1. +
Cash Flow Exercise
Corrine Beaumont
c.beaumont@kingston.ac.uk

2. You are selling baskets filled with a cheese, a bottle of wine and a
chocolate box. There are 3 things you need to know:
• What does it cost to buy the items?
• What price do you need to charge to make a profit?
• When will you break even on your investment?

3. 1. First, figure out what it costs for the items you want to put in your basket. What
is the cost per basket if you buy single items? bulk of 10? bulk of 30?
2. What investment is required to get the items at the different rates?
3. You want to make a profit of £1000. How many baskets do you need to sell and
what is the cheapest price you can sell them?

4. 4. Did you remember V.A.T? (which is 20% in 2011)
4. What expenses are involved in getting the baskets to the customers?

5. 6. You’ve got an inventory of 100 blocks of cheese, 50 bottles of wine and 110
boxes of chocolate. What effects your storage costs? What storage costs
options do you have? What is the best option?
7. Let’s say you pay £2000 for storage in total. How many baskets do you need to
sell at £75 each to break even on your storage investment in one month?

6. Other considerations:
• Did you account for “UK Excise Duty on Beers, Wines and Spirits”?
(look up the tax cost online)
• Insurance (for what?)
• Corporation tax (http://www.hmrc.gov.uk/rates/corp.htm)?
• Website or storefront costs, advertising
• Paying yourself or employees?
• Anything else?

7. Answers
Costs to seller: (basket + cheese + wine + chocolate) = £54/single, £49/10pack, £41/30pack
assume bulk 30 selling price 40 45 50 55 60 65 70 85 90 95 100
Sell per month after vat 32 36 40 44 48 52 56 68 72 76 80
1 -9 -5 -1 3 7 11 15 27 31 35 39
5 -45 -25 -5 15 35 55 75 135 155 175 195
10 -90 -50 -10 30 70 110 150 270 310 350 390
20 -180 -100 -20 60 140 220 300 540 620 700 780
30 -270 -150 -30 90 210 330 450 810 930 1050 1170
40 -360 -200 -40 120 280 440 600 1080 1240 1400 1560
50 -450 -250 -50 150 350 550 750 1350 1550 1750 1950
60 -540 -300 -60 180 420 660 900 1620 1860 2100 2340
70 -630 -350 -70 210 490 770 1050 1890 2170 2450 2730
80 -720 -400 -80 240 560 880 1200 2160 2480 2800 3120
90 -810 -450 -90 270 630 990 1350 2430 2790 3150 3510
100 -900 -500 -100 300 700 1100 1500 2700 3100 3500 3900
assume bulk 10 selling price 40 45 50 55 60 65 70 85 90 95 100
Sell per month after vat 32 36 40 44 48 52 56 68 72 76 80
1 -17 -13 -9 -5 -1 3 7 19 23 27 31
5 -85 -65 -45 -25 -5 15 35 95 115 135 155
10 -170 -130 -90 -50 -10 30 70 190 230 270 310
20 -340 -260 -180 -100 -20 60 140 380 460 540 620
30 -510 -390 -270 -150 -30 90 210 570 690 810 930
40 -680 -520 -360 -200 -40 120 280 760 920 1080 1240
50 -850 -650 -450 -250 -50 150 350 950 1150 1350 1550
60 -1020 -780 -540 -300 -60 180 420 1140 1380 1620 1860
70 -1190 -910 -630 -350 -70 210 490 1330 1610 1890 2170
80 -1360 -1040 -720 -400 -80 240 560 1520 1840 2160 2480
90 -1530 -1170 -810 -450 -90 270 630 1710 2070 2430 2790
100 -1700 -1300 -900 -500 -100 300 700 1900 2300 2700 3100
individual selling price 40 45 50 55 60 65 70 85 90 95 100
Sell per month after vat 32 36 40 44 48 52 56 68 72 76 80
1 -22 -18 -14 -10 -6 -2 2 14 18 22 26
5 -110 -90 -70 -50 -30 -10 10 70 90 110 130
10 -220 -180 -140 -100 -60 -20 20 140 180 220 260
20 -440 -360 -280 -200 -120 -40 40 280 360 440 520
30 -660 -540 -420 -300 -180 -60 60 420 540 660 780
40 -880 -720 -560 -400 -240 -80 80 560 720 880 1040
50 -1100 -900 -700 -500 -300 -100 100 700 900 1100 1300
60 -1320 -1080 -840 -600 -360 -120 120 840 1080 1320 1560
70 -1540 -1260 -980 -700 -420 -140 140 980 1260 1540 1820
80 -1760 -1440 -1120 -800 -480 -160 160 1120 1440 1760 2080
90 -1980 -1620 -1260 -900 -540 -180 180 1260 1620 1980 2340
100 -2200 -1800 -1400 -1000 -600 -200 200 1400 1800 2200 2600