CASE STUDY – FRED’S PHARMACY
Fred’s pharmacy is located in a large suburban shopping centre and is one of two in the centre. The pharmacy is 300m2 and employs 12 staff. Usually 6 staff are rostered at any one time. The pharmacy employs three pharmacists, two of which are on at any one time. On a usual day the pharmacy serves around 250 customers, has an average basket of ~$20 and dispenses around 200 scripts.
With this information in mind, and the Income Statement provided to you below prepare answers to the following questions for submission. Most questions correspond with data lettered a-i in the notes columns of the Income Statement
ANALYSING P&L’s
Calculate the missing figures and subsequent ratios (b and i) for all the years.
Following this, work through and prepare answers to the following questions:
- Calculate the percentage growth in total sales over the three consecutive years from 2011/12 to budgeted 2014/2015. (3)
- Note the increase in advertising expenses in 2013/14. Discuss possible reasons and the effect of this. (3)
- Discuss the Rent/Sales Ratio for each of the three years. Note how this changes as sales change. What are some strategies for reducing the rent/sales ratio? (5)
- Note and discuss the decrease in bank interest over the three years. (3)
- Discuss the Staff/Sales Ratio for the three years. Note how this changes as sales change. Discuss whether you think total staff expenses should be considered in this ratio or simply wages and salaries. (5)
- Discuss the changes in IT expenses for the 3 years and proposed budget year. What are possible reasons for these changes? (3)
- Discuss potential reasons for the decrease in telephone expenses in the year 2013/2014. (3)
- Comment on why despite an increase in total sales in 2013/14 Net Profit (%) decreased when compared to other years. (2.5)
- Discuss the effect of renovating the pharmacy on Gross Profit % and Net Profit %. (2.5)
Total 30 marks
Pharmacy
ACTUAL 2011/2012
ACTUAL
2012/2013
ACTUAL
2013/2014
Budget
2014/2015
Notes
INCOME
Total Income
$3,450,000
$3,500,000
$3,900,000
$ 4,000,000
a
Total Cost of Goods Sold
$2,300,000
$2,250,000
$2,705,500
$ 2,600,000
Gross Profit
GROSS PROFIT %
b
EXPENDITURE
Operating Expenses
Accounting Fees
$9,500
$8,300
$7,800
$ 8,000
Advertising
$14,500
$12,500
$17,000
$ 40,000
c
Bank Charges
$12,560
$16,334
$14,300
$ 15,000
Bank Interest
$35,050
$32,820
$27,989
$ 30,000
e
Book Keeping
$9,800
$10,500
$11,300
$ 12,000
Business Insurance
$3,600
$4,500
$4,500
$ 4,500
Cleaning
$1,230
$1,150
$1,149
$ 1,200
Commission Diners/Amex
$3,636
$3,858
$2,069
$ 4,000
Donations
$950
$1,060
$1,150
$ 1,000
Fittings Lease/Storage/Hire
$1,190
$1,560
$1,480
$ 2,000
Freight
$450
$620
$490
$ 500
IT Expenses
$2,800
$780
$7,330
$ 2,000
g
Legal Fees
$0
$878
$450
$ 500
Packing & Wrapping Materials
$625
$900
$460
$ 1,000
Postage
$2,800
$2,765
$3,263
$ 3,000
Rent & Outgoings
$250,077
$260,080
$269,000
$ 270,000
d
Stationery
$3,345
$3,165
$2,900
$ 3,000
Subscriptions
$1,060
$980
$1,055
$ 1,000
Security
$606
$461
$780
$ 800
Telephone
$12,530
$9,500
$5,625
$ 6,000
h
Electricity
$8,500
$8,600
$8,685
$ 9,000
Travel Expenses
$3,895
$4,615
$3,950
$ 4,000
Motor Vehicle
$3,840
$3,565
$3,795
$ 4,000
Total Operating Expenses
$382,545
$389,491
$396,520
$ 422,500
Employment Expenses
Staff Amenities
$3,560
$4,200
$3,690
$ 4,000
Staff Training
$2,055
$1,560
$1,595
$ 2,000
Superannuation
$29,543
$28,622
$31,541
$34,876
Wages & Salaries
$328,252
$318,025
$350,451
$ 387,512
W/Comp Ins
$4,907
$4,846
$5,301
$ 5,500
Uniforms
$1,650
$785
$1,955
$ 2,000
Rewards/Bonuses
$3,860
$3,250
$3,750
$ 4,000
Total Employment Expenses
$373,827
$361,288
$398,282
$ 439,888
f
Total Expenses
$756,372
$750,779
$794,803
$862,388
Net Taxable Profit
Net profit#
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