Sukkur Institute of Business Administration University

Airport Road Sukkur, Sindh, Pakistan

FORECASTING CASHFLOWS AT MALAAK
ANGELOLOGY

This case has been written by the students of BS Accounting & Finance, Murk Shaikh and Farhana
Siddiqui under the supervision of lecturer Mr. Sajjad Ahmed Mahesar at Sukkur IBA University.
And under the guidance of Anees Ali, Accountant General, Malaak Angelology Fashion LLC. This
case aims to provide material exclusively for class discussion. The authors may have disguised
certain names and other identifying information to protect confidentiality.

5th January 2020: Miss Huda-al-Nuaimi, CEO of Malaak Angelology Fashion LLC was having
meeting with the management accountant of the company, Mr. Kareem. After analyzing the
performance of company in the previous year. Miss Huda-al-Nuaimi wants Mr. Kareem to budget
for the product abaya for 1st quarter of 2020. In order to determine that whether the company would
be able to pay for its fixed expenses and still be able to meet other basic needs.

Malaak Angelology Fashion LLC is a Private Limited Company, it was established in 2011 in Dubai,
United Arab Emirates. The organisation operates in the clothing and accessories sector and has
received global recognition for its unique and stylish clothing stuff. Main products of the company
are abayas, kaftans, jumpsuits, turbans, emblems, and jewelry items.

Each abaya first goes through cutting and designing department. Where its design is selected and
after cutting, it goes to the other department for stitching. When an abaya is finished, it is sent for
packaging and respective tracing numbers are allotted.

Direct material consists of fabric only, type of fabric varies depending on the type of abaya.
Company maintain a closing raw material balance of at least 5 meters of each type of fabric used, at
the end of the month. Fabric used for each type of abaya is shown in Exhibit 1. Payment for direct
materials is paid 70% in the month of purchase and 30% in following month. Direct labor is paid on
monthly basis. It includes pattern maker, tailor, cutter. Salaries are paid on the 5 th day of each month
(Exhibit 2). Each abaya also requires variety of indirect materials according to its design. Such as:
lining, second fabric, , fusing, buttons, threads, tick tack, buckle, elastic, labels, beads, zip, Eyelet,
Hook and bar. The estimated total cost of indirect material per item 72 AED (Arab emirates dirham),
refer Exhibit 3. Payments for indirect materials are made in the month of purchase. Company also

1
pays courier charges of AED 130 per abaya which is paid at the end of each month, if the abaya is
sold out. The total courier charges per month is determined based on the pieces sold.

The company bears average electricity expenses of AED 800 per month, which is paid on 15 th of
each month. Depreciation charges are AED 1,167 per month. Supervisor Salary is AED 4,000, paid
on the 5th day of each month. Accounting consultancy expenses are AED 2,100 per month which is
paid in advance. Shop rent for each quarter is AED 16,000 which is paid quarterly.

The company make sells on cash and credit basis. Usually 70% of sales are on cash basis. Whereas
30% of the sales are made on credit basis, 50% of which is received in the same month, and the
remaining is received in the following month. Selling price per item is shown in Exhibit 4.

Mr. Kareem has estimated that the company is expected to sell relatively more abayas in the month
of January. Details of his estimation is given in Exhibit 5. Closing finished inventory balance must
be at least 2 pieces of each item at the end of the month. There are some unsold abayas available
from previous year, which are expected to be sold this year (Exhibit 6). Company has AED 5,000
cash available in its bank account. Company maintain an ending cash balance of at least AED 3,000
at the end of each month, in order to meet basic needs of company.

Now, Mr. Kareem has to forecast the future cashflows of company for the first quarter of 2020 to
ensure that the company will make enough money in the first quarter to pay off shop rent and other
major expenditures of the company and also meet basic needs of the company.

Required:
1, Perform a monthly cashflow analysis for the first quarter of 2020.
2. Perform a break-even analysis, assuming Malaak Angelology produces only one product (abaya).

