Cost Analysis and Supplier Negotiation

The assignment presents two case studies focusing on cost analysis and strategic supplier negotiations. The first case examines potential cost savings by renegotiating contracts with bar and kitchen suppliers. The second case evaluates the financial viability of hiring a delivery service based on a net present value calculation. Students are tasked with analyzing costs, identifying negotiation opportunities, and making informed decisions based on financial projections.

Running head: MANAGE FINANCE
Manage finance
Name of the student
Name of the university
Author note

1MANAGE FINANCE
Table of Contents
Case study 1...............................................................................................................................2
Case study 2...............................................................................................................................7
References..................................................................................................................................8

2MANAGE FINANCE
Case study 1
Sales
Year 1 Year 2 Year 3
Ticket Sales - Seats Price Value ($)
Seat
s Price Value ($) Seats Price Value ($)
Regular - day 130 12 1560 145 12 1740 145 14 2030
Regular - Evening 160 18 2880 175 18 3150 175 21 3675
Gold Class - Day 25 24 600 30 24 720 30 27 810
Gold Class - Evening 30 36 1080 35 36 1260 35 40 1400
Total - Ticket Sales per day 6,120 6870 7915
Total - Ticket Sales per year 22,03,200 24,73,200 28,49,400
Bar Sales 27.5 25 2,47,500 32.5 25 2,92,500 32.5 28 3,27,600
Total sales 24,50,700 27,65,700 31,77,000
Income Statement
Year 1 Year 2 Year 3
Ticket Sales 22,03,200 24,73,20
0
28,49,40
0
Less: Costs of Sales
Payment to film
distributors
8,81,28
0
9,89,28
0
11,39,76
0
Wages 3,00,00
0
11,81,28
0
3,12,00
0
13,01,28
0
3,24,48
0
14,64,24
0
Gross Profit on tickets 10,21,920 11,71,920 13,85,160
Bar trading - Sales 2,47,500 2,92,50
0
3,27,600
Less: Costs of Sales
Wages 70000 72800 75712
Food and drinks 50000 120000 60000 132800 72000 147712
Gross Profit on Bar
trading
1,27,500 1,59,70
0
1,79,888
Advertisement
income 2,50,000 2,75,000 3,02,500
Total Gross income 13,99,420 16,06,620 18,67,548

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Operating Expenses
Salaries 2,00,000 2,08,000 216320
Basic Lease payments
- Cinema
6,00,000 6,00,000 6,00,000
Additional Lease
payments - Cinema
0 17320 50000
Advertising 75,000 82500 90750
Depreciation 1,70,000 1,70,000 1,70,000
Write Off - Set up
Costs
50,000 50,000 50,000
Interest 56,000 36000 27000
Other expenses 80,000 88000 96800
Total Operating
Expenses
12,31,000 12,51,820 13,00,870
Net Income 1,68,420 3,54,800 5,66,678
Balance Sheet
Particulars Year 1 Year 2 Year 3
Assets
Current Assets:
Cash 359548 710318 1292819
Inventory 5000 6000 7200
Accounts Receivable 25000 27500 30250
Total Current Assets 3,89,548 7,43,818 13,30,269
Long Term Assets
Screens, Fixtures and Fittings 1500000 1350000 1200000
Less: Accumulated Depreciation 150000 150000 150000
1350000 1200000 1050000
Motor Vehicle 100000 80000 60000
Accumulated Depreciation 20000 20000 20000
80000 60000 40000
Set up Costs 200000 150000 100000
Less Write Off - Set up Costs 50000 50000 50000
150000 100000 50000
Total Long Term Assets 15,80,000 13,60,000 11,40,000
Total Assets 19,69,548 21,03,818 24,70,269
Liabilities and Stockholders'
Equity
Current Liabilities:
Accounts Payable - Film
Distributors
88128 98928 113976

