Harry Huffnpuff Glassblowing
Harry Huffnpuff is a skilled artist with a specialty in glassblowing. He has worked for a variety of companies as a glassblower for 25 years during which time he honed his skills to the point where he is able to create glass-blown art pieces of extremely high quality.
On January 1, 2006, Harry took the majority of his life savings and opened his own shop where he produces three products: vases, paperweights, and tumblers. His shop consists of the ovens and blowing room, the finishing and packing room, a storeroom, and a business office, he has one employee, Sam a semi-skilled worker who works approximately 20 hours per week at $15 per hour. Sam’s hours each week varies as needed and is available for up to 40 hours per week.
Harry’s dilemma is that he is working as hard as he can, sells all his production but has very little positive cash flow. He feels he should be taking $25,000 (after his tax rate of 28%) in salary, but is far short of that goal.
After reading the background information and doing research, I will prepare the following to assist Harry in saving his business:
1. An income statement for 2006 in traditional format projecting the totals for the year.
2. An income statement for 2006 in contribution format projecting the totals for the year.
3. Calculate breakeven point for a year’s activity including Harry’s desired net income.
4. Prepare a summary of specific recommendations for Harry to improve his cash flow.
To assist in answering question one, I will make an assumption because we are told ...