 3.25

Delia!s D nuts

Exhibit 3How much is health insurance and workman’s compensation per employee?

Number of EmployeesNumber of Employees

8 packaging and shipping people

30 bakers

1 packing and shipping manager

6 office staff

1 delia

46 full-time total in 2009

14 part time employees

60 total employees (both F/T and P/T) in 2009

Number of part time retail employeesNumber of part time retail employees

2 employees to staff retail at all times

18 hours per day to staff

7 days per week

252 total number of hours needed to staff per week

40 hours per full-time employee

7 full-time employees needed to staff per week

14 part-time employees needed to staff per week

Delia!s D nuts

Exhibit 3 Continued

Number of BakersNumber of Bakers

7 bakers per shift

3 shifts per day

8 hours per shift

7 days per week

1,176 total number of hours needed to staff per week


30 full-time bakers needed to staff one week

Health Insurance and Workman's Compensation CalculationsHealth Insurance and Workman's Compensation Calculations

$171,429 total health insurance per year

$3,727 health insurance per employee

$40,000 workman's comp per year

$667 Workman's comp per person per year

Assumptions

Full time employees work 40 hours per week

Doubled number of full-time workers needed to translate into part-time workers

Only full-time employees get health insurance

All full-time and part-time employees get workman's compensation

All retail employees are part-time employees

Delia!s D nuts

Exhibit 4How much do machine maintenance and warranty cost per year?

Maintenance Costs per yearMaintenance Costs per year

$1,000 cost per month

12 months per year

$12,000 total costs per year

Warranty Costs per yearWarranty Costs per year

$650 cost per month in first (2) years

$850 cost per month in last (3) years

$15,600 total costs for the first (2) years

$30,600 total costs for the last (3) years

$46,200 Total for (5) years

$92,400 Total for (10) years

$9,240 Blended rate per year

Delia!s D nuts

Exhibit 5What will the COGS be if we use machines?

New COGS due to MachinesNew COGS due to Machines

2009 COGS $2,398,571

labor costs (55% of total COGS) $1,319,214

COGS - Bakers Labor $1,079,357

Rent $35,000

COGS - Rent $1,044,357

10% of COGS (due to machine efficiencies) $104,436

New COGS due to savings $974,921

Delia!s D nuts

Exhibit 6What will Property & Causality Insurance cost if we use machines?

New Property and Casualty Insurance Costs CalculationsNew Property and Casualty Insurance Costs Calculations

Property and Casualty Insurance 2009 Costs $8,571

Percentage Increase due to Machinery 15%

New Property and Casualty Insurance Costs due to Machinery $9,857

Delia!s D nuts

Exhibit 7How much do 3.25 machines cost?

Full-Time Machine CalculationsFull-Time Machine CalculationsFull-Time Machine Calculations

(1)

machine

(3)

machines

Annual Depreciation $10,000 $30,000

Staff Costs ((2) workers x 24 hours x $15/hour x 365

days)

$262,800 $788,400

Staff Health Insurance ((2) workers per shift x (3) shifts

x (8) hours/shift x (7) days per week / (40) hours for

full-time employment)

$33,540 $100,621

Staff Workman's Compensation $6,000 $18,000

Warranty Costs $9,240 $27,720

Maintenece Costs $12,000 $0

TOTAL $333,580 $964,741

Total Costs for 3.25 MachinesTotal Costs for 3.25 Machines

Total Costs for (3) machines $964,741

Total Costs for (1) machine at 25% capacity $82,700

Total COGS $974,921

Total Rent $35,000

Total Property & Casualty Insurance $9,857

Total Costs for 3.25 Machines $2,067,219

Delia!s D nuts

Exhibit 8How much does it cost to run a machine at 25% capacity?

