Business Math Help

D

dino.abraham

New member
Joined
Jul 19, 2012
Messages
9
Hey all!

I own a 'fake business' (as part of a school project) - its to teach us skills etc. lol Im stuck on the math part because I do not have a mathematical background. Can someone who is strong at mathematics with a business mindset to please help me out with a problem I'm facing.

Details:

April and May: Total Income = 320 (12 orders), Total expenditure (stock, advertising, postage) = 435, Net income: -149
June: Total Income = 530 (25 orders), Total expenditure (stock, advertising, postage, stock for july also) = 1055, Net Income: -525
July (so far): Total Income = 637.47 (35 orders), Total expenditure (stock for august estimated at £400, postage, advertising) = 609.80, Profit = 27.67

you are a franchise so pay 6% of total income to your boss + £1 for every order. e.g. in june you paid 0.06*530 + 25 = £56.80
advertising costs are max £4 a day but can be changed if this is too much

Products:
Product 1 currently priced at £4.95 (least popular product) - current competitor/market price is £5 - you buy it at/cost is $3
Product 2 currently priced at £9.95 (semi-popular although product 3/4 are brought more now) - current competitor/market price is £14 - you buy it at/cost is $8
Product 3 currently priced at £14.95 (equally popular to product 4) - current competitor/market price is £20 - you buy it at/cost is $12
Product 4 currently priced at £16.95 (equally popular to product 3) - current competitor/market price is £25 - you buy it at/cost is $12
You HAVE to sell all 4 products.

Questions:
What prices should you charge for each product in order to break-even this month and make a profit (consider all costs) of £100+? Please do not say £100 as no one will buy the product haha. You need to price it just below your competitor.
How many of each product should you buy?
Should the terms of the deal be changed?

I can PM the excel spreadsheet with further details (wasn't uploading here for some reason). If you have any questions please let me know :)
 
Last edited:
JeffM said:
You have the wrong idea. We (or at least most us) do not give answers. We give help, by which we mean hints to get started or corrections of errors in your work.

As for getting started, I'd set up a pro-forma income statement that varies based on quantities sold of the four products and the prices of the product.

Based on the information given, it is not obvious to me that there is a simple method to find the very best answer, but there may be ways to find a lot of good answers.
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Hello. Can you please help me with a pro-forma income statement? Not really sure how to set one up. Do you have a template please?
I understand that you cannot give answers - I am happy to work it out - just not sure how :)
 
Thank you for your detailed reply... I understand some parts of it but not others. Is there no template or something that I can use to form something? I haven't studied accounting btw either. :S
 
Hello.

Going through your post….

Revenue = Net Income – Net Expenses. Makes sense to me. This is how I set up my excel sheet. I listed all the orders, deducted any paypal costs etc, and then listed expenses and calculated profit. Trouble is, form the looks of it, ill never break even. My friend told me that stock you have is an asset so you cant count that as an expense? This confused me!

Yup I am familiar with sigma notation. The bit that is hard to do is that I do sell 4 products, but the sale price varies. This month I have lowered the price, last month it was higher, and it changes a bit depending on demand/my supply. However, its likely to stay at this amount for a while but the total revenue needs to be calculated by adding up the orders I have got (because they pay via paypal – paypal takes 5% off each order – and each order total varies depending on postage costs etc – so I have to do it individually right?) This is why I am not sure how to lay this out.

Understood on fixed/variable costs. The cost of buying the product, the advertising per day, envelopes to post the stuff are fixed costs. Variable costs will be the postage cost (depending on what type they pick) and the franchise fee. I would calculate that by multiplying 0.06*SUM(revenue)+no. of orders that month.

I tried to upload my spreadsheet but its not uploading onto this website. How shall I show you what I have done? I tried uploading a PDF also - didn't work. :S
 
To simplify things I downloaded an accounting software (free and legally) but its confusing me even more as I don't understand what goes where. The software is 'express accounts' (by NCH). I tried inputting the costs and sales i made but it keeps saying my accounts are not balancing. when i finally add something and close it, then everything vanishes. I don't understand what to do. Can someone please help me or suggest a good (free) alternative software?
 
