2010 Paper 7 Question 6
Business Studies
A certain company decides to make a new educational computer. They agree terms
with an OEM to supply units at a cost of £10/unit delivered, payable by LoC on
shipment. They predict sales per quarter in units as follows:
Quarter Q1 Q2 Q3 Q4
Sales (units) 200 2000 4000 8000
The units are sold to a distributor as they are delivered at a price of £30 wholesale,
for a target price of £49.99 retail.
The company employs five staff at a monthly salary of £2000 each, and has
overheads equivalent to salary. In addition there is a marketing spend of £10,000
per quarter.
(a) Draw up a quarterly profit and loss statement. [5 marks]
(b) Draw up a quarterly cash flow projection for this project, stating assumptions.
How much working capital is required? [5 marks]
(c) Draw up a balance sheet at the end of Q4. [5 marks]
(d) Comment on how the working capital might be funded. [5 marks]