BU5026 Accounting and Financial ManagementAssignment 2010 Project PlanBackground and requirements

You work for firm of consultants providing advice to small and medium sized companies on operational and management accounting issues. You are funded by a government scheme aiming to encourage the establishment on new small businesses and helping small businesses to grow.

Look at the document on webCT to find out which of the following assignments has been as allocated to you.

For your selected assignment you should prepare a management report, including the following sections:

Executive summaryBackground and logic of the proposalAnalysis of the decisionNumericNon-numericSensitivity analysisConclusion and recommendation.

Ignore any tax and inflation in your analysis.

Your report should be no more than 1,500 words long and should include integrated tables and graphs as appropriate. The requirement for reasonable report presentation skills is part of this assessment. You may also need to carry out some research into the industry in question in order to develop the logic of the proposal and the non-numeric aspects of the analysis. Any material you use from academic or web-based sources must be clearly referenced.

You must hand-in one hard copy of your report and one copy via Turnitin. The deadline is 12 noon on 9th December, 2010

AssignmentsAssignment A Chaste Chocs

Chaste Chocs is a small chocolate manufacturing business (a chocolatier) which is considering a very significant advertising campaign to achieve a major shift in its level of sales.

The campaign will cost 5,000,000 and chocolate advertising experts, who have already been paid 23,000 for their advice, estimate additional sales to be as follows:

Year 12,000,000Year 21,000,000Year 3750,000Year 4500,000

The chocolate sells for 2.75 per bar and each bar has a variable cost of 1.05. Additional staff will be required when extra demand is more than 600,000 bars per year. Four extra people will be required in year 1, two people in year 2 and just one in year 3. Each member of staff will be paid 17,500 per annum.

You are advised that you should use a cost of capital of 19% when assessing this scheme.Assignment B Aberdrive

Aberdrive will be a new local van and driver company. They aim to buy ten vans for 12,000 each, which they anticipate selling for 2,000 each at the end of year 4. There will also need to be a large initial advertising campaign costing 50,000.

They anticipate a daily hire rate of 110.00 with a daily variable cost of 17.50. In addition, the drivers will be paid 12,500 per year. The table below shows the expected volume of business (days per year) and the number of drivers that the company intends to employ each year.Business (days)Staff requiredYear 11,6007Year 21,7608Year 31,9209Year 42,2509

You are advised that you should use a cost of capital of 21% when assessing this scheme.

Assignment C Beached

Beached is a small travel agency considering the opening of a new branch. The computer equipment, furniture and fittings are estimated to cost 109,000. There would also need to be an initial advertising campaign costing 25,000 followed by further advertising in each operating year (see below). The annual rental and fixed costs of the branch are expected to be 22,500 in each of the operating years. For every holiday sold, Beached anticipates a commission of 65 and to incur a variable cost of 20.00. Salary costs will be in addition to this with each employee expected to be paid 10,500 per year the number of anticipated employees is shown below. The branch will be open for four years and it is hoped to sell the computers and fittings for 5,000 at the end of this final year.

Holidays soldStaff requiredAdvertisingYear 12,500425,000Year 22,900425,000Year 33,200520,000Year 43,500515,000

You are advised that you should use a cost of capital of 22% when assessing this scheme.

Assignment D Let them eat cakeLet them eat cake (LTEC) will be an innovative cake baker and seller meeting the increasing need for individualised cakes. The new bakery and shop will require equipment and fixtures costing 45,000. In the initial setting up stage there will be an advertising cost of 5,000 and this amount will then need to be spent in each of the four anticipated operating years.

A delivery vehicle will be purchased for 13,200 and it is then expected to be sold for 1,250 at the end of year four.

The cakes are going to be sold at 67.50 each with variable costs of 50.00 per cake. In addition, there will be staff costs of 14,000 per person per year the number of employees required is shown below.

Cake sales per weekStaff requiredYear 11002Year 21203Year 31403Year 41404

You are advised that you should use a cost of capital of 23% when assessing this scheme.

Assignment E Greek KitchenGreek Kitchen (GK) is going to be a new Greek restaurant in Aberdeen. The kitchen equipment, restaurant furniture and fittings are estimated to cost 65,000 in total. There would also need to be an initial advertising campaign costing 6,000 followed by further advertising in each operating year (see below). The annual cost of rent will be 17,500 and other fixed costs will be a further 13,500 in each of the operating years. A van will be purchase at the start of the business for 9,800 and hopefully sold for 500 at the end of year four.

For every customer to the restaurant, GK anticipates revenue of 19.75 and a variable cost of 8.50. In addition to this, each employee expected to be paid 12,750 the number of anticipated employees is shown below. The restaurant will be open for four years and it is hoped to sell the computers and fittings for 5,000 at the end of this final year.

Expected customers per weekStaff requiredYear 11702Year 21803Year 32103Year 42103

You are advised that you should use a cost of capital of 21% when assessing this scheme.

Assignment F Hairly in the morningHairly in the Morning (HM) will be a mobile hairdressing service, focussing on busy executives who do not have time to make a visit to a hairdressers shop. Two vans will be purchased for 15,000 each and equipment of 2,500 will be needed for each van.

HM will need a base to operate from and this will require rental costs of 5,500 per annum with further fixed costs amounting to 4,300 per year. Initial advertising of 4,500 will be needed and then a similar amount will need to be spent in each operating year.

The company intends to charge 23.50 for each appointment and incur variable costs of 11.00. Salary costs will be in addition to this with each employee expected to be paid 17,500 the number of anticipated employees is shown below. The business is expected to operate for four years and it is hoped to sell the vans for 725 each at the end of this final year.

Appointments per weekStaff requiredYear 1842Year 2982Year 3982Year 41122

You are advised that you should use a cost of capital of 17% when assessing this scheme.

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