Task 1
AC1.1 review sources of funding (8 Sources) available to business and services industries
AC1.2 evaluate the contribution made by a range of methods of generating income within a given business and services operation
- A review of the sources of funding (8 sources) available to business and service industries (AC1.1)
- An evaluation of the contribution made by various methods of generating income for a large chain restaurant. (AC1.2)
You are in a small business as a sole trader. You wish to purchase some new machinery costing £50,000. Capital expenditure may be financed by a variety of external sources (as well as internal). Capital investment appraisal is an important decision-making function. The selection of a particular project and the most appropriate means of financing it are difficult decisions to make. As a senior manager you will receive some expert advice on what you can do. Ultimately, the final decision will be one for you. You need to choose one source for this machinery funding with reasons. Also:
- Review the sources of funding (8 SOURCES) available to business and service industries (1.1)
- Evaluate the contribution made by various methods of generating income for a large chain of restaurants. (1.2)
Task 2
AC2.1 discuss elements of cost, gross profit percentages and selling prices for products and services
AC2.2 evaluate methods of controlling stock and cash in a business and services environment
CASE STUDY: Monitoring and controlling performance at Marks & Spencer
Marks & Spencer is Europe's most profitable retailer with a global brand and global recognition. Its achievement largely depends on the effective use of people. An organisation may have the latest technology and the best physical resources, but it will never thrive if it does not value its people. Its most valuable asset will always be its people and the work they do. For Marks & Spencer, this means that the people who look after customers, select and merchandise the products and run the operations, must aspire to be the best qualified and equipped in retailing.
The effective control of stock and cash is also an important factor for a business. While the Commercial Manager is generating enough sales to meet the forecast, and the Personnel Manager is controlling the agreed staffing budget, the Financial Manager will monitor all other costs. Costs are broadly broken down into direct costs and indirect costs. Direct costs are those clearly identified with the sales volume. They include carrier bags, food waste and staffing costs. Indirect costs include stationery, telephone expenses, security and electricity.
Making the store more profitable involves looking not just at the large direct costs but also examining the smaller indirect costs. (Savings in stationery in one store may be small, but across the whole Marks & Spencer Group, it may represent a considerable sum.)
Some costs are easier to control than others. For example, notices near light switches may be a simple way to save electricity by encouraging staff to turn off unnecessary lights. The use of stationery may simply be limited to the amount ordered. Costs such as theft and loss, however, may take up much more time, involving maximising the benefits of close-circuit television, using security guards efficiently to deter crime and deciding how to use store detectives. With around 35 tills in an average store, possibly being using by up to eight to ten staff each day and with large volumes of stock coming in at the back door, it will also involve close scrutiny of all areas of business organisation.
Required: With reference to the case above,
- Discuss elements of cost, gross profit percentages and selling prices for products and services (AC2.1)
- Evaluate methods of controlling stock and cash in a business and services environment (AC2.2)
Task 3
AC3.3 discuss the process and purpose of budgetary control
AC3.4 analyse variances from budgeted and actual figures, offering suggestions for appropriate future management action
Yuri, a cutlery manufacturer, produces spoons. The market in which the business operates is highly competitive, as there is a shortage of steel of adequate quality. There is a good availability of labour, but not of those who are experienced in cutlery manufacture. The budgeted and actual figures for the previous period are represented in the tables below
|
Budget |
Actual |
Variance |
| Units sold |
100,000 |
75,000 |
(25,000) |
| Materials |
£ 15,000 |
22,500 |
(7,500) |
| Direct labour |
£ 22,500 |
24,375 |
(1,875) |
|
Material (£) |
Labour (£) |
| Price/rate variance |
(4,500) |
3,750 |
| Usage/efficiency variance |
(3,000) |
(5,625) |
| Total variance |
(7,500) |
(1,875) |
Required:
- Discuss the process and purpose of budgetary control and outline the budgetary control cycle (AC3.3)
- Review the variance analysis of Yuri's budget. Suggest reasons for the results (AC3.4).
Task 4
AC3.1 assess the source and structure of the trial balance
AC3.2 evaluate business accounts, adjustments and notes
AC4.1 calculate and analyse all ratios to offer a consistent interpretation of historical business performance
AC4.2 recommend appropriate future management strategies
PART A:
"The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions" (International Accounting Standards Board, 2007).
Financial statements are intended to be understandable by readers who have "a reasonable knowledge of business and economic activities and accounting, and who are willing to study the information diligently". They may be used by different users for different purposes.
You are required to
1. Assess the source and structure of the trial balance (A.C.3.1)
2. and make adjustments to the profit and loss accounts and balance sheet of R. Riggs on discovery of the following 3 mistakes in recording various transactions during the financial year. ( AC3.2)
i. Additional furniture worth £1,525 were purchased on credit on 3 March 2015 but were not recorded
ii. The business receive interest of £500 on their deposit from the bank on 30 December 2015 but this transaction was not recorded
iii. Accrued expenses of £200 were paid on 4 June 2015 but were not recorded.
3. Calculate the following 7 ratio for R. Riggs based on the financial statements given on the coming pages and write a brief memorandum report to recommend appropriate strategies to improve the performance of the business. (AC4.1, AC4.2)
i. Gross profit and Net profit margin
ii. Current and acid test ratio
iii. Debtors and creditors payment periods and stock turnover
Task 5
AC5.1 categorise costs as fixed, variable and semi-variable for a given scenario
AC5.2 calculate contribution per product/customer and explain the cost/profit/volume relationship for a given scenario
AC5.3 justify short-term management decisions based on profit/loss potentials and risk (break-even) calculations for a given business and services operation
Looking ahead to the financial year ending 31 March 2017, the directors of Problems
Limited are faced with a budgeted loss of £10,000. This is based on the following data.
| Budgeted number of units: |
10,000 |
|
£000 |
| Sales revenue |
100 |
| Less: Variable costs |
80 |
|
|
| Contribution |
20 |
| Less: Fixed costs |
30 |
|
---- |
| Budgeted loss |
-10 |
|
---- |
The directors would like to aim for a profit of £20,000 for the year to 31 March 2017.
Various proposals have been put forward, none of which require a change in the budgeted level of fixed costs. These proposals are as follows:
1. Reduce the selling price of each unit by 10 per cent.
2. Increase the selling price of each unit by 10 per cent.
3. Stimulate sales by improving the quality of the product, which would increase the variable cost of the unit by £1.50 per unit.
Required:
(a) Write brief notes on your understanding of fixed, variable and semi-variable costs (AC5.1)
(b) For each proposal calculate: (AC5.2, AC5.3)
i. the break-even position in units and in value terms;
ii. the number of units required to be sold in order to meet the profit target
(c) State with reasons which proposal you think should be adopted. (AC5.2, AC5.3)
- Present your work in one business report style which should include table of contents, reference list, foot or end notes and appendices if any
- Include the reference code of this assignment on your assignment submission front page.
- Each page must be numbered at the bottom right hand side.
- Ensure the following information is in the footer on every page:
o Your name
o The production date of your submission
o The code number of your assignment brief
o The page number
- Spell-check the document and make sure there are no grammatical errors.
- Complete all the tasks.
- Produce clear specific reasoning and arguments in support of your answers.
- Submit your work in a single work processed document of not more than 5000 words for all Learning Outcomes. This word limit is only for guidelines, and is not applied to grading.
- You must include a bibliography at the end to show where your information was sourced.
- Your sources must be identified using the Harvard referencing system. The words used in your bibliography will not be included in your word count.
Attachment:- Finance in the Hospitality Industry.rar