Explain the significance of unit cost for pricing decisions


Managing Financial Resources and Decisions Assignment -

Learning Outcomes -

  • Be able to make financial decisions based on financial information.
  • Be able to evaluate the financial performance of a business.

BreadTalk Group Limited Case Study -

Task 1 - Assume that the following income and expenses are excerpted from one of the branches of BreadTalk in Singapore. Prepare a cash budget for the month of March 2017 and analyse the liquidity position of that branch and suggest appropriate financial measures..

Transaction details -

1. All sales at the branch are on cash basis only; the Marketing manager has estimated weekly sales in the month of March 2017 to be $6500.

2. Supplies for the branch are bought on credit the suppliers give 2 months credit. Details of Purchase are as follows:

Jan 2017 - $4200

Feb 2017 - $4250

March 2017 - $4350

3. Monthly rental for the shop is $8250, and paid on 5th of every month.

4. Three full time bakers work in the branch and all three are paid per month $2200 each and two part time cashiers are paid $650 each.

5. Advertising and promotion expenses per month are estimated to be $1000 per month.

Task 2 - Explain the significance of unit cost for pricing decisions? How can BreadTalk calculate its unit cost for freshly baked buns and how would it affect its pricing?

Task 3 - Assume that you have been appointed as the Investment Manager for BreadTalk's expansion in the UK market. Explain how would you evaluate the business proposal based on the following information?

Investment details - The management's objective is to recover the cost within the next three years and see whether the project would be a viable project.  

Initial Investment

SGD 2 Million, cost of capital 10%

Year

(Outflow)/Inflow

0

(2000000)

1

600000

2

700000

3

700000

Task 4 - a) Discuss the main financial statements such as Trading Account, Profit and Loss Account and Balance Sheet.

b) Explain how the financial statements of a Doctor's Partnership firm would differ as compared to BreadTalk Group.

Task 5 - Calculate the following financial ratios and compare and analyse the performance of BreadTalk group for the financial year's 2014 and 2015.

  • Current Asset ratio.
  • Acid Test ratio.
  • Return on Capital Employed.
  • Gross Profit ratio.
  • Stock Turnover ratio.
  • Capital gearing ratio.

Attachment:- Case Study.rar

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Finance Basics: Explain the significance of unit cost for pricing decisions
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