Number of Part-Time Machine Operators Number of Part-Time Machine Operators

2 employees to run machine

6 hours per day

7 days per week





Part-Time Machine CalculationsPart-Time Machine Calculations

(1) Machine at 25% Capacity

Annual Depreciation $10,000

Staff Costs ((2) workers x (6) hours a day x

$15/hour x 365 days)

$65,700

Staff Health Insurance $0

Staff Workman's Compensation (6 staff) $4,000

Warranty Costs $0

Maintenece Costs $3,000

TOTAL $82,700

Assumption

Running a machine at 25% capacity reduces maintenance costs by 75%

Delia!s D nuts

Exhibit 9How much would it cost to pay 7 bakers to make 2009 donuts?

Bakers Cost CalculationsBakers Cost Calculations

Bakers Salary $1,079,357

Bakers Health Insurance $111,802

Bakers Workman's Compensation $20,000

Total COGS $1,079,357

Property & Casualty Insurance $8,571

TOTAL $2,538,944

Note: COGS includes cost of donuts outsourced due to insufficient productionNote: COGS includes cost of donuts outsourced due to insufficient production

Delia!s D nuts

Exhibit 10Is it less expensive to purchase machines or hire bakers?

Machines vs. Bakers Cost ComparisonMachines vs. Bakers Cost Comparison

Total Costs for Bakers $2,538,944

Total Costs for Machines $2,067,219

Savings due to Machines $471,724

Delia!s D nuts

Question 2

Should Delia’s proceed with the purchase of the computer equipment?

Why or why not?

Should Delia’s proceed with the purchase of the computer equipment? Why or why not?

• Yes, Delia should proceed with the purchase of the computer equipment.• It is cheaper to have one computer and one new employee than it is to have

3 employees with no computer.• Buying computer equipment would increase productivity by at least 25%

which is equivalent to 2.5 people (.25 x 6 current office staff = 1.5 people)• To reach the goal of the increased staff of 2.5 people, we would need to

purchase one computer and one office worker.• Key numbers:

o Total Cost (one machine and one person annually) = $60,560o 3 Office Workers= $88,680o Delia will save = $27,788

• See Exhibits 1 -5:o 1: How does a computer increase productivity and by how much?o 2: How much does it cost to hire 3 people?o 3: How much does it cost to purchase a machine?o 4: How much does it cost to hire 1 person?o 5: Is it less expensive to hire 3 people than 1 computer and 1 person?

Delia!s D nuts

Delia!s D nuts

Exhibit 1How does a computer increase productivity and by how much?

Productivity CalculationsProductivity Calculations

25% Guaranteed productivity increase by purchasing a computer

6 Current number of staff

1.5 Equivalent number of staff added if productivity is

increased by 25%

Assumption

Equivalent staff increase due to computer productivity will not be rounded up

Delia!s D nuts

Exhibit 2How much does it cost to hire 3 people?

Staffing CalculationsStaffing Calculations

Salary $75,000

Health Insurance $11,181

Workman's Compensation $2,001

TOTAL COSTS PER YEAR $88,182

Delia!s D nuts

Exhibit 3How much does it cost to purchase a machine?

Computer CalculationsComputer Calculations

Annual depreciation for computer $25,000

Computer maintenance per year $6,000


Delia!s D nuts

Exhibit 4How much does it cost to hire 1 person?

Staffing CalculationsStaffing Calculations

Salary $25,000

Health Insurance $3,727

Workman's Compensation $667


Delia!s D nuts

Exhibit 5Is it less expensive to hire 3 people than 1 computer and 1

person?

Staff vs. Computer ComparisonStaff vs. Computer Comparison

Total Costs for (3) people $88,182

Total Costs for computer and person $60,394

Savings due to computer and person $27,788

Delia!s D nuts

Question 3

Should Delia’s proceed with the opening of the new South side store?

Why or why not?

Should Delia’s proceed with the opening of the new South side store? Why or why not?

• Based on the information, we cannot formally draw a conclusion.• We do not have enough data to confidently recommend opening a south side

store because of the following assumptions:o We will not cannibalize sales from the North side store.o We will reach expected sales based on 2009 retail sales.

