NEW ZEALAND DIPLOMA IN BUSINESS LEADERSHIP AND MANAGEMENT LEVEL 6
603 (v6)
FINANCE FOR MANAGERS (LEVEL 6, 13 CREDITS)
ASSESSMENT 2 – INDIVIDUAL ASSIGNMENT: CASE STUDY BASED
DUE DATE: 01 FEBRUARY 2019
Assessment Overview
This is the second of two assessments for this course. This assessment requires you to complete a case study analysis. The purpose of this assessment is to demonstrate your ability to analyse and apply financial management techniques and methods for the effective and efficient performance of an organisation including financial forecasts, budgets, cost accounting and performance management for an organisation. You will also need to demonstrate that you can determine and apply the relevant regulatory and compliance requirements for organisations in New Zealand.
Assessment Table
Assessment Activity Weighting Learning
Outcomes Assessment
Grading
Scheme Completion
Requirements
1. Research based Case Study Analysis &
Presentation 35% 1,2 Competency-Based A/NA
2. Case Study Based Analysis 65% 3,4,5,6 Competency-Based A/NA
Conditions of Assessment
1. You are required to present your work in a word-processed format using headings, page and section numbering as appropriate. Where necessary, use indentations, figures and tables, appendices.
2. Word count: 6000 Words (+/- 10%) – as a guide
3. Use Arial or Times New Roman with a font size of 12, and line spacing of 1.5
4. Students must submit their reports via Turnitin for scanning of plagiarism which must be less than- equals 10%.
Refer to Policy 7.7. Clause (I) for uploading of assessments to Turnitin.
5. Please submit a soft copy to http://abacusconnect.co.nz/ by the due date.
OR
Alternative arrangements may be made for presenting and submitting your work with help of the course instructor/tutor. For students with special needs, please discuss these with your immediate teacher/Programme Coordinator so that measures can be taken to implement your requirements for your studies.
6. All parts of your submitted assessment must be completely your own work and references must be cited and referenced appropriately using APA 6th Edition referencing. It is recommended that you use EBSCO and cite from only peer reviewed journals and articles. Only one website may be used it must be an academic source.
7. This assessment will need to be completed on or before 01 February 2019
8. You are required to present your work in a word-processed format using headings and section numbering as appropriate. Where necessary, use indentations, figures and tables, appendices.
9. Use Arial or Times New Roman with a font size of 12, and line spacing of 1.5
10. Please submit a soft copy to http://abacusconnect.co.nz/ by the due date. Alternative arrangements may be made for presenting and submitting your work with help of the Teacher – (Refer to QMS Policy 7.7 (Clause (l) for uploading of assessments to Turnitin).
11. All parts of your submitted assessment must be completely your own work and references must be cited and referenced appropriately using APA 6th Edition referencing. It is recommended that you use EBSCO and cite from peer reviewed journals and articles.
12. This assessment will need to be completed by: 01 February 2019.
Pass Criteria
This is a competency-based assessment (A/NA). This means that all parts of the assessment must meet the required standard in order for you to be awarded the grade of ‘Achieved’.
Late Submission /Reassessment /Extensions
a. Students are given the opportunity to be reassessed up to two (2) times and at the convenience of the academic staff for all types of assessments. In most circumstances, reassessments shall usually consist of learners producing further evidence required to achieve competency in a given task.
b. Students shall achieve competency in at least 50% of the set assessment tasks to be eligible for a reassessment (resubmission).
c. If students’ fail two (2) attempts and have not achieved 50% of assessment tasks in the 2nd attempt, he/she must complete the course again and pay the re-enrolment course fee i.e. $50 per credit.
d. Timeframe for resubmissions: Within 1 week of submission date + 1 week for marking (minimum).
e. There shall be no opportunity for 3rd/4th attempts. If a teacher decides that specific circumstances require a 3rd attempt – this must be discussed and approved by the Director Teaching and Learning.
f. Late submissions will not be accepted for marking, unless the teacher has granted this in writing to the student(s).
g. If there are extenuating circumstances that prevent a student submitting by the submission date, he/she must discuss this with the Programme Leader / Course Coordinator, so that a resolution can be confirmed.
Learning Outcomes
At the successful completion of this course, learners will be able to:
Discuss and apply the principles and practices of financial analysis for the strategic LO1 management of an organisation.
Research and communicate financial analysis and make recommendations for various
LO2 business situations to internal and external stakeholders for the efficient and effective performance of the organisation
LO3 Analyse organisational requirements and prepare financial forecasts and budgets for planning and control within an organisation.
LO4 Apply cost accounting technique and method for the effective and efficient performance of an organisation.
