Understanding of Fundamental Concepts, Techniques, and Models - Gravepals PLC

LEARNING OUTCOMES

KNOWLEDGE:

1. The knowledge about the fundamental models, techniques, and concepts which are used in financial accounting.
2. Demonstrate your understanding of fundamental models, concepts, and techniques that are used in management accounting.
3. Present the knowledge of finance roles at the international and domestic levels.

SKILLS:

• Explain the utilization of theoretical concepts to extent of practical scenarios which allows the firm to produce a solution of the business problems.

This project has to be done in three parts.

PART A - GRAVEPALS PLC

You are appointed as an accountant manager in grave-pals plc, this business has begin their trading from January 2017.  The summary of transaction is mentioned below for the first year of trading:

• The entrepreneur  has  present the  equity of £180,000 which was paid into the bank account of the business.
• The annual rent for the premises from 1 January 2017 is £90,000. the rent of £112,500 was paid to the premises owner during the year.
• Tax rate for the business premises are as followed:
  • 1 January to 31 March (2017)                                    £2400
  • 1 April 2017 to 31 march 2018                                    £4500
• The delivery van was purchased for £60,000 on 1 January 2017. it is expected that this van will be used in business for 5 years and then it will be sold for £12,000.
• annual wages paid £117,000. at the year-end, the business owned the wages of £2175 for the last week of the year.
• The electricity bill paid for the first three quarters of the year is £5700. after 31 December 2017, the bill for the last quarter is £2025 (not paid).
• Credit purchases of inventories £486,000
• cash purchases of inventories £39,000
• credit sales revenue £504000 (sales £243000)
• cash sales revenue £129000 ( sales £54000)
• trade receivables receipts £438000
• trade payable payments £393000
• total expenses paid for the van were £33,600

At the year-end, the credit customer ( trade receivable) who owned the £1500 is not paying any part of the debt. It is expected the other trade receivables will be settled in full.

For the noncurrent assets, the straight-line depreciation method will be used.  

You are required to create an income statement for the year-end 2017 and a statement of financial position for the year 31 December 2017.

PART B - Clarkenpark Ltd.

The company used to create the small shelves which are currently sold at £13 each. The management thinks that the company can produce 70000 units per year. The budget for the year is 53000 and the cost are estimated as follows:

1. you are required to state the contribution by each shelf for covering the fixed cost if it is sold for £13.
2. explain the BEP and margin of safety in context with units and revenue if the shelf sold for £13.
3. if the company produces 48000 tables and sells the shelf for £13 each, calculate the company's profit.
4. Analyse if it is a good strategy or not if a company spends the £45000 on marketing and advertising but continuously the selling price is raising by 9%. The new sales( units) and advertising prices increase by 17%.
5. find out and examine the assumptions of break-even point and also consider the analysis of model which can be successfully adopted by various businesses.

 Assume yourself as a member of the finance team in which you have to manage the viability of investment as you are provided further details.

• The purchase cost of the new machine is £40,000,000.
• expected cash inflow from the machine is £17,000,000 and cash outflow of £6,400,000.
• the expected life of the machine is 5 years and it will be sold for £5,000,000.
• cost of capital for Cockfield Ltd is 7%.
• the straight line depreciation method will be used.

1. You are required to calculate the Payback period, accounting rate of return, and the net present value of the machine. And also give the recommendation about the machine whether it should be purchased or not.
2. Make a report which considers the evaluation and examination of the merits and limitations of various investment appraisal techniques.
3. Also, find out and study the advantages and disadvantages of using the budget as a tool for strategic planning.