Konstantin Korenevskiy: 7.2. Cost forecast / Financial section / Financial and Organizational Model of a Community Beauty Salon.

Forecasting direct materials costs per service.

Indicator name		units of meas.	1 month	2 month	3 month	4 month	5 month	6 month
Haircuts	norm of Shampoo	ml	15	15	15	15	15	15
	Price	Euro	20	20	20	20	20	20
	Summa	Euro	0,25	0,25	0,25	0,25	0,25	0,25
	norm of Conditioner	ml	10	10	10	10	10	10
	Price	Euro	15	15	15	15	15	15
	Summa	Euro	0,15	0,15	0,15	0,15	0,15	0,15
	norm of Hairspray	ml	35	35	35	35	35	35
	Price	Euro	35	35	35	35	35	35
	Summa	Euro	3,06	3,06	3,06	3,06	3,06	3,06
	norm of Hairmousse	ml	15	15	15	15	15	15
	Price	Euro	30	30	30	30	30	30
	Summa	Euro	1,5	1,5	1,5	1,5	1,5	1,5
	Total:	Euro	4,96	4,96	4,96	4,96	4,96	4,96
Makeup	norm of Liquidpowder	ml	1,5	1,5	1,5	1,5	1,5	1,5
	Price	Lt	35	35	35	35	35	35
	Summa	Lt	1,05	1,05	1,05	1,05	1,05	1,05
	norm of Mascara	ml	0,35	0,35	0,35	0,35	0,35	0,35
	Price	Lt	25	25	25	25	25	25
	Summa	Lt	0,73	0,73	0,73	0,73	0,73	0,73
	norm of Pomade	ml	0,3	0,3	0,3	0,3	0,3	0,3
	Price	Lt	10	10	10	10	10	10
	Summa	Lt	0,075	0,075	0,075	0,075	0,075	0,075
	norm of eye shadow	ml	0,4	0,4	0,4	0,4	0,4	0,4
	Price	Lt	15	15	15	15	15	15
	Summa	Lt	0,17	0,17	0,17	0,17	0,17	0,17
	norm of Cream	ml	1,1	1	1	1	1	1
	Price	Lt	12	12	12	12	12	12
	Summa	Lt	0,08	0,08	0,08	0,08	0,08	0,08
	norm of Loose powders	ml	0,7	0,7	0,7	0,7	0,7	0,7
	Price	Lt	30	30	30	30	30	30
	Summa	Lt	1,4	1,4	1,4	1,4	1,4	1,4
	norm of Contour pencil	ml	0,1	0,1	0,1	0,1	0,1	0,1
	Price	Lt	10	10	10	10	10	10
	Summa	Lt	0,8	0,8	0,8	0,8	0,8	0,8
	Total:	Lt	4,31	4,31	4,31	4,31	4,31	4,31

Direct material costs per unit of production remain constant for six months. We purchased materials from suppliers for six months at a time, so the price of raw materials (shampoo, conditioner, hairspray, mousse, powder, mascara, lipstick, eyeshadow, cream, and contouring) remained constant each month.

The amount of direct material costs for hair and makeup was calculated using the formula: Price of material × Norm of material ÷ Quantity of material per bottle.

Direct costs for providing one service are calculated by summing the cost of all materials required to provide that service.

After calculations, we find that direct material costs for a haircut are 4.96 Euro, and for makeup – 4.31 Euro.

