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INTRODUCTION TO ACCOUNTING AND

FINANCE

Student ID: 1922807/1

Lecturer: Reynold Cooper
Date: 04 January 2020
Word Count: 2250
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Part 1

Assumptions
I. Vanity Hairs’ revenue is forecasted to increase within the next three (3) to
five (5) years.
II. The company will foresee a rise in sales during the period of July to
December.
III. Our forecasted sales would be low in January.
IV. It is expected that Fresh Wave would have a steady growth when placed on
the market.
V. It is projected to make that the company would make 1.7 million dollars in
profit at the end of the first financial year.
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Part 1

The Books of Vanity Hair: Marginal Costing Statement for 12 months ending 2020 Dec 31st
Details Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Production units 3000 3000 2500 2000 2000 2000 2000 2000 1800 1800 1800 1800 25700
Sales in Units of: 1,800 1,900 2,200 2,500 2,500 1,750 1,800 1,900 2,000 2,200 2,150 2,000 24700
Sales Value (@ £65 per unit) £117,000 £123,500 £143,000 £162,500 £162,500 £113,750 £117,000 £123,500 £130,000 £143,000 £139,750 £130,000 £1,605,500

less: Marginal Cost

Aqua water (@ £1 per unit) -3,000.00 -3,000.00 -2,500.00 -2,000.00 -2,000.00 -2,000.00 -2,000.00 -2,000.00 -1,800.00 -1,800.00 -1,800.00 -1,800.00 -25,700
Hydrated Castor Oil (@ £1.25 per
unit) -3,750.00 -3,750.00 -3,125.00 -2,500.00 -2,500.00 -2,500.00 -2,500.00 -2,500.00 -2,250.00 -2,250.00 -2,250.00 -2,250.00 -32,125
Glycerin (@ £1.00 per unit) -3,000.00 -3,000.00 -2,500.00 -2,000.00 -2,000.00 -2,000.00 -2,000.00 -2,000.00 -1,800.00 -1,800.00 -1,800.00 -1,800.00 -25,700
Phenoxyethanol (@ £1 per unit) -3,000.00 -3,000.00 -2,500.00 -2,000.00 -2,000.00 -2,000.00 -2,000.00 -2,000.00 -1,800.00 -1,800.00 -1,800.00 -1,800.00 -25,700

Parfum Fragrance (@ £2.5 per unit) -7,500.00 -7,500.00 -6,250.00 -5,000.00 -5,000.00 -5,000.00 -5,000.00 -5,000.00 -4,500.00 -4,500.00 -4,500.00 -4,500.00 -64,250
Hydrolyzed Silk (@ £2 per unit) -6,000.00 -6,000.00 -5,000.00 -4,000.00 -4,000.00 -4,000.00 -4,000.00 -4,000.00 -3,600.00 -3,600.00 -3,600.00 -3,600.00 -51,400
Shea Butter (@ £1.25 per unit) -3,750.00 -3,750.00 -3,125.00 -2,500.00 -2,500.00 -2,500.00 -2,500.00 -2,500.00 -2,250.00 -2,250.00 -2,250.00 -2,250.00 -32,125
Bottle & Label (@ £1.10 per unit) -3,300.00 -3,300.00 -2,750.00 -2,200.00 -2,200.00 -2,200.00 -2,200.00 -2,200.00 -1,980.00 -1,980.00 -1,980.00 -1,980.00 -28,270
Labour (@ £3 per unit) -9,000.00 -9,000.00 -7,500.00 -6,000.00 -6,000.00 -6,000.00 -6,000.00 -6,000.00 -5,400.00 -5,400.00 -5,400.00 -5,400.00 -77,100
Marginal Cost of Production: -42,300.00 -42,300.00 -35,250.00 -28,200.00 -28,200.00 -28,200.00 -28,200.00 -28,200.00 -25,380.00 -25,380.00 -25,380.00 -25,380.00 -362,370.00

