(a) Distinguish between a profit and loss statement and cash flow statement.[5 marks]
(b) A company is proposing to build a low cost single board computer that will sell for£30 direct from its web page. The bill of materials (BoM) costs for components are£15/unit, while manufacturing and other costs are estimated as 33% of sale price. Components can only be bought in lots of 10,000 at a time and must be paid for 1 month before first use. The company estimates sales for the first six months as a ramp for 0 in the first month increasing by 1000/month to 5000 units in month 6.
(i) Draw up a cash flow estimate for the first six months of operation. Ignore VAT, bank and other charges.[5 marks]
(ii) How much working capital will be required?[5 marks]
(iii) In month 5 the company is offered the opportunity to sell 50,000 units but at a price of£25/unit. Should the company take this opportunity? Justify your answer.[5 marks
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