Name of indicator		Units meas.	1 month	2 month	3 month	4 month	5 mouth	6 month.
Haircut	Hourly rate for hairwashing	Euro	5	5	5	5	5	5
	Normative time	Hour	0,08	0,08	0,08	0,08	0,08	0,08
	Unit price	Euro	0,4	0,4	0,4	0,4	0,4	0,4
	Hourly rate for haircuts	Euro	6	6	6	6	6	6
	Normative time	Hour	0,5	0,5	0,5	0,5	0,5	0,5
	Unit price	Euro	3	3	3	3	3	3
	Hourly rate for hairstyling	Euro	7	7	7	7	7	7
	Normative time	Hour	0,2	0,2	0,2	0,2	0,2	0,2
	Unit price	Euro	1,4	1,4	1,4	1,4	1,4	1,4
	Summa of unit prices	Euro	4,8	4,8	4,8	4,8	4,8	4,8
	Social security contributions	Euro	1,49	1,49	1,49	1,49	1,49	1,49
Makeup	Hourly rate for facial treatments	Euro	9	9	9	9	9	9
	Normative time	Hour	0,33	0,33	0,33	0,33	0,33	0,33
	Unit price	Euro	3,00	3,00	3,00	3	3	3
	Hourly rate for eyelid tinting	Euro	8	8	8	8	8	8
	Normative time	Hour	0,17	0,17	0,17	0,17	0,17	0,17
	Unit price	Euro	1,36	1,36	1,36	1,36	1,36	1,36
Makeup	Hourly rate for mascara	Euro	8	8	8	8	8	8
	Normative time	Hour	0,08	0,08	0,08	0,08	0,08	0,08
	Unit price	Euro	0,64	0,64	0,64	0,64	0,64	0,64
	Summa of unit prices	Euro	5	5	5	5	5	5
	Social security contributions	Euro	1,55	1,55	1,55	1,55	1,55	1,55

The staff at the GrazuteRoom beauty salon (hairdresser, makeup artist) will work on a piecework basis. This means that wages are directly related to the number of clients served.

Hairdressing services include the following basic procedures: cutting, washing, and styling hair. Makeup services include applying cream and powder to the face, tinting and contouring the eyelids, and applying mascara. Hourly and time rates are set for each service separately. The unit price is calculated by multiplying the hourly rate by quantities hourly rate. The unit price for a hairdresser is €4.80, and fo a cosmetologist, €5. Social security contributions are 30.98 percent of the unit price.

Employee wages and social insurance

Indicators

1 Month

2 Month

Month

Total

3 hairdressers' salaries

Production program, pcs.

700

720

725

740

750

4355

Unit price, Euro

4,80

Salary, Euro

3360,00

3456,00

3480,00

3552,00

3600,00

20904,00

Social insurance, Euro

1040,93

1070,67

1078,10

1100,41

1115,28

6476,06

Makeup artist salary

Production program, pcs.

210

220

230

1300

Unit price, Euro

5,00

Salary, Euro

1050,00

1100,00

1150,00

6500,00

Social insurance, Euro

325,29

340,78

356,27

2013,70

Director's salary

Salary, Euro

2000,00

12000,00

Social insurance, Euro

619,60

3717,60

Accountant salary

Salary, Euro

800,00

4800,00

Social insurance, Euro

247,84

1487,04

Solary of total

7210,00

7306,00

7380,00

7452

7550,00

44204,00

Social insurance of total

2233,66

2263,40

2286,32

2308,63

2339,00

13694,40

Contribution to the Guarantee Fund

7,21

7,30

7,38

7,45

7,55

44,19

Since hairdressers and make-up artists will be paid according to a unit wage form and the beauty salon plans to serve more and more clients every month, their wages will increase accordingly. A monthly salary will be set for the director and accountant. The director's salary will be 2,000 Euro and the accountant's - 800 Euro. The table also calculates the mandatory social insurance of employees, which is calculated by multiplying the accrued salary by 30.98 percent. The contribution to the Guarantee Fund is also calculated. It is calculated by multiplying the accrued salary by 0.1 percent.

Direct costs per product

Expense items		Meas. pcs.	1 Month	2 Month.	3 Month.	4 Month.	5 Month.	6 Month.
Haircut	Direct materials costs	Euro	4,96	4,96	4,96	4,96	4,96	4,96
	Direct wages	Euro	4,80	4,80	4,80	4,80	4,80	4,80
	Social security contributions	Euro	1,49	1,49	1,49	1,49	1,49	1,49
	Total	Euro	11,25	11,25	11,25	11,25	11,25	11,25
Makeup	Direct materials costs	Euro	4,31	4,31	4,31	4,31	4,31	4,31
	Direct wages	Euro	5,00	5,00	5,00	5,00	5,00	5,00
	Social security contributions	Euro	1,55	1,55	1,55	1,55	1,55	1,55
	Total	Euro	10,86	10,86	10,86	10,86	10,86	10,86

Direct material costs are calculated in Table 7, and direct wage and social security contributions are shown in Table 9. Direct unit costs are calculated by adding direct material costs, direct wage costs, and social security contributions. Direct costs for one haircut were €11.25, and for one makeup service, €10.86.