• Also, Delia should not open a South side store location until she considers the following:

o Increasing charity by $0.04 per donuto Decreasing sales commission by 2%

• We cannot conclude if there is a manufacturing space in the new South side store. Based on this, if Delia were to open a new South side store, we suggest only making it a retail store because we are losing money at the North side store in charity.

• Key numbers:o Gross Profit (if she were to open a retail only store) = $219,781

• See Exhibits 1- 9:o 1: How much will the South side store sell?o 2: How many machines will we need to purchase to make projected sales?o 3: How much will production cost from projected sales?o 4: What are the non-production expenses for the South side store?o 5: What will the South side store’s net profit be?o 6: How are the increases in charitable sales affecting our bottom line?o 7: What additional revenue can we gain by decreasing sales commission to

the 2008 level?o 8: What additional revenue can we gain by increasing price by $0.04 per

charity unit sold?o 9: How will these additional revenue affect our bottom line?

Delia!s D nuts

Delia!s D nuts

Exhibit 1How much will the South side store sell?

Projected Sales (based on 2009 retail data)Projected Sales (based on 2009 retail data)

Total 2009 Retail Sales $775,500

Frosted Percentage 60%

Frosted Retail Sales $465,300

Frosted Retail Unit Price $0.625

Frosted Retail Total Units Sold 744,480

Filled Percentage 40%

Filled Retail Sales $310,200

Filled Retail Unit Price $0.75

Filled Retail Total Units Sold 413,600

Total Retail Units Sold 1,158,080

Delia!s D nuts

Exhibit 2How many machines will we need to purchase to make projected sales?

Calculations for # of machines for South Side StoreCalculations for # of machines for South Side Store

Projected Unit Sales 1,158,080


Machines needed to make projected sales 0.56

Delia!s D nuts

Exhibit 3How much will production cost for projected sales?

COGS Per Unit CalculationsCOGS Per Unit Calculations

2009 COGS $2,398,571

Bakers Labor $1,319,214

Manufacturing Rent $35,000

COGS - Labor - Rent $1,044,357

Number of donuts sold in 2009 6,774,879

COGS per unit $0.15

Total COGS based on Projected SalesTotal COGS based on Projected Sales

COGS per unit $0.15

Projected Unit Sales 1,158,080

Total COGS based on Projected Sales $178,520

Part-Time Machine CalculationsPart-Time Machine Calculations

(1) Machine at 56% Capacity

Annual Depreciation $10,000

Staff Costs ((2) workers x (13) hours a day x

$15/hour x 365 days)

$142,350

Staff Health Insurance $0

Staff Workman's Compensation (10 staff) $6,670

Warranty Costs $0

Maintenance Costs $6,720

TOTAL $165,740

Delia!s D nuts

Exhibit 3 Continued

Total Production CostsTotal Production Costs

Total COGS $178,520

Total Machine Costs $165,740

Total Production Costs $344,260

Delia!s D nuts

Exhibit 4What are the non-production expenses for the South side store?

Part-Time Retail Staff NeededPart-Time Retail Staff Needed

2 employees to staff retail at all times

18 hours per day to staff

7 days per week





Part-Time Retail Staff CalculationsPart-Time Retail Staff Calculations

Number of hours per day to staff 14

Hourly rate $15

Retail Salaries per year $76,650

Health Insurance $0

Workman's Compensation @ $667 per employee $9,338

Rent CalculationsRent Calculations

North Side Store Rent per year $24,000

South Side Rent Difference 35%

South Side Rent Total per year $15,600

Delia!s D nuts

Exhibit 4 ContinuedAllocation Percentage Calculations (by square feet)Allocation Percentage Calculations (by square feet)Allocation Percentage Calculations (by square feet)

Total Square Feet Allocated Percentage

Retail 2,400 19%

Pack/Ship 2,000 16%

Sales 1,000 8%

Manufacturing 7,000 56%

TOTAL 12,400 100%

Retail G&A Expenses based on Allocation by square feetRetail G&A Expenses based on Allocation by square feetRetail G&A Expenses based on Allocation by square feet