LO5 Interpret financial reports to evaluate organisational performance and decision-making for the efficient and effective performance of an organisation.
LO6 Interpret and present financial data according to the legal and professional financial reporting and tax requirements in New Zealand
Note: Learning Outcomes 1 and 2 were assessed in Assessment 1.
Assessment Schedule
Task Learning Outcome/s Evidence Judgement
INTRODUCTION
Write a brief introduction
(maximum 500 words) to the organisation which includes
• relevant background information and
• accounting procedures and standards followed to include International Financial Reporting Standards and tax requirement in NZ.
Learning
Outcome 6
Interpret and present financial data according to the legal and professional financial reporting
and tax requirements in
New Zealand
The case study is briefly introduced. This may include but is not limited to:
• Contents
• An outline of the company
• Background information
• Procedures used Introduction of report should focus on contents, background information and procedures used. It must be clear and concise.
–
ANALYSIS
Analyse the current situation.
Section A
1. Calculate (by designing a spreadsheet) the amount of fixed overhead to be applied for each product using absorption costing both per:
a. machine hour and
b. labour hour
2. Calculate for each product (by developing your spreadsheet) the following:
Learning
Outcome 4 Apply cost accounting technique and method for the effective and
efficient performance of an organisation.
Analyse the detailed calculations of absorption costing for both products, using both machine and labour hours.
– From storage to administration, Xenon and Yanon factory
Application of absorption costing by providing detailed and accurate calculations in a spreadsheet by correctly apportioning and allocating the overheads
– From storage to administration,
a. selling price, and
b. amount of profit and profit percentage (GST exclusive),
Learning
Outcome 6
Interpret and present financial data according to the legal and professional financial reporting and tax requirements in
New Zealand
–
–
–
–
–
–
–
–
–
–
From administration to distribution, Xenon and Yanon factory
From distribution to
Xenon and Yanon Overheads absorption rate per machine hour Overheads absorption rate per labour hour Selling prices for each product using machine hours
Selling prices for each product using labour hours
Profit ($) per unit for each product using machine hours
Profit ($) per unit for each product using labour hours Profit (%) for each product using machine hour
Profit (%) for each product using machine hour –
–
–
–
–
–
–
–
– Xenon and Yanon
factory
From administration to distribution, Xenon and Yanon factory From distribution to
Xenon and Yanon Overheads absorption rate per machine hour Overheads absorption rate per labour hour Selling prices for each product using
machine hours
Selling prices for each product using labour hours
Profit ($) per unit for each product using
machine hours
Profit ($) per unit for each product using labour hours Profit (%) for each product using machine hour
– Profit (%) for each product using machine hour
3. In regard to the effective and efficient performance of Folkstone Limited, describe and analyse the following costing techniques in terms of:
i. Activity based costing
ii. Traditional absorption costing (current method used by Folkstone)
iii. Job Costing
iv. Process costing
4. Submit calculations as an appended electronic spreadsheet file along with the soft copy of your report.
The description and analysis are valid for all four costing methods.
The spreadsheet (financial data) must be compliant
Description and analysis of the costing methods as required by explaining:
– How each method works
– What is the effect of each method on organisations;
– Explain the advantages and disadvantages of each
– What type of organisations use each method
Spreadsheet is appended. (See model answer for further guidance on evidence required) with the legal and professional financial reporting and tax requirements in New Zealand.
Spreadsheet accurately
calculates requirements
Spreadsheet is clearly laid out.
Section B
1 – Analyse the income statement for Folkstone above and develop a spreadsheet to forecast a quarterly budget using best practice which meets the legal and professional financial reporting requirements of New Zealand for the year ended 30 June 2019.
2 – Develop spreadsheet to generate a cashflow forecast for quarter 1 to quarter 4 ending on 30th June 2019 using the information from question 1 above and the instructions given below. The cashflow forecast must be presented using best practice which meets the legal and professional financial reporting requirements of New Zealand
3 – Submit calculations for 1 & 2 above as an appended electronic spreadsheet file along with the soft copy of your report.
Learning
Outcome 3 Analyse organisational requirements and prepare financial forecasts and budgets for planning and control within an organisation.
Learning
Outcome 5
Interpret financial reports to evaluate organisational performance and
decision-making for the efficient and effective performance of an organisation.
Learning
Outcome 6
Interpret and present financial data according to the legal and professional
Learner has generated a budget forecast from the income statement for all 4 quarters for the year ended 30 June 2019.
