A Case Study On Purchase Point Media Corporation

A case study on Purchase Point Media Corporation

Deadline: November 10, 2018, 10:11 pm

project health

Number of sources: 7

 

Writing Style: APA

Type of document: Coursework

Academic Level:Undergraduate

Number of Pages: 8 (Double Spaced)

Category: Business

Language Style: English (U.S.)

Order Instructions:

This case is based on actual financial projections developed

and provided by a publicly traded firm, Purchase Point Media

Corporation (PPMC). Carefully examine the PPMC projections,

which are presented in a sequence and format suitable for

break-even calculation and analysis. After you calculate the

break-even point, use additional, publicly available information

to come to a decision with respect to market potential.

The increase in the price per share of PPMC stock suggests

that, over time, the market may have reacted to their results

and analyses, using a comparable methodology.

OBJECTIVES

• Identify discernable errors, irregularities, and improprieties

in style and format within publicly reported data

• Meet financial statement presentation requirements for a

specific “real world” example

• Determine whether financial information provided follows

generally accepted accounting principles (GAAP) or is

presented in “good form”

• Distinguish between the substance and form of

financial statements

• Estimate variable and fixed costs for a publicly

traded company

• Assess publicly disseminated information from publicly

traded companies to determine the feasibility of market

potential and market penetration

project health

Number of sources: 7

 

Writing Style: APA

Type of document: Coursework

Academic Level:Undergraduate

Number of Pages: 8 (Double Spaced)

Category: Business

Language Style: English (U.S.)

Order Instructions:

This case is based on actual financial projections developed

and provided by a publicly traded firm, Purchase Point Media

Corporation (PPMC). Carefully examine the PPMC projections,

which are presented in a sequence and format suitable for

break-even calculation and analysis. After you calculate the

break-even point, use additional, publicly available information

to come to a decision with respect to market potential.

The increase in the price per share of PPMC stock suggests

that, over time, the market may have reacted to their results

and analyses, using a comparable methodology.

OBJECTIVES

• Identify discernable errors, irregularities, and improprieties

in style and format within publicly reported data

• Meet financial statement presentation requirements for a

specific “real world” example

• Determine whether financial information provided follows

generally accepted accounting principles (GAAP) or is

presented in “good form”