2
EXHIBIT 1
Fabric used for each type of abaya:

Meter
Item name Material used consumption per Price per meter
piece
KETAMTRADING-
WHITE FLOUNCE CHIKAN 3.5 AED 20.00
KETAMTRADING-
HAMPTON CHIKAN 4 AED 20.00
KUWAIT PAISLEY
HARPER BLUE BLUE 5 AED 18.50
KUWAIT PAISLEY
CANARY PAISLEY BLUE 4.2 AED 18.50
PUFF PAISLEY RED KUWAIT PAISLEY RED 3.5 AED 18.50
RED CANARY KUWAIT PAISLEY RED 3.5 AED 18.50
KETAMTRADING-
LENNOX CHIKAN 3.5 AED 20.00
NAUTICAL KUWAIT NAUTICAL 5 AED 18.50
CANARY LINEN KUWAIT 4.2 AED 18.50
LINEN ABAYA KUWAIT 3.5 AED 18.50
FLORAL JAQUARD Y&M 3.5 AED 49.00
SUMMER DRESS FAREAST TRADING 5 AED 12.00
PAISLEY BLACK KUWAIT PAISLEY
SUMMER BLACK 5 AED 18.50
KUWAIT PAISLEY
CANARY BLACK BLACK 3.5 AED 18.50
PAISLEY BLACK KUWAIT PAISLEY
SKIRT BLACK 1.5 AED 18.50

EXHIBIT 2
Salaries of direct labor:

No. of employees Direct Labour Salary of an employee per month

10 Pattern Maker AED 3,000.00
15 Trailer AED 2,500.00
12 Cutter AED 2,000.00
37 Total Direct Labor AED 7,500.00

3
EXHIBIT 3
Indirect materials used:

Indirect Material Estimated price per Item

LINING AED 7.00
2ND FABRIC AED 15.00
CHEILA AED 4.00
FUSING AED 14.00
BUTTON AED 3.00
THREADS AED 2.00
TICK TACK AED 2.00
BUCKLE AED 4.00
ELASTIC AED 3.00
LABELS AED 4.00
BEADS AED 7.00
ZIP AED 2.00
EYELET AED 3.00
HOOCK&BAR AED 2.00
Total estimated indirect material per item AED 72.00

EXHIBIT 4
Selling price per item:

Item Name Sale Price per Item

WHITE FLOUNCE AED 2,844.00

HAMPTON AED 2,243.00
HARPER BLUE AED 1,725.00
CANARY PAISLEY AED 2,565.00
PUFF PAISLEY RED AED 2,248.00
RED CANARY AED 1,967.00
LENNOX AED 2,755.00
NAUTICAL AED 2,941.00
CANARY LINEN AED 2,135.00
LINEN ABAYA AED 2,764.00
FLORAL JAQUARD AED 2,848.00
SUMMER DRESS AED 1,749.00
PAISLEY BLACK SUMM AED 2,115.00
CANARY BLACK AED 2,384.00
PAISLEY BLACK SKIRT AED 1,931.00

4
EXHIBIT 5
Estimated sales:

Total Estimated Sales in Qty

Item Name
Jan-20 Feb-20 Mar-20 Apr-20
WHITE FLOUNCE 8 6 7 6
HAMPTON 6 13 4 13
HARPER BLUE 12 4 8 4
CANARY PAISLEY 9 3 2 3
PUFF PAISLEY RED 6 7 6 7
RED CANARY 11 4 13 4
LENNOX 7 8 4 8
NAUTICAL 14 2 3 2
CANARY LINEN 5 7 7 7
LINEN ABAYA 6 3 4 5
FLORAL JAQUARD 8 7 8 6
SUMMER DRESS 5 4 2 13
PAISLEY BLACK SUMM 9 8 7 4
CANARY BLACK 3 2 4 3
PAISLEY BLACK SKIRT 8 7 8 9

EXHIBIT 6
Opening inventory for the year 2020:

Item Name Finish stock Available on 31st Dec 19

WHITE FLOUNCE 2
HAMPTON 2
HARPER BLUE 4
CANARY PAISLEY 3
PUFF PAISLEY RED 2
RED CANARY 5
LENNOX 2
NAUTICAL 3
CANARY LINEN 2
LINEN ABAYA 2
FLORAL JAQUARD 3
SUMMER DRESS 2
PAISLEY BLACK SUMM 4
CANARY BLACK 2
PAISLEY BLACK SKIRT 3