A spreadsheet is appended. (See model answer for further guidance on evidence required)
Learner has generated a cashflow forecast for all 4 quarters for the year ended 30
June 2019
A spreadsheet is appended. (See model answer for further
guidance on evidence required)
Spreadsheet is appended. (See model answer for further guidance on evidence required)
Learner has generated a valid and accurate budget forecast as a spreadsheet for all 4 quarters ending at 30 June 2019.
Learner has generated a valid and accurate cashflow forecast as a spreadsheet for all 4 quarters ending at 30 June 2019.
The spreadsheet (financial data) must be compliant with the legal and professional financial reporting and tax requirements in New Zealand.
Spreadsheet accurately calculates requirements
4 – Prepare a summary (minimum 300 words) for senior management which interprets the quarterly income statement budget and cashflow forecast.
financial reporting
and tax requirements in
New Zealand
Analyse by preparing a summary of income statement budget and cashflow forecast which interprets the information in a way suitable for senior management.
Spreadsheet is clearly laid out.
Analysis and valid interpretation of the forecasted information which is appropriate for senior management rather than rephrasing forecast instructions
CONCLUSIONS/RECOMMENDATIONS
1. In light of your analysis of costing techniques in Section A, recommend with justifications, which method Folkestone should apply to most accurately calculate selling prices and margins along with an explanation of why current method might or might not be suitable.
Learning
Outcome 3 Analyse organisational requirements and prepare financial forecasts and budgets for planning and control within an organisation Recommendation of the most suitable method for Folkstone Ltd with appropriate justification in terms of more accurate pricing and margins and in light of the analysis presented.
Recommendation of the most suitable method for Folkstone with valid justification in terms of more
accurate pricing and margins along with an explanation of why current method might or might not be suitable
2. In light of your interpretation of the quarterly income statement budget and cashflow forecast in Section B, make recommendations to management on any areas that may need attention for raising bank loan or other finance.
Learning
Outcome 5
Interpret financial reports to evaluate organisational performance and
decision-making for the efficient and effective performance of an organisation
Learning
Outcome 6
Interpret and present financial data according to the legal and professional financial reporting and tax requirements in New Zealand Learner has provided recommendations for the areas that may need attention by senior management for raising bank loan or other finance.
Learner has made valid recommendations i.e. at least 2 for the areas that need attention and must be addressed by senior management at Folkstone.
FINAL RECOMMENDATIONS
In the light of the financial analysis and conclusions make recommendations for improvements for Folkstone Limited. These must include but are not limited to the feasibility of raising a bank loan or other finance Learning
Outcome 1 Discuss and apply the principles and practices of financial analysis Recommendations are drawn
from the analysis and conclusions, make recommendations for improvements and comment on
the feasibility of raising a bank loan. Recommendations drawn show evidence of the application of principles and practices of financial analysis.
for the strategic management of
an organisation
Learning
Outcome 2 Research and communicate
financial analysis and make
recommendations for various business situations to internal and external stakeholders for the efficient and effective performance of
the organisation
APPENDICES
As required Spreadsheets are appended where required Each appendix must be numbered and referred to in the body of the report
Instructions
This assessment requires you to demonstrate your ability to analyse and apply financial management techniques and methods for the effective and efficient performance of an organisation including financial forecasts, budgets, cost accounting and performance management for an organisation. You will also need to demonstrate that you can determine and apply the relevant regulatory and compliance requirements for organisations in New Zealand.
To do this you will need to:
1. Read through Case study on Folkstone Ltd and identify core issues.
2. Research and reflect on financial management techniques and methods for the effective and efficient performance of an organisation. Techniques and methods include financial forecasting, budgeting, cost accounting and performance management.
3. Research the relevant regulatory and compliance requirements for organisations in New Zealand, specifically in the areas of legal and professional financial reporting and
4. Consider how your research on financial management techniques and methods could be applied to Folkstone Limited for its effective and efficient performance and with view to making recommendations. Apply these findings to the Case Study.
5. Propose with justification which method might or might not be suitable.
2
Abacus Institute of Studies
603 Assessment 2 (v6)
Case Study Analysis
You are employed as an accountant at Folkstone Limited and are required to use the information gathered in steps 1 to 3 to write a case study financial analysis to assist in its effective and efficient management in three sections: Introduction, Analysis/Discussion, Conclusions/Recommendations as outlined in detail on the following pages.
FOLKESTONE LIMITED
Folkestone uses traditional absorption costing in calculating the selling prices of their products. Folkstone have two products which need to have their pricing reviewed.
The products Acadia (a touring bike) and Bison (an electric-assist bike) are produced in two factories: Xeon (which produces the bike frames) and Yanon (which assembles all of the components onto the frames). Their top product is the new Bison electricassist pedal bike, which they are very excited about. It is a fast-growing company in sales and in assets and is looking to continue this growth.