Total Costs at

North Side

Retail Allocation

(19% of total cost)

Property & Casualty Insurance $8,571 $1,628

Product Liability $6,429 $1,222

Telephone $8,571 $1,628

Extermination $6,429 $1,222

General Maintenance $30,000 $5,700

Property & Casualty Insurance Calculations due to MachineryProperty & Casualty Insurance Calculations due to Machinery

Property and Casualty Insurance $1,628

Percentage Increase due to Machinery 15%

New Property and Casualty Insurance Costs due to Machinery $1,873

Delia!s D nuts

Exhibit 4 ContinuedSouth Side Non-Production ExpensesSouth Side Non-Production Expenses

Rent $15,600

Utilities $8,571

Salaries - Retail $76,650

Retail Workman's Compensation $9,338

Supplies $6,429

Property & Casualty Insurance $1,873

Product Liability $1,222

Telephone $1,628

Extermination $1,222

General Maintenance $5,700

TOTAL NON-PRODUCTION EXPENSES $128,232

Delia!s D nuts

Exhibit 5What will the South side store’s net profit be?

South Side Store Projected Income StatementSouth Side Store Projected Income Statement

Projected Gross Sales $775,500

Projected COGS $178,520

Projected Gross Profit $596,980

Projected Expenses

Rent $15,600

Utilities $8,571

Salaries - Retail $76,650

Retail Workman's Compensation $9,338

Supplies $6,429

Property & Causality Insurance $1,873

Product Liability $1,222

Telephone $1,628

Extermination $1,222

General Maintenance $5,700

Annual Machine Depreciation $10,000

Salaries - Production $142,350

Production Staff Workman's Compensation $6,670

Maintenance Costs $6,720

Projected Total Expenses $293,972

PROJECTED NET PROFIT $303,008

Delia!s D nuts

Exhibit 6How are the increases in charitable sales affecting our bottom line?

Total SalesTotal SalesTotal SalesTotal SalesTotal SalesTotal Sales

2005 2006 2007 2008 2009

Retail $375,000 $633,500 $810,000 $814,500 $775,500

Charitable $300,000 $750,500 $1,336,000 $1,578,600 $3,033,071

Total $675,000 $1,384,000 $2,146,000 $2,393,100 $3,808,571

Percentage of Total SalesPercentage of Total SalesPercentage of Total SalesPercentage of Total SalesPercentage of Total SalesPercentage of Total Sales

2005 2006 2007 2008 2009

Retail 56% 46% 38% 34% 20%

Charitable 44% 54% 62% 66% 80%

Changes in Sales CommissionChanges in Sales CommissionChanges in Sales CommissionChanges in Sales CommissionChanges in Sales CommissionChanges in Sales Commission

2005 2006 2007 2008 2009

Charitable

Sales

$300,000 $750,500 $1,336,000 $1,578,600 $3,033,071

Sales

Commission

$4,750 $13,575 $27,000 $49,775 $151,654

Sales

Commission

Percentage

2% 2% 2% 3% 5%

Difference in RevenueDifference in RevenueDifference in Revenue

Plain Retail Plain Charitable

Price per dozen $7.50 $6.50

Difference $1.00

Delia!s D nuts

Exhibit 7What additional revenue can we gain by decreasing sales commission to the

2008 level?

Commissions ComparisonCommissions ComparisonCommissions Comparison

2009 Charitable Sales 5% Commission 3% Commission

$3,033,071 $151,654 $90,992

Difference $60,661

Delia!s D nuts

Exhibit 8What additional revenue can we gain by increasing price by $0.04 per charity

unit sold?

2009 Total Charity Donuts Sold2009 Total Charity Donuts Sold

Total 2009 Charity Sales $3,033,071.00



Total Charity Units Sold 5,616,798

Increased Price CalculationsIncreased Price Calculations


Price Increase $0.04

New Price Per Unit $0.58


Total 2009 Charity Units Sold 5,616,798

Total Charity Sales $3,257,743

Additional Revenue due to price increase $224,672

Delia!s D nuts

Exhibit 9How will these additional revenue affect our bottom line?