less: Fixed Cost of Production

Admin Cost: Salaries -10,000.00 -10,000.00 -10,000.00 -10,000.00 -10,000.00 -10,000.00 -10,000.00 -10,000.00 -10,000.00 -10,000.00 -10,000.00 -10,000.00 -120,000
Production Cost: Rent -3,500.00 -3,500.00 -3,500.00 -3,500.00 -3,500.00 -3,500.00 -3,500.00 -3,500.00 -3,500.00 -3,500.00 -3,500.00 -3,500.00 -42,000
Selling & Distribution -3,000.00 -3,000.00 -3,000.00 -3,000.00 -3,000.00 -3,000.00 -3,000.00 -3,000.00 -3,000.00 -3,000.00 -3,000.00 -3,000.00 -36,000
-16,500.00 -16,500.00 -16,500.00 -16,500.00 -16,500.00 -16,500.00 -16,500.00 -16,500.00 -16,500.00 -16,500.00 -16,500.00 -16,500.00 -198,000
Marginal Cost of Sales: -58,800.00 -58,800.00 -51,750.00 -44,700.00 -44,700.00 -44,700.00 -44,700.00 -44,700.00 -41,880.00 -41,880.00 -41,880.00 -41,880.00 -560,370

Contribution £58,200.00 £64,700.00 £91,250.00 £117,800.00 £117,800.00 £69,050.00 £72,300.00 £78,800.00 £88,120.00 £101,120.00 £97,870.00 £88,120.00 £1,045,130

Marginal Costing Profit: £1,045,130

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Part 2
The Books of Vanity Hair: Cash Budget for 12 months ending 31 December 2020
Details Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Capital 150,000 150,000
Investors Loan 550,000 550,000
Sales 0 117,000 123,500 143,000 162,500 162,500 113,750 117,000 123,500 130,000 143,000 139,750 1,475,500

Cash Inflows 700,000 117,000 123,500 143,000 162,500 162,500 113,750 117,000 123,500 130,000 143,000 139,750 2,175,500
0
Less: Outflows 0
Purchases 33,300 33,300 27,750 22,200 22,200 22,200 22,200 22,200 19,980 19,980 19,980 265,290
Wages -9,000 -9,000 -7,500 -6,000 -6,000 -6,000 -6,000 -6,000 -5,400 -5,400 -5,400 -5,400 (77,100)
Salaries -10,000 -10,000 -10,000 -10,000 -10,000 -10,000 -10,000 -10,000 -10,000 -10,000 -10,000 -10,000 (120,000)
Rent -3,500 -3,500 -3,500 -3,500 -3,500 -3,500 -3,500 -3,500 -3,500 -3,500 -3,500 -3,500 (42,000)
Selling & Distribution -3,000 -3,000 -3,000 -3,000 -3,000 -3,000 -3,000 -3,000 -3,000 -3,000 -3,000 -3,000 (36,000)
Cleaning Services -500 -500 -500 -500 -500 -500 -500 -500 -500 -500 -500 -500 (6,000)
Annual Certification Fee -5,000 (5,000)
Customer Samples -800 -600 -500 -450 -400 -350 -300 -300 -250 -250 -200 -100 (4,500)
Bank Charges -288 -288 -288 -288 -288 -288 -288 -288 -288 -288 -288 -288 (3,456)
Loan Repayments -31,485 -31,485 -31,485 -31,485 (125,940)
Advertising/Promotion -2,500 -250 -2,000 -600 -500 -1,500 -100 -150 -1,000 -400 (9,000)
Air Conditioning Units -8,000 (8,000)
Panel Van -70,000 (70,000)
Blending Equipment -140,000 (140,000)
Filling/Packing Equipment -130,000 (130,000)
Net Outflows -382,588 6,162 -25,473 3,412 -1,988 -34,423 -1,488 -1,538 -33,223 -3,358 -2,908 -34,293 (511,706)

Net Cash Flows 317,412 123,162 98,027 146,412 160,512 128,077 112,262 115,462 90,277 126,642 140,092 105,457 1,663,794
Opening Balance 193,460 510,872 634,034 732,061 878,473 1,038,985 1,167,062 1,279,324 1,394,786 1,485,063 1,611,705 1,751,797 193,460
Closing Balance 510,872 634,034 732,061 878,473 1,038,985 1,167,062 1,279,324 1,394,786 1,485,063 1,611,705 1,751,797 1,857,254 1,857,254
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Part 3 cont’d