• Distinguish between the substance and form of

financial statements

• Estimate variable and fixed costs for a publicly

traded company

• Assess publicly disseminated information from publicly

traded companies to determine the feasibility of market

potential and market penetration

Step 2

Calculation of First Year Break Even Points	Calculation of First Year Break Even Points
Note	M1	M2	M3	M4	M5	M6	M7	M8	M9	M10	M11	M12	1st	1st	2nd	3rd	4th	1st
Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Year	Qtr	Qtr	Qtr	Qtr	Year
Stores	1,200	2,400	3,600	4,800	6,000	7,200	8,400	9,600	10,800	12,000	13,200	14,400	93,600	1,440,000	4,320,000	712,800	950	2,296,000
Multiply by 200 carts	240,000	480,000	720,000	960,000	1,200,000	144,000	1,680,000	1,920,000	2,160,000	2,400,000	2,640,000	2,880,000	18,720,000	158,400	475,000	712,800	950,400	2,296,000
Total Carts	240,000	480,000	720,000	1,200,000	1,440,000	1,680,000	1,920,000	2.160.000	2.400.000	2,640,000	2,880,000	3,120,000	20,880,000
Multiply by Revenue per cart	1,620,000.00	3,240,000.00	4,860,000.00	6,480,000.00	810,000.00	9,720,000.00	11,340,000.00	12,960,000.00	14,580,000.00	16,200,000.00	17,820,000.00	19,440,000.00	126,360,0 00	9,720,000.00	24,300,000.00	38,880,000.00	53,460,000.00	126,360,0 00
Total Revenues	1	0	0	0	0	0
Variable Costs (VC)
Amortization (2 year S/L) Burcicki, Jim: While amortization in its normal sense would be considered a FC, it is considered a VC here because the number of carts is variable even though we are using an average of 200 carts as the basis.	2	746,400	746,400	746,400	746,400	746,400	746,400	746,400	746,400	746,400	746,400	746,400	746,400	746,400	2,239,200	2,239,200	2,239,200	2,239,200	8,956,800
Printing	3	240,000	240,000	240,000	240,000	240,000	240,000	240,000	240,000	240,000	20,880,000	14,440,000	475,200	6,480,000	8,640,000	2,296,000
Replacement (even distribution)	4	18,990	18,990	18,990	18,990	18,990	18,990	18,900	18,900	18,900	18,900	18,900	18,900	227,880	569,499	569,499	569,499	569,499	22
Cart Rental (10% Revenue)	5	1,620	3,240	4,860	6,480	8,100	9,720	11,340	12,960	14,580	16,200	17,820	19,440	126,360	2,268	2,916	9,234
Mktg. Sales & Comm.	6	1,458,000	3,645,000	5,382,000	8,019,000	23,454,000	2,583,000	4,777,000	6,957,000	6,957,000	23,454,000
Grocery Store Operations	7	240,000	240,000	240,000	480,000	480,000	480,000	720,000	720,000	720,000	2,160,000	2,520,000	2,880,000	3,240,000	3,600,000	12,240,000
Total VC	767,010	768,630	2,228,250	1,251,870	1,253,490	4,900,110	1,496,640	1,498,260	6,881,880	1,741,500	1,743,120	9,763,740	34,294,500	3,763,890	7,405,470	9,876,780	13,248,360	34,294,500
Contribution Margin (CM)	(767,010)	(768,630)	(2,228,250)	(1,251,870)	(1,253,490)	(4,900,110)	(1,496,640)	(1,498,260)	(6,881,880)	(1,741,500)	(1,743,120)	(9,763,740)	(34,294,500)	-3,763,890	-7,405,470	-9,876,780	-13,248,360	-34,294,500
CM per Unit/Cart	(3.20)	(1.60)	(3.09)	(1.04)	(0.87)	(2.92)	(0.78)	ERROR:#VALUE!	ERROR:#VALUE!	(0.66)	(0.61)	(3.13)	(1.64)	ERROR:#DIV/0!	ERROR:#DIV/0!	ERROR:#DIV/0!	ERROR:#DIV/0!	ERROR:#DIV/0!
Fixed Costs (FC)
Accounting & Audit	8	24,000	24,000	52,000	26,000	26,000	52,000	26,000	26,000	26,000	26,000	26,000	32,000 Burcicki, Jim: Will cost 15k so I am assuming the expense is being accrued and therefore expensed in December as an adjusting entry.	47,000	100,000	100,000	78,000	84,000	446,000
Advertising (even distribution)	9	13,125	13,125	131,250	13,125	13,125	131,250	13,125	13,125	131,250	13,125	13,125	131,250	132,825	132,825	132,825	132,825	531,300
Auto Lease	10	6,000	6,000	6,000	6,000	6,000	6,000	6,000	6,000	24,000
Bank Charges	11	500	500	500	500	2,000	500	500	500	500	2,000
Entertainment & Promotion	12	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	30,000	30,000	30,000	30,000	120,000
Insurance	13	25,000	25,000	25,000	25,000	100,000	25,000	25,000	25,000	25,000	100,000
Legal	14	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	30,000	30,000	30,000	30,000	120,000
Management Fees	15	24,167	24,167	24,167	24,167	24,167	24,167	24,167	24,167	24,167	24,167	24,167	24,167	290,000	72,500	72,500	72,500	72,500	290,000
Office & Sundry	16	15,000	9,000	12,000	15,000	51,000	15,000	9,000	12,000	15,000	51,000
Public Relations	17	100,000	100,000	100,000	100,000	400,000	100,000	100,000	100,000	100,000	400,000
Rent	18	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	30,000	30,000	30,000	30,000	120,000
Salaries & Benefits	19	12,000	12,000	12,000	12,000	12,000	12,000	12,000	12,000	12,000	12,000	12,000	12,000	144,000	21,600	28,800	21,600	72,000	144,000
Stationary & Printing	20	Burcicki, Jim: The author expenses the 10k in January. However, it states that the 10k will be purchased during the first quarter – first three months – in sufficient quantities to last the entire year. This should be a prepaid and then expensed during the year. With no set amoutns, I assumed an even distribution throughout the year.	10,000	10,000	10,000
Telephone & Faxc	21	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	10,500	10,500	10,500	10,500	42,000
Travel & Accommodation	22	30,000	60,000	90,000	135,000	315,000	30,000	60,000	90,000	135,000	315,000
Total FC	106,792	106,792	439,417	108,792	108,792	453,417	108,792	108,792	460,417	108,792	108,792	514,417	2,734,004	653,001	671,001	678,001	732,001	2,734,004
Total Expenses (VC + FC)	873,802	875,422	2,667,667	1,360,662	1,362,282	5,353,527	1,605,432	1,607,052	7,342,297	1,850,292	1,851,912	10,278,157	37,028,504	4,416,891	8,076,471	10,554,781	13,980,361	37,028,504
Net Operating Income	(873,802)	(875,422)	(2,667,667)	(1,360,662)	(1,362,282)	(5,353,527)	(1,605,432)	(1,607,052)	(7,342,297)	(1,850,292)	(1,851,912)	(10,278,157)	-37,028,504	-4,416,891	-8,076,471	-10,554,781	-13,980,361	-37,028,504
Break Even Point in terms of carts	-1,664,582 Burcicki, Jim: The Formula Method – Managerial Accounting, 15th ed., Page 201 BE (Carts) = Total FC / (CM per Unit/Cart)	ERROR:#DIV/0! Burcicki, Jim: The Formula Method – Managerial Accounting, 15th ed., Page 201 BE (Carts) = Total FC / (CM per Unit/Cart)
Break Even Point in terms of stores	-7,462 Burcicki, Jim: The Equation Method – Managerial Accounting, 15th ed., Page 201 Break Even = Q Unit CM = CM / Total # of Stores Profit = Unit CM x Q – Fixed Expense	-183,040 Burcicki, Jim: The Equaion Method – Managerial Accounting, 15th ed., Page 201 Break Even = Q Unit CM = CM / Total # of Stores Profit = Unit CM x Q – Fixed Expense

 

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