JeffM said:
You need to talk to your teacher. It does not sound to me as though you need accounting software. Either you have enough information to solve this by algebra (in which case you must have much more information than you have shared at this site), or you need to set up a simple model for revenue and expense and find by trial and error a reasonable set of prices and expenses that generate the desired net income. Such a model can be set up in excel in an hour or two; I even showed you the preliminary steps. Learning double entry bookkeeping (accounting) takes months of work. Good luck.
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I did speak to my teacher and he said that we did need to use accounting software and make financial statements. He said that it should be easy because yo just need to input the data into the software and it will create the statements themselves. So Im still stuck... I get what I'm supposed to do but when I do it it doesn't work.

As for prices - he cancelled this part of the project because everyone was having trouble. He said to use the data I already have to draw up financial statements and then once I have those ill be able to draw up pro-forma financial statements. Been reading all day about this stuff - kinda get it - the software is just going wrong though :S
 
JeffM said:
It would have been nice had he told you what software he was talking about. In any case, I can't help you with accounting software. Sorry not to have been of help.
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He did... I listed it in my previous post.
Im really stuck. Do you know where I can get some help please?
Thanks!
 
Denis said:
Plus you told us this (1st post):
"Im stuck on the math part because I do not have a mathematical background."

Looks to me like you're not ready.
Like, you can't play reasonable hockey if you can't skate...
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Yes I didnt know any accounting when I first posted on here. But - as I wrote above - I spent a day reading up and trying to understand the software/terms - but still am getting stuck on parts of the software.
 
Denis said:
Plus you told us this (1st post):
"Im stuck on the math part because I do not have a mathematical background."

Looks to me like you're not ready.
Like, you can't play reasonable hockey if you can't skate...
Click to expand...

Also you cannot play reasonable Cricket if you cannot throw/catch (barehands - no wimpy mitts!)
 
dino.abraham said:
To simplify things I downloaded an accounting software (free…)

The software is 'express accounts' (by NCH)

I tried inputting the costs and sales i made but it keeps saying my accounts are not balancing.

when i finally add something and close it, then everything vanishes.

Can someone please help me or suggest a good (free) alternative software?
Click to expand...

What is the rest of your class doing? Your first statement above seems to imply that you're blazing your own path. Did your instructor tell the class to search the Internet for free accounting software to "simplify" this assignment?

Does the free NCH software come with instructions? Searching bulletin boards for somebody to teach you how to use this particular software does not sound like a simplification, to me. (Did you search the NCH site for a community forum?)

Otherwise, I do not understand why your instructor has not provided software information -- if accounting software is a part of the class.

As far as free software goes, sometimes one ends up with exactly what they paid for. Maybe you should chat up your teacher. :cool:
 
mmm4444bot said:
What is the rest of your class doing? Your first statement above seems to imply that you're blazing your own path. Did your instructor tell the class to search the Internet for free accounting software to "simplify" this assignment?

Does the free NCH software come with instructions? Searching bulletin boards for somebody to teach you how to use this particular software does not sound like a simplification, to me. (Did you search the NCH site for a community forum?)

Otherwise, I do not understand why your instructor has not provided software information -- if accounting software is a part of the class.

As far as free software goes, sometimes one ends up with exactly what they paid for. Maybe you should chat up your teacher. :cool:
Click to expand...

I have no idea what they are doing. Yes - the simplification was told to the whole class. But it only affects some of us because we are dealing with different parts of the project.

I watched the tutorial videos etc for the software but it doesn't explain what Im after. I just need a simple software which will let me input all my sales and costs and then it will figure out financial statements accordingly. There are no dividends/complex stuff in this business but i think all the software i have come across are overcomplicating everything.

Do you know of any suitable software? I have been googling around but either things don't work on a mac or are online only (i have a limited internet connection otherwise i would go for that - but you have to pay!).
 
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