Additional Revenue CalculationsAdditional Revenue Calculations

Revenue from decreasing commission $60,661

Revenue from price increase $224,672

Total Additional Revenue $285,333

2009 Budget due to changes2009 Budget due to changes

2009 Net Income Loss -$150,464

Sales Manager $40,000

Sales Manager Commissions (1% of new sales) $32,577

Additional Revenue $285,333

2009 Budget due to changes $62,292

Assumptions

Price increase will keep charitable demand stagnant (i.e. sales will stay the same)

Decreased commission will not affect sales due to sales manager hired

Delia!s D nuts

Question 4

Should Delia’s begin selling donuts to C-stores?

Why or why not? If yes, how?

Should Delia’s begin selling donuts to C-stores? Why or why not? If yes, how?

• Yes, Delia should being selling donuts to C-stores because it yields a 60% margin at 40 accounts (at 80 accounts, profit margin goes down 2%).

• We considered the same assumptions that were made for opening a new South side store (listed above in Question 3). However, the profit margin is so high that it is going to make Delia money.

• Key numbers:o 37% net profit margin (40 accounts)o 35% net profit margin (80 accounts)

• See Exhibits 1-8:o 1: What are the projected sales for 40 accounts?o 2: How many unites would we need to produce in order to reach project

sales?o 3: How many machines and bakers would we need to meet projected unit

sales?o 4: What are the non-production related expenses for 40 accounts?o 5: What are the production related expenses for 40 accounts?o 6: What are the total projected expenses for the 40 accounts?o 7: What is the projected net income for 40 accounts?o 8: What is the projected net income for 80 accounts?

Delia!s D nuts

Delia!s D nuts

Exhibit 1What is the projected sales for 40 accounts?

Projected Sales for 40 AccountsProjected Sales for 40 Accounts

Fall/Winter

Cost per dozen $6

# of dozen sold per day in Fall/Winter 12

sales per week $525

# of weeks in Fall/Winter 24

Total Fall/Winter Sales $12,600

Spring/Summer

Cost per dozen $6

# of dozen sold per day in Spring/Summer 10

sales per week $438

# of weeks in Spring/Summer 24

Total Spring/Summer Sales $10,500

Total Annual Sales for (1) Account $23,100

Number of Accounts for (1) F/T Sales Staff 40

TOTAL PROJECTED SALES $924,000

Delia!s D nuts

Exhibit 2How many units would we need to produce in order to reach projected sales?

Projected Units Sold CalculationsProjected Units Sold Calculations

Fall/Winter

# of dozen sold per day in Fall/Winter 12

# of units per dozen 12

days per week 7

weeks per month 4

total months 6

Total Fall/Winter Units Sold 24,192

Spring/Summer

# of dozen sold per day in Spring/Summer 10

# of units per dozen 12

days per week 7

weeks per month 4

total months 6

Total Spring/Summer Units Sold 20,160

Total Annual Units Sold for (1) Account 44,352

Number of Accounts for (1) F/T Sales Staff 40

TOTAL PROJECTED UNITS SOLD 1,774,080

Delia!s D nuts

Exhibit 3How many machines and bakers would we need to meet projected unit sales?

Total Donuts made by MachinesTotal Donuts made by Machines


Total Number of Machines Owned 4

Maximum capacity of donut production 8,342,440

Donuts needed for Retail/Charity 6,774,879

Excess Inventory 1,567,561

Projected Units needed for (40) Accounts 1,774,080

Difference -206,519

Donuts per baker per shiftDonuts per baker per shift

Donuts made per week 125,000

Days Per Week 7

# of shifts per day 3

# of bakers per shift 7

Donuts made per baker per shift 850

Part-Time Baker HoursPart-Time Baker Hours

# of donuts made by hand 206,519

# of donuts needed per day 566

Donuts made per baker per shift 850

Productivity Needed 67%

# of hours per shift 8

Number of hours needed per day 5.3

Delia!s D nuts

Exhibit 3 Continued

Number of Part-Time BakersNumber of Part-Time Bakers

Bakers per shift 1

Shifts per day 1

Hours per shift 5.3

Days per week 7

Total number of hours needed to staff per week 37

Hours per full-time employee 40

Total number of part-time bakers needed 1

Delia!s D nuts

Exhibit 4What are the non-production related expenses for 40 accounts?

