MN5507 - Business Planning and Control Report Writing - Budgeting - Management Assignment Help

MN5507: Business Planning and Control Report Writing Management Assignment Help

Assignment Task:

ASSIGNMENT: Business Planning and Control 
 
Consider a Case Study firm which is a consumer electronics firm that could (currently or potentially) manufacture equipment for ‘Smart Homes’. The firm has recently achieved a year-on-year sales growth of 35% (in volumes) and seen a market return of 2.5 compared to the market average from a Capital Structure comprising one-third debt (with interest charges of 7.4%) and two-thirds equity. 
 
The assignment is to develop an appraisal of the Case Study firm’s current situation in the first part. The second part relates to an investment appraisal. The third part relates to business planning and budgeting for a small business. Assumptions are to be clearly stated.

Part 1. Case Study Analysis 
The last two Operating Statements for a manufacturing facility are given on the following page. The sales volumes in both statements are within the facility’s relevant range. Fixed Assets total £800,000 and comprise two-thirds (2/3) factory equipment and one-third (1/3) office equipment. At any time stocks (Inventories) held have the value of one-tenth (1/10) of Direct materials for the two previous periods and are one-fifth (1/5) of Current Assets. 
 
The production facility expects sales of £475,000 in the coming quarterly (3-month) period: 
 
a) Financial Reporting: prepare an Income Statement for Periods 1, 2 and 3 in the typical format used for financial accounting shown on the following page. This is to be based on the costing data given (next page). Show your workings and state any assumptions. 
 
b) Performance Analysis: examine the facility’s recent performance (for Period 3) by calculating and commenting on ratios concerning the following: 
 
Profitable?  Use Profit Margins (Gross, Operating, and Net) and ROS (Return on Sales) Productive? Use ROA (Return on Assets): examine Profit (Operating Income) generated Liquid? Use Current Assets (CA) over Current Liabilities (CL of £120,000) Efficient? Use Inventory Turnover and Asset Turnover: Sales Revenue over ‘item’

Part 2. Investment Appraisal 
 
The firm is considering whether to invest £7.2 Million in Year 0 to develop a product for which they expect Sales during Years 1 – 5. 
 
a) Investment Appraisal: examine the Net Present Value (NPV) for a new product investment at a 10% rate given that the firm expects annual Sales Revenues (in £) equal to 9,875,000 and a Profit Margin of 25%. 
 
 
b) Project Sensitivity Analysis: examine the sensitivity of the project to sales erosion (of 10%, 20%, and 30%) including the project NPV (using the same 10% discount rate). 
 
 c) Project Return: using the original sales revenue, increase the discount rate till you achieve a negative NPV and use this to establish the project IRR (Internal Rate of Return). Comment on this result given that that the firm is likely to have to raise finance to fund part of this investment. 
 
 
 Part 3. Business Planning and Budgeting 
 
You are asked to advise a small UK family run firm that provides Smart home systems (comprising a wall-mounted control unit and connectivity to home devices for home automation) priced at £5,000. They design and manufacture the systems in a small workshop with an annual capacity of 20,000 units where variable costs are high at two-thirds of revenues and annual overheads are £7.5 Million. The business aims for a ROS (Return on Sales) of at least 20%. They are looking at whether it will be sensible to upgrade the business as follows: 
 
i) machinery upgrade: purchase an automatic assembly machine leading to a Contribution Margin increase (for the same price) as variable costs reduce to 50% of selling price 
 
ii) add a retail part to the business: set up a retail store (on their land) to sell parts (smart lighting products etc..) to new/potential customers in person or online 
 
 
a) Break-Even Analysis: prepare contribution statements and a break-even analysis (state any assumptions) for the existing workshop and secondly, the effect of each of the potential business upgrades using a C-V-P chart to illustrate the differences. 
 
b) Economics of Production: examine the economic implications of the upgrades including business risk (using Target Sales). Do you recommend any upgrades?

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