BU5026

Accounting and Financial

Management
Assignment 2010 Project Plan
Background and requirements
You work for firm of consultants providing advice to small and medium
sized companies on operational and management accounting issues. You
are funded by a government scheme aiming to encourage the
establishment on new small businesses and helping small businesses to
grow.
Look at the document on webCT to find out which of the following
assignments has been as allocated to you.
For your selected assignment you should prepare a management report,
including the following sections:
Executive summary
Background and logic of the proposal
Analysis of the decision
Numeric
Non-numeric
Sensitivity analysis
Conclusion and recommendation.
Ignore any tax and inflation in your analysis.
Your report should be no more than 1,500 words long and should include
integrated tables and graphs as appropriate. The requirement for
reasonable report presentation skills is part of this assessment. You may
also need to carry out some research into the industry in question in order
to develop the logic of the proposal and the non-numeric aspects of the
analysis. Any material you use from academic or web-based sources must
be clearly referenced.
You must hand-in one hard copy of your report and one copy via Turnitin.
The deadline is 12 noon on 9th December, 2010

Assignments
Assignment A Chaste Chocs
Chaste Chocs is a small chocolate manufacturing business (a
chocolatier) which is considering a very significant advertising campaign
to achieve a major shift in its level of sales.
The campaign will cost 5,000,000 and chocolate advertising experts, who
have already been paid 23,000 for their advice, estimate additional sales
to be as follows:
Year
Year
Year
Year

1
2
3
4

2,000,000
1,000,000
750,000
500,000

The chocolate sells for 2.75 per bar and each bar has a variable cost of
1.05. Additional staff will be required when extra demand is more than
600,000 bars per year. Four extra people will be required in year 1, two
people in year 2 and just one in year 3. Each member of staff will be paid
17,500 per annum.
You are advised that you should use a cost of capital of 19% when
assessing this scheme.

Assignment B Aberdrive
Aberdrive will be a new local van and driver company. They aim to buy
ten vans for 12,000 each, which they anticipate selling for 2,000 each
at the end of year 4. There will also need to be a large initial advertising
campaign costing 50,000.
They anticipate a daily hire rate of 110.00 with a daily variable cost of
17.50. In addition, the drivers will be paid 12,500 per year. The table
below shows the expected volume of business (days per year) and the
number of drivers that the company intends to employ each year.
Business (days) Staff required
Year 1
1,600
7
Year 2
1,760
8
Year 3
1,920
9
Year 4
2,250
9
You are advised that you should use a cost of capital of 21% when
assessing this scheme.

Assignment C Beached
Beached is a small travel agency considering the opening of a new
branch. The computer equipment, furniture and fittings are estimated to
cost 109,000. There would also need to be an initial advertising
campaign costing 25,000 followed by further advertising in each
operating year (see below). The annual rental and fixed costs of the
branch are expected to be 22,500 in each of the operating years. For
every holiday sold, Beached anticipates a commission of 65 and to incur
a variable cost of 20.00. Salary costs will be in addition to this with each
employee expected to be paid 10,500 per year the number of
anticipated employees is shown below. The branch will be open for four
years and it is hoped to sell the computers and fittings for 5,000 at the
end of this final year.
Holidays sold
Advertising
Year 1
Year 2
Year 3
Year 4

2,500
2,900
3,200
3,500

Staff required
4
4
5
5

25,000
25,000
20,000
15,000

You are advised that you should use a cost of capital of 22% when
assessing this scheme.

Assignment D Let them eat cake

Let them eat cake (LTEC) will be an innovative cake baker and seller
meeting the increasing need for individualised cakes. The new bakery and
shop will require equipment and fixtures costing 45,000. In the initial
setting up stage there will be an advertising cost of 5,000 and this
amount will then need to be spent in each of the four anticipated
operating years.
A delivery vehicle will be purchased for 13,200 and it is then expected to
be sold for 1,250 at the end of year four.
The cakes are going to be sold at 67.50 each with variable costs of
50.00 per cake. In addition, there will be staff costs of 14,000 per
person per year the number of employees required is shown below.

Year
Year
Year
Year

1
2
3
4

Cake sales per week

100
120
140
140
3

Staff required
2
3
3
4

You are advised that you should use a cost of capital of 23% when
assessing this scheme.

Assignment E Greek Kitchen

Greek Kitchen (GK) is going to be a new Greek restaurant in Aberdeen.
The kitchen equipment, restaurant furniture and fittings are estimated to
cost 65,000 in total. There would also need to be an initial advertising
campaign costing 6,000 followed by further advertising in each operating
year (see below). The annual cost of rent will be 17,500 and other fixed
costs will be a further 13,500 in each of the operating years. A van will
be purchase at the start of the business for 9,800 and hopefully sold for
500 at the end of year four.
For every customer to the restaurant, GK anticipates revenue of 19.75
and a variable cost of 8.50. In addition to this, each employee expected
to be paid 12,750 the number of anticipated employees is shown
below. The restaurant will be open for four years and it is hoped to sell the
computers and fittings for 5,000 at the end of this final year.
Expected customers per week
Year
Year
Year
Year

1
2
3
4

170
180
210
210

Staff required
2
3
3
3

You are advised that you should use a cost of capital of 21% when
assessing this scheme.

Assignment F Hairly in the morning

Hairly in the Morning (HM) will be a mobile hairdressing service, focussing
on busy executives who do not have time to make a visit to a hairdressers
shop. Two vans will be purchased for 15,000 each and equipment of
2,500 will be needed for each van.
HM will need a base to operate from and this will require rental costs of
5,500 per annum with further fixed costs amounting to 4,300 per year.
Initial advertising of 4,500 will be needed and then a similar amount will
need to be spent in each operating year.
The company intends to charge 23.50 for each appointment and incur
variable costs of 11.00. Salary costs will be in addition to this with each
employee expected to be paid 17,500 the number of anticipated
employees is shown below. The business is expected to operate for four
years and it is hoped to sell the vans for 725 each at the end of this final
year.

Year 1

Appointments per week

84
5

Staff required
2

Year 2
Year 3
Year 4

98
98
112

2
2
2

You are advised that you should use a cost of capital of 17% when
assessing this scheme.