Non-Production Related Expenses for 40 AccountsNon-Production Related Expenses for 40 Accounts

Salary - (1) F/T Staff $25,000

Sales Health Insurance $3,727

Sales Workman's Compensation $667

Commission (1% of sales) $9,240

Annual Depreciation on Van $12,000

TOTAL SALES EXPENSES $50,634

Delia!s D nuts

Exhibit 5What are the production related expenses for 40 accounts?


(1) machine (4) machines


Staff Costs ((2) workers x 24 hours x $15/hour x

365 days)

$262,800 $1,051,200

Staff Health Insurance ((2) workers per shift x (3)

shifts x (8) hours/shift x (7) days per week / (40)

hours for full-time employment)

$33,540 $134,162



Maintenance Costs $12,000 $0

TOTAL $333,580 $1,286,322

Machine Costs Allocation based on ProductivityMachine Costs Allocation based on Productivity

Costs for 3.25 Machines for Retail/Charity $1,047,441

Costs for (4) Machines $1,286,322

Costs allocated towards C-Store production $238,880

Bakers Cost CalculationsBakers Cost Calculations

Bakers Hourly Rate $15

Hours Per Day 5.3

Bakers Annual Salary $29,018

Health Insurance $0

Bakers Workman's Compensation $667

TOTAL BAKERS EXPENSES $29,705

Delia!s D nuts

Exhibit 5 Continued

C-Store COGSC-Store COGS

Total Projected Units Sold 1,774,080

COGS/unit $0.15

TOTAL C-STORE COGS $266,112

Production Related ExpensesProduction Related Expenses


Total Part Time Bakers Expenses $29,705

TOTAL PRODUCTION EXPENSES $268,585

Delia!s D nuts

Exhibit 6What are the total projected expenses for the 40 accounts?

Projected Expenses for (40) AccountsProjected Expenses for (40) Accounts

Non-Production Related Expenses $50,634

Production Related Expenses $268,585

TOTAL EXPENSES $319,219

Delia!s D nuts

Exhibit 7What is the projected net income for 40 accounts?

C-Store Projected Income Statement (for 40 accounts)C-Store Projected Income Statement (for 40 accounts)

Projected Sales $924,000

Projected COGS $266,112

Projected Gross Profit $657,888

Projected Expenses

Salary - (1) F/T Staff $25,000

Sales Health Insurance $3,727

Sales Workman's Compensation $667

Commission (1% of sales) $9,240

Annual Depreciation on Van $12,000

Machine Costs allocated towards C-Store

production

$238,880

Bakers Annual Salary $29,018

Health Insurance $0

Bakers Workman's Compensation $667

Total Projected Expenses $319,219

PROJECTED NET INCOME $338,669

Delia!s D nuts

Exhibit 8What is the projected net income for 80 accounts?

Total Donuts made by MachinesTotal Donuts made by Machines


Total Number of Machines Owned 4

Maximum capacity of donut production 8,342,440

Donuts needed for Retail/Charity 6,774,879

Excess Inventory 1,567,561

Projected Units needed for (80) Accounts 3,548,160

Difference -1,980,599

Total Number of Machines Needed for DifferenceTotal Number of Machines Needed for Difference

Donuts Needed 1,980,599


Machines Needed 1

Total Number of Machines needed for (80) Accounts 5


(1) machine (5) machines


Staff Costs ((2) workers x 24 hours x $15/hour x

365 days)

