Managing Financial Principles and Techniques Assignment Help

Assignment Detail:-

Number of Words: 4000

Managing Financial Principles and Techniques Assignment

The Purpose of this Assignment:

For an organisation to be competitive both now and in the future, it is vital to understand how current thinking on leadership influences an organisation’s planning to meet current and future leadership requirements. Managing Financial Principles and Techniques assignment will enable you to demonstrate an understanding of the links between strategic management, leadership and organisational direction, and the skills to be able to apply this understanding within an organisational context.

Task 1

Solution Plc produces industrial cleaning machines. A particularly successful product is the Duren1. This device is based upon a sub-assembly manufactured in China. The product is completed in the UK. The following information relates to October 2013:

Duren1	Budgeted Units	Actual Units
Purchase of sub-assemblies	720	720
Completed production	720	560
Sales	520	600
Stock of finished goods at 1 October 2013	60	60
Stock of finished goods at 31 October 2013	260	20

There was no stock of sub-assemblies or work-in-progress at either the start or the end of the month. The finished goods are valued at full standard production cost. The standard cost of one unit is:

Sub-assembly	$ 1200
Direct labour	$ 600
Fixed production overhead	$ 400
Variable production overhead	$ 200
Total	$ 2 400

The fixed production overhead is based on the monthly budgeted volume of production. The selling price of the product is $6 000 per unit.

Actual costs during October 2013 were as follows:

Sub-assemblies $ 694 400

Direct labour $ 380 000

Fixed production overhead $ 280 000

Variable production overhead $ 104 000

Required

Explain the importance of costs in the pricing strategy for Solution Plc and Duren1

Design a costing system for use with Duren1

Propose improvements to the costing and pricing systems used by Solution Plc

Task 2

Management of Norman Ltd has obtained the following estimated cash flows from the company’s profiled functional budgets for next year:

Quarter 1 Quarter 2 Quarter 3 Quarter 4

£ £ £ £

Sales revenue	70000	52500	42500	31650
Purchase of direct materials	34460	13500	10000	7000
Direct Wages	13000	11500	10000	10000
Production overhead	1550	1550	1550	1550
Selling overhead: Fixed	4000	2500	5000	6500
Variable	700	525	425	317
Administration overhead	3250	3250	3250	3250

Additional information:

1. Examination of the capital expenditure budget reveals cash payments of £41,500 and £30,000 in Quarters 2 and 3 respectively. In Quarter 1, sale of capital assets will realise £1,000 in cash.

2. Corporation tax of £10,500 in respect of last year’s profit will be payable in Quarter 3.

3. 10 per cent of sales are made on a cash basis, the remainder being credit sales. Of the company’s customers, 70 percent pay in the quarter after sale, 18 percent pay two quarters after sale and the balance is irrecoverable bad debts. At the end of the current year, it is estimated that debtors will amount to £71,000 of whom 70 percent will pay in Quarter 1, and 26 percent in Quarter 2, the balance being bad debts.

4. Purchases of materials are paid for 50 percent in the quarter of purchase and the remainder in the quarter after At the end of the current year, it is estimated that creditors for purchases will amount to £2,000 all of which will be paid in Quarter 1.

5. Direct wages, selling overheads and administration overheads are paid in the quarter in which they are incurred.

6. Included in the production overhead is £50 for depreciation.

7. At the end of the current year it is expected that the cash balance at the bank will be £1,500.

Required

Apply forecasting techniques to make cost and revenue decisions for Norman Ltd
Assess the sources of funds available to Norman Ltd if it wants to expand its business.

Task 3

Hop plc is a company that produces containers used for the storage of Beer. The company’s two main products are containers described by the code names B308 and B310.

The budgeted and actual results for September 2013 are as follows:

	Budget units	Actual units
Output Product B308	1 200	1 000
Product B310	800	1 000
Costs Materials	$ 26 400	26 600
Direct labor	$ 14 000	16 800
Machining	$ 19 200	18 900
Overheads	$ 8 800	8 800

Total $ 68 400 71100

The budget was constructed on the following bases

Product	B308		B310
Material required per unit Kg		8	10
Direct labour hours per unit		2	4
Machine hours per unit		1	0,5

Machining costs include a variable element of $4 per machine hour and overhead costs include a variable element of $1 per machine hour.