The Books of Vanity Hair

Forecasted Income Statement for the period ended 31st Dec 2020

£ £
Sales (24,700 @ £65 per unit) 1,605,500

Less: Marginal Cost

Materials (@ £11.10 per unit) 274,170
Labour (@ £3 per unit) 74,100
348,270
Contribution 1,953,770

Less: Fixed Cost

Admin Cost 120,000
Production Cost -42,000
Selling & Distribution -36,000
Mgmt Fees -3,456

Less Other Costs:

Cleaning Services -6,000
Subscription Fees -5,000
Customer Samples -4,500
Advertising/Promotion -9,000

-225,956

NET PROFIT £1,727,814

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Part 3 cont’d

The Books of Vanity Hair

Forecasted Balance Sheet as at 31 December 2020
£ £
Fixed Assets:
Blending Equipment 140,000 Capital 150,000
Filling/Packing Equipment 130,000 Net Profit 1,727,814
Panel Van 70,000
Air Conditioning Units 8,000

Current Assets:
Stock 14,100 Investors Loan 424,060
Debtors 130,000 Loan Int payable 5% per yr 27,500
Bank 1,857,254 Creditors 19,980

2,349,354 2,349,354
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Part 4

BUSINESS PLAN

To: Potential Investors

From: General Manager of Vanity Hair
Date: 04 January 2020
Subject: Business Plan for New Hair Product – Fresh Wave

Mission
Our mission is to enhance our competitiveness by producing excellent and
affordable hair care product that will boost the customer's physical appearance.

Objective
To use the best marketing strategies to enter and survive in a competitive market,
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Introduction
Each day people undertake a personalized beautification routine before going out.
Incorporated in that ritual are the standard shower and shave, the regular nail trim,
and the weekly hairstyle (Sena 2014). As indicated by Lopaciuk & Loboda (2013),
the beauty industry has been expanding enormously over the years. Hence, it gives
a varied scope of opportunities for the intrigued entrepreneur. There are endless
beauty items accessible on the market, and these figures appear to be regularly rising.

Be as it may, the development of these beauty brands has shone light on one
significant issue inside the beauty industry (Jethani, 2013). Only one out of every
odd individual has a similar hair care need. Not every person has the same hair care
needs, most vary from others, and everyone deserves excellent hair regardless of
their hair type.

This business case gives an overview of a new hair care product that our company
is scheduled to launch at the beginning of January 2020. To achieve this objective,
we are seeking your approval for additional financing of Five Hundred and Fifty
Thousand Dollars (£550,000.00) to be repaid over five (5) years at a rate to be
negotiated. We will use the funding to purchase equipment, a motor vehicle,
inventory and other startup cost.

Considering our market research, the Company’s income is forecasted to rise within
the next five (5) years as our product moves from its introduction stage to maturity.
Included are some projections of our Cash Budget, a Forecast Income Statement and
a Balance Sheet for your review. Also attached is the details of the product, its
competitive advantages, business objectives, sales and profit and plans.
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Company

Vanity Hair is a start-up venture which is strategically located on the Eastern Main
Road, Champs Fleurs, Trinidad. The team at Vanity Hair is comprised of several
qualified professionals with a combined experience of over fifteen (15) years within
the beauty industry. Our chief lab-technician previously worked at Hair Nite
Laboratory, one of the leading beauty product providers as a lab-assistant for over
nine (9) years. She was heavily associated with numerous researches and the
creation of various hair care products. She would work in tandem with the other
professionals on board, which includes the Quality Assurance Officer and the
Marketing Representative.

Vanity Hair will have an exceptionally striking retail facade to draw in clients as
well as individuals from its community. Also, the company will widen its exposure
through efficient advertising just as to acquaint the regions to market segments that
have not yet found the Company.

Product

Fresh Wave is a new hair balm that has been developed by Vanity Hair for all hair
types, coarse, straight or curly and short or long. Fresh Wave can be used for a range
of hairstyles from messy hair looks to more structured styles. It will give a shiny or
matte finish and can be utilized to create spikes or hold the hair down for a clean
look. It also gives your hair a soft, shiny and silky texture that will enable you to
maintain your style throughout the day. This innovative product was developed
through the combination of natural sources and science and is produced in 6 FL OZ
only. The contents of Fresh Wave are in keeping with the latest hair trend needs,
which include pure botanical extracts and modern-day hair care ingredients. At
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sixty-five $65.00 a bottle. Fresh Wave will give your hair a healthy, soft, beautiful
look that will last for hours.