Forecast of indirect production costs

Expense items	1 Month	2 Month	3 Month	4 Month	5 Month	6 Month	Total
1. Production repairing of premises	650,00	650,00	650,00	650,00	650,00	650,00	3900,00
2. Auxiliary materials	955,83	910,83	910,83	910,83	910,83	910,83	5509,98
3. Equipment depreciation	228,11	228,11	228,11	228,11	228,11	228,11	1368,66
4. Costs for electricity to service equipment	490,02	505,00	568,13	574,81	559,42	561,93	3259,31
5. Electricity costs for lighting the premises	69,12	69,12	77,76	74,88	74,88	74,88	440,64
6. Costs for heating production facilities	233,50	233,50	220,00	-	-	-	687,00
7. Other indirect costs	105,88	105,88	105,88	105,88	105,88	105,88	635,28
Total of indirect production costs	2732,46	2702,44	2760,71	2544,51	2529,12	2531,63	15800,87

Indirect production costs are calculated by summing the rent of production premises, auxiliary materials (which are taken from Table 1 and distributed equally over six months), depreciation of equipment (calculated in Table 11.1), costs of electricity for servicing equipment (calculated in Table 11.2) and lighting of premises (calculated in Table 11.3), costs for heating production premises (calculated in Table 11.4) and costs for cold and hot water (calculated in Table 11.5).

The rent for production premises is calculated by multiplying the area of the production premises (50 sq. m) by the price of 1 sq. m (13 Euro) and is calculated including VAT.

Appellation	Quantity	Initial value	Liquidation value percentage	Liquidation value, Euro	Equipment depreciation, Years	Annual depreciation amount, Euro	Monthly depreciation amount, Euro
Equitments	Computers	1	2000	10%	200,00	5	360,00	30,00
	Printer	1	400	10%	40,00	5	72,00	6,00
	TV set	1	1900	10%	190,00	5	342,00	28,5
	Coffee machine	1	1100	10%	110,00	5	198,00	16,5
	Hair straightener	3	200	10%	20,00	5	36,00	3,00
	Hair dryer	3	190	10%	19,00	5	34,2	2,85
	Hair curling tongs	3	120	10%	12,00	5	21,6	1,8
	Hair curlers	3	190	10%	19,00	5	34,2	2,85
	Hair clipper	3	180	10%	18,00	5	34,2	2,85
	in all:	19	6280	10%	628,00	5	1132,2	94,35
Furnitures	strongbox	1	910	10%	91,00	6	136,5	11,38
	Barber's work furniture, komplects	3	9000	10%	900,00	6	1350,00	112,50
	Sofa	1	790	10%	79,00	6	118,5	9,88
	Total	5	10700	10%	1070,00		1605	133,76
Depreciation of all equipment and furniture							2737,2	228,11

Depreciation of equipment and furniture

When calculating depreciation, a percentage of the liquidation value was chosen, which amounted to 10 percent.

The useful life of the equipment in years was applied to each piece of equipment. The following formula was used to calculate the annual depreciation amount:

V1 - acquisition value of fixed assets;

V2 - liquidation value of fixed assets;

T – useful life, in years.

price including VAT, Euro	3,92	3,92	4,42	4,25	4,25	4,25
Television set
Number of equitments	1	1	1	1	1	1
Power of electric motors unit, kW	0,24	0,24	0,24	0,24	0,24	0,24
Useful working time fund, hours	192	192	216	208	208	208
Price of 1 kW, Euro	0,45	0,45	0,45	0,45	0,45	0,45
Electricity price excluding VAT, Euro	20,74	20,74	23,33	22,46	18,47	18,47
Electricity price including VAT, Euro	25,10	25,10	28,23	27,18	27,18	27,18
In all cost of electricity excluding VAT, Euro	490,02	505,00	568,13	574,81	559,42	561,93
Cost in all of electricity VAT, Euro	592,92	611,05	687,44	695,52	676,90	679,94

To calculate how much electricity the equipment consumes, we need to know the useful working time fund, which is calculated by multiplying the shift duration by the calendar working days. We calculate the shift duration by multiplying the number of people served per month by the time required for one person to serve the equipment. Below, we provide an example of how we calculated the useful working time fund of a hair straightener. We calculated the useful working time funds of other equipment in a similar way.