$262,800 $1,314,000

Staff Health Insurance ((2) workers per shift x (3)

shifts x (8) hours/shift x (7) days per week / (40)

hours for full-time employment)

$33,540 $167,702



Maintenece Costs $12,000 $0

TOTAL $333,580 $1,607,902

Delia!s D nuts

Exhibit 8 Continued

Machine Costs Allocation based on ProductivityMachine Costs Allocation based on Productivity

Costs for 3.25 Machines for Retail/Charity $1,047,441

Costs for (5) Machines $1,607,902


Net Income Margin ComparisonsNet Income Margin ComparisonsNet Income Margin Comparisons

40 Accounts 80 Accounts

Projected Sales $924,000 $1,848,000

Projected COGS $266,112 $532,224

Projected Gross Profit $657,888 $1,315,776

Projected Expenses

Salary - (1) F/T Staff $25,000 $50,000

Sales Health Insurance $3,727 $7,454

Sales Workman's Compensation $667 $1,334

Commission (1% of sales) $9,240 $18,480

Annual Depreciation on Van $12,000 $24,000

Machine Costs allocated towards C-

Store production

$238,880 $560,461

Bakers Annual Salary $29,018 $0

Health Insurance $0 $0

Bakers Workman's Compensation $667 $0

Total Projected Expenses $319,219 $661,729

Projected Net Income $338,669 $654,047

PROJECTED NET INCOME MARGIN 37% 35%

Delia!s D nuts

Question 5

How can the company begin to reign in its health-care costs?

Delia!s D nuts

How can the company begin to reign in its health-care costs?

• Saving money by:o We are firing full time staffo We are purchasing machineso The part-time employees that will be hired will not be given health care

• See Exhibits 1-2:o 1: What would our health insurance numbers be if we didn’t

recommend C-store or Sales Manager additions?o 2: What percentage of expenses is health care taking up with C-store

and Sales manager additions?

Delia!s D nuts

Exhibit 1What would our health insurance numbers be if we did not recommend

C-Store or Sales Manager additions?

Comparison of Full-Time Employees (No C-Stores or Computer/Office Staff Increase)



2009 2010

Packing & Shipping 8 8

Packing & Shipping Manager 1 1

Bakers 30 0

Office Staff 6 6

Delia 1 1

Sales Manager 0 0

Sales - C-Store 0 0

Machine Labor 0 27

TOTAL FULL TIME EMPLOYEES 46 43

Health Care Costs ComparisonHealth Care Costs ComparisonHealth Care Costs ComparisonHealth Care Costs Comparison

2009 2010 Differences

Health Care Costs $171,429 $160,261 -$11,168

Expenses $1,042,900 $2,801,978 $1,759,078

Percentage of Expenses 16% 6% -11%

Delia!s D nuts

Exhibit 2What percentage of expenses is health-care taking up with C-Store and

Sales Manager additions?

Comparison of Full-Time EmployeesComparison of Full-Time EmployeesComparison of Full-Time Employees

2009 2010

Packing & Shipping 8 8

Packing & Shipping Manager 1 1

Bakers 30 0

Office Staff 6 7

Delia 1 1

Sales Manager 0 1

Sales - C-Store 0 1

Machine Labor 0 36

TOTAL FULL TIME EMPLOYEES 46 55

Health Care Costs ComparisonHealth Care Costs ComparisonHealth Care Costs ComparisonHealth Care Costs Comparison

2009 2010 Differences

Health Care Costs $171,429 $204,985 $33,556

Expenses $1,042,900 $2,801,978 $1,759,078

Percentage of Expenses 16% 7% -9%

Delia!s D nuts

2009 Monthly BudgetJan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. Total

# Donuts Sold (est.) 677488 677488 677488 677488 609739 406493 338744 270995 406493 677488 677488 677488 6,774,879

Revenue:

Retail Sales 77550 77550 77550 77550 69795 46530 38775 31020 46530 77550 77550 77550 775,500

