Upstate Canning Analysis Assumptions

Topics: Investment, Wage, Generally Accepted Accounting Principles Pages: 2 (526 words) Published: October 26, 2011
* Assume fiscal year begins July 1
* Personal savings account of $15,000 and added family money gives him an investment fund of $35,000. The $15,000 personal savings is included in the total investment fund. * Acceptable to base pro forma estimates off of 1956 data. * The property, including the two plants, can be assumed as Plant & Equipment, and given the appraised value of $200,000. * Assume that this P&E will not need major repair in the near future * Depreciation is given for 1956 at $24,000 per year, or $2,000 per month(Exhibit 3). However, I will assume that the property has a longer useful life than around 8 years, and will depreciate the property with a useful life of close to 17 years, given a yearly depreciation amount of $12,000 and a monthly depreciation amount of $1,000. As long as the equipment is kept in excellent repair, as it has been, 17 year useful life is a reasonable assumption * Given Fordham’s production schedule, I will assume that 2/3 of yearly production will occur in August and September. The remaining 1/3 of yearly production will take place in July and October. * As production only accounts for 50% of production capacity, I will assume no additional capital expenditures in the near future * Assume that farmer’s were paid upon delivery at prevailing market prices * Assume that normal practice was to sell entire season’s pack before next canning season, thus keeping inventory low * Assume sales breakdown as follows: (Jul-Oct: 50%); (Nov-Dec: 20%); (Jan-Jun: 30% evenly throughout) * Assume A/R as net 30-day term, with bad-debt losses rare * Assume A/P as 2/10 net 30-day terms

* Assume from Shields’ projections(Exhibit 1) that sales will be as follows(fiscal year beginning): (1957: $850,000); (1958: $1,050,000); (1959: $1,250,000); (1960: $1,450,000); (1961: $1,650,000) * Assume employee wages as fixed hourly wage paid weekly

* Assume COGS as a percentage of sales...
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