USEFUL WORKING TIME FUND

1) Hair straightener:

It takes 5 minutes for one person to service with a hair straightener.

Shift duration per month:

1 month served 500 people * 5 minutes = 42 hours;

2 month served 528 people * 5 minutes = 44 hours;

3 month served 520 people * 5 minutes = 43 hours;

4 month served 525 people * 5 minutes = 45 hours;

5 month served 540 people * 5 minutes = 43 hours;

6 month served 540 people * 5 minutes = 45 hours.

Useful working time fund = calendar working days * shift duration.

1 month 42 * 24 working days = 1008 hours;

2 month 43 * 24 working days = 1032 hours;

3 month 43 * 27 working days = 1161 hours;
4 month 44 * 26 working days = 1144 hours;
5 month 45 * 26 working days = 1170 hours;
6 month 45 * 26 working days = 1170 hours.

When calculating the costs of electricity to service the devices, the following formula was applied: Price for electricity = number of devices * power of one device, kW * useful working time fund * price of 1 kW, Euro.

The electrical power output was determined separately for each device.

Lighting of administrative and production premises.

Lighting of administrative premises
Indicators	1 Month	2 Month	3 Month	4 Month	5 Month	6 Month	In all
Illuminated area, sq. m.	10	10	10	10	10	10	-
Lighting duration, hours	8	8	8	8	8	8	-
Lighting duration, days	24	24	27	26	26	26	-
Lighting power rate, kW/m. sq.	0,016	0,016	0,016	0,016	0,016	0,016	-
Electricity price, Euro	0,45	0,45	0,45	0,45	0,45	0,45	-
Electricity value excluding VAT, Euro	13,82	13,82	15,55	14,98	14,98	14,98	88,13
Electricity value including VAT, Euro	16,72	16,72	18,82	18,13	18,13	18,13	106,64
Lighting of production premises
Illuminated area, sq. m.	50	50	50	50	50	50	-
Lighting duration, hours	8	8	8	8	8	8	-
Lighting duration, days	24	24	27	26	26	26	-
Lighting power rate, kW/m. sq.	0,016	0,016	0,016	0,016	0,016	0,016	-
Electricity price, Euro	0,45	0,45	0,45	0,45	0,45	0,45	-
Electricity value excluding VAT, Euro	69,12	69,12	77,76	74,88	74,88	74,88	440,64
Electricity value including VAT, Euro	83,64	83,64	94,1	90,60	90,60	90,60	533,18
In all of cost indoor lighting excluding VAT, Euro	82,94	82,94	93,31	89,86	89,86	89,86	528,77
In all of cost indoor lighting including VAT, Euro	100,36	100,36	112,91	108,73	108,73	108,73	639,82

The premises of the hairdresser K.Korenevskis individual enterprise "GrazuteRoom" are about 60 m2. The area for production premises is 50 m2 (where beauty salon services are performed), administrative premises are 10 m2. The company works six days a week, and each month on different days: the first and second months - 24 days, the third month - 27 days, the fourth, fifth and sixth months - 26 days each. Shift duration - 8 hours.

When calculating the lighting costs of administrative and production premises, the following formula was used:

Illuminated area * lighting duration, hours * lighting duration, days * lighting power rate kW/m. sq. ( 0.016) * electricity price, Euro (0.45 ct) .

It is predicted that the costs of electricity for lighting the premises will amount to 88.13 Euro for administrative premises and 440.64 Euro for production premises, excluding VAT. The total lighting of all premises for 6 months will amount to 528.77 Euro, excluding VAT, and 639.82 Euro, including VAT.

Heating of administrative and production premises.

