ACC10707 Accounting for Business Assignment Help

ACC10707 Accounting for Business Assignment Help

ACC10707 Accounting for Business Assignment Help

Assessment 2

In this assessment, you are required to calculate key financial ratios for a listed company and its competitor and interpret this information in the context of your allocated competitor and interpret this information in the context of your allocated competitor company over time.

criteria

Marks

The accuracy of data sourced and calculations performed for ratios and the cash cycle

Correct calculations for net profit margin, asset turnover, current ratio, quick ratio and debt ratio

2 marks for each ratio and total is 60 marks. Part marks can be allocated

Correct calculations for cash cycle

3 marks per year for possible 18 marks

Demonstration of an understanding of the issues involved in effective ratio and  cash cycle management of a company

Relevant and accurate theoretical discussion is incorporated. For example, does the report provide a quality explanation of key concepts of the ratios and the cash cycle, their meaningfulness and issues relevant in making and implementing policy around these ratios and cash cycle including limitations from a theoretical point of view as proposed in chapter 8 of the textbook

12 marks

Assessment and recommendations are based on logic and evidence and ability to apply knowledge of the outcomes calculated

Accurate interpretation/assessment of the company's actual calculated ratios and cash cycle figures and its components, on their own and in comparison with a competitor.

 

15 marks

Recommendations clearly follow from the assessment of the current situation derived from ratios and the cash cycle

15 marks

Total of 120 marks available divided by 6 to equate to 20 marks.

Assessment 3

At 30 June 2018, this company had a bank balance of $26 500.

Assessment 3

a. Prepare and manage monthly cash budget for the three months ending 30 September 2018.

Comment:This question is covered on pages 395-397 section 9.5 of the textbook. On page 397 there is a similar set up covered at Step 4.

                                                  Landscaping Business

Cash budget

for 3 months ended 30 September 2018

 

July

August

September

ANTICIPATED RECEIPTS

 

 

 

Fees

 

 

 

Sale of surplus non-current assets

 

 

 

 

 

 

 

Total receipts0.5 marks per balance year

 

 

 

ANTICIPATED PAYMENTS

 

 

 

Salaries and wages

 

 

 

Supplies

 

 

 

New equipment

 

 

 

 

 

 

 

Plants

   

 

 

 

 

Total Payments0.5 mark per balance year

 

 

 

Excess (Deficit) receipts over payments

 

 

 

 

 

 

Bank balance at beginning of month 1.5 per year

 

 

 

 

 

Bank Balance at End of Month1.5 marks per year

 

 

 

 

 

 

 

b. The owners were wondering what the effect would be on the cash position if they did not buy the new equipment but instead took advantage of a new rental arrangement. The equivalent equipment would cost $10 000 per month under the rental arrangement. Redraft the cash budget to show the impact of the rental alternative. Based on the information available, should they lease or buy the equipment?

Based simply upon cash flow outcomes between part a and part b they should lease the equipment as this means no periods of negative cash flow as evidenced in part a.

2. The landscaping business plans to introduce various aged trees to their product range in 2018. They have provided the following information relating to its planned activities.

                                                                                                I year old       2 years old                3 years old

Sales mix (250,000 units)                                               125,000   75,000                      50,000

Selling price                                                                            $20                           $28                            $45

Variable cost/unit                                                                 12                              18                              27

Total fixed cost = $402,800

Required

a. Calculate the break-even point in total units and units per product based on the 2018 data.

 

1 year old

2 years old

3 years old

Total

Unit sales

125 000

75 000

50 000

250 000

1.Contribution margin $

 

 

 

 

2.Sales mix %

 

 

 

 

3.WACM $

 

 

 

 

4. Break-even point =

5Number of units of each product to sell:

1 year old =

2 years old =  

3 years old =     

Comment: This is covered on pages 429 to 430 of the text under Break- even analysis for multiple products.

B. Calculate the before-tax profit (loss) that would be achieved in 2018 based on the above data. This calculation relates to the information from question 2 only.

Comment: Can either use Revenue (Sales * selling price) – Expenses (costs) or Units * WACM – Fixed Costs.

C. Management is concerned about competition for some of its trees and wants to increase its sales of 3 years old trees relative to 1-year-old trees. This initiative would increase annual fixed costs by $50 000 and alter the sales mix to 30 percent for 2 years old trees, 30 percent for 3 years old trees and 40 percent for 1-year-old trees. On the available data, would you recommend the initiative? Show workings.