Competitive Advantage
The knowledge and experience that our chief lab-technician gained from assisting
with the manufacturing of beauty products at Hair Nite Laboratory gives Vanity Hair
a competitive edge since she is aware of the pros and cons of other competitors. The
equipment purchase is fully automated and requires only two (2) production workers
to oversee the filling and packaging of the product. Prior to our expected launch in
January 2020, we distributed samples of the product to the public at salons and
cosmetic counters. Our sample package included a 2oz resealable pack and the
company's contact information to provide feedback and to place orders.

Since then, our product had been in use by potential clients and has gotten
extraordinary reviews as seen on our social media pages, and some have also
inquired about placing orders. Vanity Hair market methodology depends on
supplying a product for individuals who are searching for a remarkable hair care
product. Most customers prefer a product that is reliable and can stay through its
objectives and Vanity Hairs’ obligation to convey on their desires.

Market Process
One of the main aims of Vanity Hair is to comprehend client needs, wants and
demands to build value-laden client’s connections. In doing so, this will increase
our long-haul client equity. An external analysis of the market was conducted to
acquire a better understanding of the current market place, by examining the current
beauty trends and customer preferences using the four (4) P's of the marketing mix:
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product, price, place and promotion/advertising. In addition, we also examine what
factors were not quite the same on the market and whether the item will be marked

as sub-brand or new. In light of these inquiries, we had the option to make several
decisions.

Sales and Profit

Even though the launch of Fresh Wave is on the heels of Christmas, it is also the
start of the Carnival season. It is along these lines that forecasted sales would be
low in January. However, we foresee a rise in the two (2) months leading up to
Carnival, and this should remain steady until June. It is believed that during the
period July to December sale volumes will steadily increase throughout this period,
moreso when additional product is distributed to more retail outlets, and the product
gains more market awareness.

Future Plans
Vanity Hair is projected to be highly liquid and in a comfortable financial position
after the first year to commit to its monthly operational cost and both its short- and
long-term debts. It was decided that no depreciation would be charged in the year
of procurement of assets. However, it would be charged in the year of disposal.

Both the blending and packing machines have an estimated useful life of twenty (20)
years with maintenance being required after every thirty thousand (30,000) units
produced. The motor vehicle has a five (5) year life span with an estimated salvage
value of Ten Thousand Dollars (£10,000.00). The company has negotiated a thirty
(30) day credit payment from our suppliers and has extended the same to our
customers.
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Planning is the key to any business throughout its existence. At Vanity Hair,
inventing new hair care products is our life. We are always searching for new and
effective ways to create a new product that will satisfy the customer needs and stand
out from the rest, ensuring that we continue to broaden our perspective about where
the company is heading and how beauty trends continue to change daily.

Conclusion
Among all other hair care products on the market today, there is a level of
classification, all of which offer different qualities and attracts different customers
to satisfy their desired hair care needs. Vanity Hair can be considered as the next
leading hair care company to contribute to the era of industrialization of hair care
products. Also, it is anticipated that Vanity Hair would become an engine for job
growth in the market once our product gets established, it will, therefore, allow us
to expand.

Regards,

Jean Paul
General Manager
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References
Jethani, N. 2013. LurnQ. 2013. Available in: http://lurnq.com/lesson/Introduction-
To-Marketing-AndMarketingProcess/section/Step-1-Understanding-The-
Marketplace-And-Customer-NeedsAnd-Wants/[accessed 01 January 2020].
Lopaciuk, A., Loboda, M., 2013. Global beauty industry trends in the 21st century.
Poland: s.n., 2013. [Accessed 03 January, 2020].
Sena, M., 2014. Beauty Industry Analysis 2014 - Cost & Trends. Franchise help.
2014.https://www.franchisehelp.com/industryreports/beauty-industry-report
[Accessed 03 January 2020.]