Heating of administrative premises
Indicators	1 Month	2 Month	3 Month	4 Month	5 Month	6 Month	In all:
Heated area, sq m	10	10	10	-	-	-	-
Heating cost per 1 sq. m, Euro	4,67	4,67	4,40	-	-	-	-
Value excluding VAT, Euro	46,70	46,70	44,00	-	-	-	137,40
Value including VAT, Euro	50,90	50,90	47,96	-			149,76
Heating of production premises
Heated area, sq m	50	50	50	-	-	-	-
Heating cost per 1 sq. m, Euro	4,67	4,67	4,40	-	-	-	-
Value excluding VAT, Euro	233,5	233,5	220,00	-	-	-	687,00
Value including VAT, Euro	254,51	254,51	239,80	-	-	-	748,82
In all for heating excluding VAT, Euro	280,20	280,20	264,00	-	-	-	824,40
In all for heating including VAT, Euro	305,41	305,41	287,76	-	-	-	898,58

The heated area of the administrative premises is 10 m2, the production premises - 50 m2. When calculating the costs of heating the premises, it was necessary to multiply the heated area by the heating price of 1 sq. m. It is expected that the heating will be for only two months, the heating price for the first two months will be 4.67 Euro per 1 sq. m, in the third month the price will decrease to 4.40 Euro. Thus, the heating costs of the administrative premises over three months will amount to 137.40 Euro, and the production premises - 687.00 Euro, excluding 9 percent VAT.

Administrative and production costs for water.

Administrative costs for water
Indicators	quantity, m3	price, Euro	In all
Hot water	1	15,80	15,80
Cold water	2	3,84	7,68
Water excluding VAT, Euro	-	-	23,48
Water including VAT, Euro	-	-	25,59
Production costs for water
Hot water	5	15,80	79,00
Cold water	7	3,84	26,88
Water excluding VAT, Euro	-	-	105,88
Water including VAT, Euro	-	-	115,41
In all excluding VAT, Euro	-	-	129,36
In all including VAT, Euro	-	-	141,00

It is expected that 1 m3 of hot water and 2 m3 of cold water will be consumed per month in administrative premises, 5 m3 of hot water and 7 m3 of cold water in production premises. The formula for calculating water costs is: 1 m3 of hot water * 1 m3 of hot water price + 1 m3 of cold water * 1 m3 of cold water price.

Thus, the monthly water costs in administrative premises will be 23.48 Euro, and in production premises - 105.88 Euro, excluding 9% VAT.

Forecast of cost of goods sold.

Makeup
Direct costs (per service)	Euro	10,86	10,86	10,86	10,86	10,86	10,86	65,16
Indirect costs (per service)	Euro	17,77	12,87	13,15	11,57	11,50	11,01	77,87
Cost of one service	Euro	28,63	23,73	24,01	22,43	22,36	21,87	143,03
Number of services sold	Euro	210	210	210	220	220	230	1300
Total cost of services	Euro	6012,30	4983,30	5061,00	4934,60	4919,20	5030,10	30940,50
Total	Euro	17618,30	15783,30	15918,60	15635,60	15767,60	16002,60	96726,00

The cost of goods sold was calculated by summing direct and indirect production costs and multiplying them by the number of services sold. The cost of one product was calculated by summing only direct and indirect costs.

Direct costs per product were taken from Table 10, the number of services sold was taken from Table 8. Indirect costs were calculated by multiplying direct costs by the allocation coefficient.

Allocation coefficient = Indirect costs / (Production scale × Direct costs per product).

Haircut and makeup distribution coefficients.

Service	1-month coefficient	2-month coefficient	3-month coefficient	4-month coefficient	5-month coefficient	6-month coefficient
Haircut	0,47396317	0,3336346	0,34082840	0,31197057	0,30270736	0,30004504
Makeup	1,63661317	1,1849689	1,21051916	1,06500502	1,05856354	1,01354392

Price of services

Service name	Indicator	1 month	2 month	3 month	4 month	5 month	6 month
Haircut	Cost price	16,58	15,00	15,08	14,76	14,66	14,63
	Surcharge, %	32,39	46,33	45,56	48,71	49,73	50,00
	Surcharge, Euro	5,37	6,95	6,87	7,19	7,29	7,32
	In All	21,95	21,95	21,95	21,95	21,95	21,95
	In all with VAT	26,56	26,56	26,56	26,56	26,56	26,56

Makeup	Cost price	28,63	23,73	24,01	22,43	22,36	21,87
	Surcharge, %	14,60	38,26	36,65	46,28	46,74	50,00
	Surcharge, Euro	4,18	9,08	8,80	10,38	10,45	10,94
	In All	32,81	32,81	32,81	32,81	32,81	32,81
	In all with VAT	39,70	39,70	39,70	39,70	39,70	39,70

The allocation coefficient changed every month, so the indirect costs changed accordingly. After adding up the direct and indirect costs, the cost of services was different every month, so we took the lowest cost of the 6 months and added a 50 percent markup to it.

