ACC81210 :Accounting for Managers - Evaluate the Working Capital Management - Accounting and Finance Assignment Help

Assignment Task:

Task:

Part 1 (12 marks)
This section requires you to use information on your allocated company for Assessment 2
a) Evaluate the working capital management of your allocated company. Start your analysis by calculating the company’s cash conversion cycle (CCC) for the three years 2018, 2019 and 2020 using relevant ratios you calculated in Assessment 2 and additional ratios available to you in your company’s folder in the ACC81210 MySCU site. Using these figures, evaluate the CCC and each of the areas that make it up with a view to identifying areas of strength and/or weakness. Give brief suggestions for actions the company could take to make improvements, noting any potential benefits and costs. (7 marks)
Approximately 350 words.

b) Briefly describe the types of external financing used by your allocated company for the 2020 financial year. What are some of the issues that the company may need to consider when it is using a combination of short and long term financing arrangements?

Part 2 (24 marks)
Home and Gather manufacture soy-based wax candles and reed diffusers. Both of their products are manufactured and warehoused on the Gold Coast in Mudgeeraba and sold to various wholesalers and retail outlets throughout Australia The business has experienced significant growth over the last year and the owner of the business has decided that now is an opportune time to start forward planning and have a more sophisticated control system put in place to ensure that the business remains profitable.
As the manager of Home and Gather, you have been tasked with preparing a budgeted income statement and cash budget for the next six (6) months that will be incorporated into the business’ overall business plan.

Part 3 (14 marks)
a) The owner of Home and Gather (Part 2) is concerned that the Reed Diffuser product is not generating enough sales and its gross profit margin is below expectations. The owner is considering removing this line of product from its product mix and is exploring an alternative product to replace the reed diffusers. Before they do this, they have asked you to provide an analysis and recommendation as to the continuation of this product.
Which costs of the business would not be relevant in making your decision? Please provide an explanation as to why. (2 marks)
Approximately 100 words

b) Home and Gather are currently investigating an alternative product to add to their product mix, electric oil diffusers. The business has conducted its market research and has estimated that it could sell these products for $70 each. Home and Gather have explored purchasing the product overseas, but would ideally like to buy locally manufactured products to support local small businesses. Home and Gather do not currently have the manufacturing capability to produce this product themselves.

The estimated variable costs per unit to outsource the production of these diffusers are as follows;
Cost of product $32.40
Freight cost $10.20
Taxes and Duties $ 5.50

It is estimated that the business will spend an additional amount of $15,000 on a marketing campaign to promote the product. This campaign will focus on the existing customer base initially. Fixed costs in the amount of $55,000 have been allocated to this new initiative. Home and Gather have asked you to undertake a cost-volume-profit analysis of the opportunity.

i. Calculate the contribution margin and contribution ratio for the new product. (1 mark)
ii. Calculate the breakeven point in the number of electric diffusers and dollars of revenue. (1 mark)

iii. The business requires a target profit for electric diffusers of $25,000 in the first year. How many diffusers will it need to sell in order to meet this target profit? (2 marks)
iv. The business has found a local supplier who could manufacture the product instead of buying from overseas. This would eliminate the costs associated with taxes and duties and a reduction of freight costs by 10% on initial estimates. However, there would be an increase to the cost of the product by 20%. This price will be firm for the next three (3) years. Calculate the breakeven point under this option and briefly discuss which option would be preferred. (Approximately 100 words)

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