 

1 year old

2 years old

3 years old

Total

Contribution margin $

 

 

 

 

1.Sales mix %

 

 

 

 

2.WACM $

 

 

 

 

3.Units

100 000

75 000

75000

250 000

Before tax profit with new product mix =Comment: Can either use Revenue (Sales * selling price) Expenses (costs) or Units * WACM – Fixed Costs.

Comment:This is covered on pages 429 to 430 of the text under the Break-even analysis for multiple products. The difference between a) and c) is simply the sales mix and the additional $50,000 in fixed costs.

Comment:If total units sold are held constant at 250 000 units the new product mix will be more profitable as sales of the product with the highest contribution, 3-year-old trees, has been increased. This will become obvious if you recalculateRevenue (Sales * selling price) – Expenses (costs) or Units * WACM – Fixed Costs.

3. Deciding between two machines

Our landscaping business is now considering the purchase of one of two acceptable pieces of equipment. Each of these two pieces of equipment is expected to have individual advantages. The Office Manager who has calculated the information below is quite conservative and likes to rely on the Accounting Rate of Return (ARR) as the chief decision-support tool. The assistant office manager, on the other hand, is a new business graduate and has worked out the expected Internal Rate of Return (IRR) for the two items of equipment as shown below.

Deciding between two machines

Required

A. What does more financial information the company owner need to make a decision?

Comment: The minimum ARR and IRR are acceptable to use as a benchmark for comparison.

B. Would you as the owner rely only on this information to make a decision? If not, why not?

Comment: No, it would be desirable to also have NPV information to ascertain the wealth-generating potential of the equipment.

C. If the calculated returns all exceed the entity’s required minimum rate, which design would you recommend to the owner? Why?

Comment: Equipment B. Even though the ARR is higher for Equipment A, the IRR is a more comprehensive measure and with the higher IRR it may have superior early net cash inflows and possibly lower risk.

Part 2

1. The following information relates to a landscaping business. At 30 June 2018, it had a bank balance of $26 500. Provided below are estimates for receipts and payments for the three months ending 30 September 2018.

Part 2

A. Prepare a monthly cash budget for the three months ending 30 September 2018. 12 Marks.

B. The owners were wondering what the effect would be on the cash position if they did not buy the new equipment but instead took advantage of a new rental arrangement. The equivalent equipment would cost $10 000 per month under the rental arrangement. Redraft the cash budget to show the impact of the rental alternative. Based on the information available, should they lease or buy the equipment? 9 marks.

2. The landscaping business plans to introduce various aged trees to their product range in 2018. They have provided the following information relating to its planned activities.

                                                                                                I year old       2 years old                3 years old

Sales mix (250,000 units)                                               125,000   75,000                      50,000

Selling price                                                                            $20                           $28                            $45

Variable cost/unit                                                                 12                              18                              27

Total fixed cost = $402,800

Required

A. Calculate the break-even point in total units and units per product based on the 2018 data. 15 marks.

B. Calculate the before-tax profit (loss) that would be achieved in 2018 based on the above data. This calculation relates to the information from question 2 only. 2 marks.

C. Management is concerned about competition for some of its trees and wants to increase its sales of 3 years old trees relative to 1-year-old trees. This initiative would increase annual fixed costs by $50 000 and alter the sales mix to 30 percent for 2 years old trees, 30 percent for 3 years old trees and 40 percent for 1-year-old trees. On the available data, would you recommend the initiative? Show workings. 15 marks.

3. Deciding between two machines

Our landscaping business is now considering the purchase of one of two acceptable pieces of equipment. Each of these two pieces of equipment is expected to have individual advantages. The Office Manager who has calculated the information below is quite conservative and likes to rely on the Accounting Rate of Return (ARR) as the chief decision-support tool. The assistant office manager, on the other hand, is a new business graduate and has worked out the expected Internal Rate of Return (IRR) for the two items of equipment as shown below.

APR and IPR

Required

A. What more financial information does the company owner need to make a decision? 2 marks.

B. Would you as the owner rely only on this information to make a decision? If not, why not? 2 mark.

C. If the calculated returns all exceed the entity’s required minimum rate, which design would you recommend to the owner? Why? 3 marks.

Total of 60 marks which will be divided by 4 to represent 15% of available marks for subject ACC10707.

Challenges students may face

Students face off various problems in completing this assessment such as understanding the complex problems of making references, prepare a cash budget, calculate profit & tax etc. Students can take help and guidance from our experts and get better grades in their assessments.

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