Charitable 303307 303307 303307 303307 272976 181984 151654 121323 181984 303307 303307 303307 3,033,071

Total 380857 380857 380857 380857 342771 228514 190429 152343 228514 380857 380857 380857 3,808,571

COGS (incl. labor) 239857 239857 239857 215871 143914 119929 95942.8 143914 239857 239857 239857 2,398,571

Gross Profit 239857 141000 141000 141000 126900 84600 70500 56400 84600 141000 141000 141000 1,410,000

Expenses:

Salaries-Retail 8928 8928 8928 8928 8928 8928 8928 8928 8928 8928 8928 8928 107,143

Salaries-Pack/Ship 16070 16070 16070 16070 16070 16070 16070 16070 16070 16070 16070 16070 192,851

Salaries-Office 13392 13392 13392 13392 13392 13392 13392 13392 13392 13392 13392 13392 160,714

Salary-Pack/Ship Mgr. 5357 5357 5357 5357 5357 5357 5357 5357 5357 5357 5357 5357 64,286

Salary-Delia 13392 13392 13392 13392 13392 13392 13392 13392 13392 13392 13392 13392 160,714

Payroll Taxes 5952 5952 5952 5952 5952 5952 5952 5952 5952 5952 5952 5952 71,428

Workers Comp. Insurance 3333 3333 3333 3333 3333 3333 3333 3333 3333 3333 3333 3333 40,000

Health Insurance 14285 14285 14285 14285 14285 14285 14285 14285 14285 14285 14285 14285 171,429

Sales Commission 15,165 15165.3 15165.3 15165.3 13648.8 9099.18 7582.65 6066.12 9099.18 15165.3 15165.3 15165.3 151,653

Rent-Retail 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24,000

Rent-Pack/Ship 842 842 842 842 842 842 842 842 842 842 842 842 10,114

Rent-Office 1250 1250 1250 1250 1250 1250 1250 1250 1250 1250 1250 1250 15,000

Utilities-Retail 714 714 714 714 714 714 714 714 714 714 714 714 8,571

Utilities-Pack/Ship 952 952 952 952 952 952 952 952 952 952 952 952 11,429

Utilities-Office 214 214 214 214 214 214 214 214 214 214 214 214 2,571

Supplies-Retail 535 535 535 535 535 535 535 535 535 535 535 535 6,429

Supplies-Pack/Ship 7142 7142 7142 7142 7142 7142 7142 7142 7142 7142 7142 7142 85,714

Supplies-Office 714 714 714 714 714 714 714 714 714 714 714 714 8,571

Prop & Casualty Insurance 714 714 714 714 714 714 714 714 714 714 714 714 8,571

Product Liability Insurance 535 535 535 535 535 535 535 535 535 535 535 535 6,429

Licenses and Taxes 476 476 476 476 476 476 476 476 476 476 476 476 5,714

Telephone 714 714 714 714 714 714 714 714 714 714 714 714 8,571

Extermination Expense 535 535 535 535 535 535 535 535 535 535 535 535 6,429

General Maintenance 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 30,000

Advertising 3750 3750 3750 3750 3750 3750 3750 3750 3750 3750 3750 3750 45,000

Depreciation 9523 9523 9523 9523 9523 9523 9523 9523 9523 9523 9523 9523 114,286

Professional Fees 3570 3570 3570 3570 3570 3570 3570 3570 3570 3570 3570 3570 42,847

Total Expense 156046 156046 156046 156046 140442 93627.8 78023.2 62418.6 93627.8 156046 156046 156046 1,560,464

Net Income before taxes -15046 -15046 -15046 -15046 -13542 -9027.8 -7523.2 -6018.6 -9027.8 -15046 -15046 -15046 -150464

Delia!s D nuts

2010 Monthly Budget

For the 2010 monthly budget, please refer to the tabloid

handout.

delia's donuts accounting summary

Documents

machines cost

o total cost

total retail units

donut machines

sales retail

frosted retail total

filled retail total

s d nuts delia