Required

Select appropriate budgetary targets for Hop plc

Participate in the creation of a master budget for Hop plc

Compare actual expenditure and income to the master budget of Hop plc

Evaluate budgetary monitoring processes in Hop plc

Task 4

DLEX 5597 is a new product that has been developed by Dude plc. The intended launch date for the product is 1 January 2014. The following information about weekly production costs and selling prices of current products is available. Assume that sales volume is equal to production volume and that there is a 50-week trading year.

The company currently uses a standard absorption costing system to calculate inventory and cost of sales values.

Product Units of output	Variable cost	Fixed cost	Selling price	$
EL552	800 000	0,90	0,30	1,50
AKL046	192 000	1,00	0,50	2,10
BSO454	560 000	2,00	0,40	2,60

The production director has estimated that there will be additional fixed costs in respect of DLEX 5597:

Modification of production machinery $ 1 600 000

Marketing and distribution costs $ 2 000 000

Variable cost of production of the new product is estimated at $1.00 per unit. Estimates of demand are as follows:

Price per unit in $ Maximum weekly demand units

3, 00	120 000
2, 80	160 000
2, 50	200 000

DSCG 6 can only be produced if the production of existing products is reduced. There are two proposals to reduce production:

Reduce the production of EL552 by 20% per
Reduce the production of BSO454 by 25% per

Required

Calculate the full production cost per unit and net profit for each product using:

Absorption costing and Activity Based costing based on the results explain the importance of costs in the pricing strategy of Dude plc.

Design a costing system for use within Dude plc for better pricing considering the possible new

Propose improvements to the costing and pricing systems used by Dude

Task 5

Herring plc produces industrial storage units. The directors of the company are looking at four potential new products. These are as follows:

Net cash inflows in year

Product Outlay

	$’000	$’000	$’000	$’000	$’000 $’000
PRIMO	2 400				1 740 1 740
SECUNDO	1 200		876	876		876
TERTIO	480	192	192	192		192	192
QUARTO	840	324	324	324		324	324

Investment capital available to start new projects is limited to $3.6 million. The company’s cost of capital is 10%

The private sector usually looks for a payback period of 5 years.

Required –

Apply financial appraisal methods to analyse competing investment projects in the public and private sector

Make a justified strategic investment decision for an organisation using relevant financial information

Report on the appropriateness of a strategic investment decision using information from a post audit appraisal

Task 6

This is based on the financial statements of Green Plc from 2009, 2010 and 2011 (Table 1).

The CEO of Green Plc is concerned about the poor liquidity of the company. Liquidity here is defined as the speed at which a company can convert its investment into money before the end of the investment period. A bank savings account is an example of a high-liquidity investment.

Conversely, in a low-liquidity investment, it may take time to find a buyer at a price that is acceptable to the company.

The CEO has asked you, as the accounting director, to report on the company’s performance. The following financial statements are extracts from the accounts of Green Plc.

Profit and Loss Accounts for years ending 31 December

		2009	2010	2011
		£000	£000	£000
Sales		960	1080	1220
Cost of sales		670	780	885
Gross profit		290	300	335
Administration expenses		260	270	302
Operating profit		30	30	33
Interest		13	14	18
Profit before taxation		17	16	15
Taxation		2	1	1
Profit after taxation		15	15	14
Dividends		0	0	4
Retained profit		15	15	10
		2009	2010	2011
		£000	£000	£000
Net fixed assets		160	120	100
Current assets: Stock		200	210	225
Debtors		160	180	250
Cash		0	0
	Total	360	390	475
Trade creditors		75	80	145
Overdraft		70	80	110
Current liabilities:		145	160	255
Net current assets		215	230	220
Total assets less current liabilities (capital employed)		375	350	320
8 per cent debentures (long term debt)		120	80	40
Capital and reserves:		255	270	280

Ordinary shares		160	160	160
Profit and loss		95	110	120
	Total	255	270	280

Required

Calculate and analyse financial statements to assess the financial viability of an
Apply financial ratios to improve the quality of financial information in an organisation’s financial
Make recommendations on the strategic portfolio of an organisation based on its financial

Learning outcomes:

Be able to apply cost concepts to the decision-making
Be able to apply forecasting techniques to obtain information for decision
Be able to participate in the budgetary process of an
Be able to recommend cost reduction and management processes for an
Be able to use financial appraisal techniques to make strategic investment decisions for an
Be able to interpret financial statements for planning and decision making

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