BIZ201 Accounting for Decision Making - Assessment 3: Business Report

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Assessment Task

Work in a group of 3-4 students, to calculate financial information for a given business scenario. Then interpret and analyse these results and explain the role and importance of financial information in business decision making.

Context

Using Financial Statements of companies to perform calculations, interpreting results and analysing them will help you develop understanding about how business decisions are made in the industry considering the available financial information. By completing this assessment, you will demonstrate the importance of financial information in business decision making, including the application of costing and capital budgeting techniques to business decisions.

Instructions

Follow the instructions below to complete this assessment.

  1. Download the provided Excel workbook ‘Assessment 3 Student Workbook.xlsx’ from the Assessment 3 area on Blackboard.
  2. Download the ‘Financial Statements Document’ from the Assessment 3 area on You will use the information contained in this document for the completion of tasks in this brief.
  3. Complete the following calculations and tasks for the given business.

TASK 1: CAPITAL BUDGETING

The company wants to monitor its actual performance of cash flows with the budgeted performance.

The actual performance is depicted by year 2022 figures. To get budgeted figures, the following table provides a summary of the expected decreases from 2021 (last year’s actual) figures:

Cash Flow Statement Line Item Decrease Amountto Decrease $’000
Net Cash Flows from Operating Activities Decrease $100, 000
Net Cash Flows from Investing Activities Decrease $10, 000
Net Cash Flows from Financing Activities Decrease $100, 000
Net Decrease (Increase) in Cash Held Decrease $50, 000
Cash at the end of the financial year Decrease $100, 000          7

1. Calculate the budgeted amounts for:

  • Net Cash Flows from Operating Activities
  • Net Cash Flows from Investing Activities
  • Net Cash Flows from Financing Activities
  • Net Decrease (Increase) in Cash Held
  • Cash at the end of the financial year.

2. Calculate the variance between actual and budgeted performance on the provided Excel Workbook within the Task 1 Capital Budgeting worksheet.

3. Indicate whether each one of them is favourable or unfavourable on the provided Excel Workbook within Task 1 Capital Budgeting worksheet.

4. Assuming the above calculation is the company’s approach to prepare budgets, comment on company’s approach to preparing budgeted cash flows and make recommendations for consideration for future cash budget processes.

TASK 2: CAPITAL INVESTMENT

The company has purchased a block of land and registration cost for $20,000,000 and is planning to build a store in Victoria. The following table provides a summary of the expected cash inflows and cash outflows for the new store over the next 10 years.

Year Cash Inflows Cash Outflows
1 $0 $40,000,000
2 530,000,000 520,000,000
3 540,000,000 525,000,000
4 $40,000,000 $25,000,000
5 $40,000,000 $25,000,000
6 $40,000,000 $25,000,000
7 $40,000,000 $25,000,000
8 $40,000,000 $25,000,000
9 $40,000,000 $25,000,000
10 $40,000,000 $25,000,000
  1. Calculate the Net Present Value [NPVI for the investment in the store within Task Capital Investment worksheet. The cost of capital has been assessed as being 9%.
  2. Based on your results, make a recommendation for investing in this new store and discuss the significance of the results of your analysis. Highlight other practical issues that should be taken into consideration.

TASK 3: COST-VOLUME-PROFIT ANALYSIS

The company believes it is important to have a positive impact in the communities where we work and live. They are planning to host a charity event whose donations will lip sent to Thread Together (NSW based charity). The event tickets are priced at $200 each. The event can accommodate 2,000 people at maximum. The fixed costs $77,000 and the variable costs $130 per person.

The company is seeking your expertise. Calculate the following on Excel workbook within Task 3 CVP Analysis worksheet:

  1. Contribution margin
  2. Contribution ratio
  3. Units required to breakeven.
  4. Sales revenue required to breakeven.
  5. Units required to achieve a target profit of $65,000.
  6. Sales revenue required to achieve a target profit of $65,000.
  7. Highlight the importance of Cost-Volume-Profit analysis and ensure you provide guidance on the maximum available profit for the event.

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