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Accounts Payable - Food and
Drinks
5000 6000 7200
Accounts Payable - Advertising 7500 8250 9075
Additional Lease payments -
Cinema
17320 50000
Total Current Liabilities 1,01,128 1,30,598 1,80,371
Long Term Liabilities 700000 450000 200000
Total Liabilities 8,01,128 5,80,598 3,80,371
Owner's Equity 1000000 11,68,420 15,23,220
Retained Profit 1,68,420 3,54,800 5,66,678
Total Equity 11,68,420 15,23,220 20,89,898
Total Liabilities and
Stockholders' Equity
19,69,548 21,03,818 24,70,269
Cash Flow
Year 1 Year 2 Year 3
Beginning cash 0
Sources of Funds
Ticket Sales 22,03,200 2473200 2849400
Bar Sales 2,47,500 292500 3,27,600
Advertising income 225000 272500 299750
Loans 700000 0 0
Contributed capital 1000000 0 0
Available cash 43,75,700 30,38,200 34,76,750
Uses of funds
Wages 5,70,000 5,92,800 6,16,512
Basic rent 6,00,000 6,00,000 6,00,000
Additional Percentage rent 0 0 17320
Payment to film Distributors 793152 978480 1124712
Food and Drinks 49,500 60,400 71,980
Advertising 67,500 81750 89925
Interest 56,000 36000 27000
Other expenses 80,000 88000 96800
Capital expenditure 1500000 0 0
Motor Vehicles 100000 0 0
Set up Costs 200000 0 0
Loan payments 0 250000 250000
Total cash out 40,16,152 26,87,430 28,94,249
Net cash Flow 3,59,548 3,50,770 5,82,501
Ending Cash 3,59,548 7,10,318 12,92,819

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Mitigating contingency plan risk –
Managing and mitigating the contingency risk associated with the cinema hall
operation is a complex task as it involves the customer satisfaction and unpredicted events.
However, the following measures can be taken to mitigate or at least reducing the risk of
contingency plan –
 The cinema hall shall have availability of fire extinguisher and other safety measures
in case of fire or any other natural disaster like earthquakes and the employees shall
be trained properly to manage the situation
 All the employees working there shall be provided with a safe working environment
and proper insurance agreement must be entered into for the employees as well as the
viewers.
 Proper security shall be implemented to protect the hall from any king of theft,
sabotage or any kind of criminal action.
 Ticket shall be properly numbered to avoid any kind of misunderstanding or
uncomfortable situation
 All the viewers shall be provided with comfortable environment while watching the
movies
Negotiations with shopping complex owner –
As discussed with the CEO of shopping complex, Brothers were informed that the
shopping complex will just provide the basic structure in the development plan. However, the
Brothers will be responsible for setting up the projection equipment and screen. Further, they
will be responsible for decorating and furnishing the theatres. Looking at the financial status,
of the Brothers, it can be suggested that the owner can at least provide the facility of building

6MANAGE FINANCE
and decorating the bar and kitchen area or the owner can provide finance for the time being
that will be payable at future date. This will reduce the financial burden of Brothers for the
time being (Cao et al., 2015). Further, the suppliers for the bar and kitchen can be requested
for reducing the wages by $ 5000 and instead of increasing the rate by 20% each year, can
increase it by 12-15% each year as the sub-contractor is also offering the rate of 20% hike in
the rate per year. To reduce the increasing rate Brothers can enter into a 5 -10 year agreement
with the bar and kitchen provider to assure them that the goods will be taken from them only
if the rate is reduced (Ginsburg & Pawlson, 2014).

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Case study 2
Cost/Week ($) Cost for
each of
Year 1& 2
Cost for
each of
Year 3 & 4
Cost for
Year 5
($) ($) ($)
Labour 120 6240 6864 7550
Vehicle 85 4420 4862 5348
Total 205 10660 11726 12899
End of Year Cash inflow ($) Cash
outflow ($)
Net cash
outflow ($)
Present
Value
Factor
Present
Value ($)
@10%
0 0 0 0 1 0
1 192296 15652 0.9091 160587
2 192296 15652 0.8264 145979
3 208842 16999 0.7513 144132
4 208842 16999 0.683 131029
Total 581727
As hiring the delivery service resulting in positive net present value, Peter shall accept the
offer for delivery.

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References
Cao, M., Luo, X., Luo, X. R., & Dai, X. (2015). Automated negotiation for e-commerce
decision making: A goal deliberated agent architecture for multi-strategy
selection. Decision Support Systems, 73, 1-14.
Ginsburg, P. B., & Pawlson, L. G. (2014). Seeking lower prices where providers are
consolidated: an examination of market and policy strategies. Health Affairs, 10-1377.