Operating cost forecast.

Indicator name	unit of meas..	1 month	2 month	3 month.	4 month.	5 month.	6 month.	In all
1. Director's	Euro	2000	2000	2000	2000	2000	2000	12000
2. Hairdressers (3 hairdressers)	Euro	3360,00	3456,00	3456,00	3480,00	3552,00	3600,00	20904,00
3. Accountants	Euro	800,00	800,00	800,00	800,00	800,00	800,00	4800,00
4. Makeup artist	Euro	1050,00	1050,00	1050,00	1100,00	1100,00	1150,00	6500,00
5. Lighting of administrative and common areas	Euro	13,82	13,82	15,55	14,98	14,98	14,98	88,13
6. Depreciation of administrative and common use assets	Euro	228,11	228,11	228,11	228,11	228,11	228,11	1368,66
7. Rent of administrative premises	Euro	130,00	130,00	130,00	130,00	130,00	130,00	780,00
8. Heating of administrative premises	Euro	46,70	46,70	44,00	-	-	-	137,40
9. Costs for cold and hot water	Euro	23,48	23,48	23,48	23,48	23,48	23,48	140,88
10. Advertising	Euro	333,33	333,33	333,33	333,33	333,33	333,33	2000
11. Communication costs	Euro	90	90	90	90	90	90	540
12. Garbage removal	Euro	50	50	50	50	50	50	300
13. Establishment costs related to operations	Euro	262,00	262,00	262,00	262,00	262,00	262,00	1572
14. Current assets for administrative purposes before operations	Euro	182,33	182,33	182,33	182,33	182,33	182,33	1094
15. Property insurance	Euro	58,33	58,33	58,33	58,33	58,33	58,33	350
16. Advertising before activity	Euro	2000,00	-	-	-	-	-	2000,00
17. Subscription	Euro	30,00	30,00	30,00	30,00	30,00	30,00	180,00
18.Taxes	Euro	2240,87	2270,70	2270,70	2293,70	2316,08	2345,55	13738,59
19.1. Contributions to the Guarantee Fund	Euro	7,21	7,30	7,30	7,38	7,45	7,55	44,19
19.2. Social insurance contributions for general and administrative personnel	Euro	2233,66	2263,40	2263,40	2286,32	2308,63	2338,0	13694,4
Total	Euro	12898,97	11024,80	11023,83	11076,26	11170,64	11298,11	68493,66

The salaries of the director, accountant, hairdresser and makeup artist are calculated in Table 9.1. The lighting of administrative and common premises is calculated in Table 11.3. The depreciation of administrative and common assets is taken from Table 11.1. The company rents premises at 13 Euro per 1 sq. m, so the rent of administrative premises is calculated by multiplying the area of administrative premises and the price of 1 sq. m. The monthly rental costs are 130 Euro. The heating costs of administrative premises are taken from Table 11.4. The costs for cold and hot water are calculated in Table 11.5. Each month the company will have 333.33 Euro in advertising costs. Communication costs are estimated at 90 Euro each month. The company has an 8 m3 garbage container, the monthly removal of such a container is 50 Euro. The establishment costs related to the operation, current assets for administrative purposes before the operation and property insurance are taken from the first table and the amounts are distributed equally over six months. Advertising before the operation is taken from the first table, which amounts to 2000 Euro. The company will subscribe to magazines and pay 30 Euro each month. Taxes are calculated in Table 9.1. Operating expenses are calculated separately each month, adding up all expenses.

<<< 7.3.

Summary Content / Financial section

7.1. >>>

Konstantin Korenevskiy

LovSurfing

Thursday, September 18, 2014

7.2. Cost forecast / Financial section / Financial and Organizational Model of a Community Beauty Salon.

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