For any company, it is very important to charge selling prices which can cover direct costs as well as the overheads of the business and earn required profit margins. Folkstone is ready to switch any other suitable costing system, which can more accurately calculate appropriate selling prices and profit margins.
Since Folkstone is GST registered business, it calculates its profit margins on GST exclusive selling price to comply with tax requirements in New Zealand.
The following information is useful for detailed calculation of selling prices and margins.
Number of units produced:
Folkestone Annual
Production
Finance for Managers
Assessment 2 – Case Study Analysis
Abacus Institute of Studies
603 Assessment 2 (v6)
Units
Labour Machine Machine
hours in hours in hours in
Yanon Xeon Yanon
per item per item per item
4 1.5 2
1 5 3.5
n
m
3
1.5
Acadia 14,000
Bison 7,000
Costs and Hours required per unit:
Folkestone
Labour
Labour Material Annual hours i
Cost per Cost per Production Xeon
item item Items per ite
$ $
Acadia 300 750 14000
Bison 150 400 7,000
Annual Fixed Overheads:
Folkestone Storage Administration
$ $
Annual Fixed Operating costs 200,000 2,400,000
Distribution Xeon Yanon
$ $ $
3,200,000 2,200,000 1,000,000
Finance for Managers
Assessment 2 – Case Study Analysis
CASE STUDY
You are required to write a Case Study Financial Analysis in three sections: Introduction, Analysis and Conclusion/Recommendations. You will also need to submit spreadsheets as appendices.
REQUIRED – ANSWER ALL QUESTIONS:
Introduction
Write a brief introduction (maximum 500 words) to the organisation which includes
• relevant background information
• accounting procedures and standards followed to include International Financial
Reporting Standards and tax requirement in NZ
(LO6)
Analysis
Section A: Cost Accounting
1. Calculate (by designing a spreadsheet) the amount of fixed overhead to be applied for each product using absorption costing both per:
a. machine hour and
b. labour hour
Additional information:
• storage costs are allocated to administration (10%), to Xenon (40%) and to Yanon (50%)
• administration costs are allocated to distribution (20%), to Xenon (40%) and to Yanon (40%)
• distribution costs are allocated to Xenon (50%) and Yanon (50%)
(LO4)
2. Calculate for each product (by developing your spreadsheet) the following: a. selling price, and
b. amount of profit and profit percentage (GST exclusive)
Use machine hours to allocate overhead, based on the following information:
Acadia
i. Mark up is set at 75%
ii. GST is to be included in the sales price
iii. Profit % is to be based on GST exclusive selling price
Bison
i. Mark up is set at 45%
ii. GST is to be included in the sales price
iii. Profit % is to be based on GST exclusive selling price
Note: Your workings (financial data) must be compliant with the legal and professional financial reporting and tax requirements in New Zealand.
(LO4, LO6)
3. Calculate for each product (by further developing your spreadsheet) the following: a. selling price
b. amount of profit and profit percentage (GST exclusive)
Use labour hours to allocate overhead, based on the following information:
Acadia
i. Mark up is set at 75%
ii. GST is to be included in the sales price
iii. Profit % is to be based on GST exclusive selling price
Bison
i. Mark up is set at 45%
ii. GST is to be included in the sales price
iii. Profit % is to be based on GST exclusive selling price
Note: Your workings (financial data) must be compliant with the legal and professional financial reporting and tax requirements in New Zealand.
4. Submit your calculations as an appended electronic spreadsheet file along with the soft copy of your report
(LO4, LO6)
5. In regard to the effective and efficient performance of Folkstone Limited, describe and analyse the following costing techniques in terms of:
• how they work,
• their suitability to different types of organisations,
• their advantages and disadvantages
I. Activity Based Costing
II. Traditional Absorption Costing (current method used by Folkstone) III. Job Costing
IV. Process Costing
(LO4, LO6)
Section B: Budgeting & Forecasting
Folkstone Ltd Income Statement
Year Ended 30 June 2017 Year Ended 30 June 2018 Quarter ended Apr-June 2018
Actual ($) Actual ($) Actual ($)
Sales 24,000,000 27,000,000 6,000,000
Cost of goods sold
Gross profit
11,000,000 12,000,000 2,750,000
13,000,000
15,000,000
3,250,000
Operating costs
Salaries
3,800,000
4,000,000
950,000
Rent and rates
2,000,000
2,500,000
500,000
Heating and lighting 2,300,000 2,600,000 575,000
Office consumables 1,200,000 1,300,000 300,000
Vehicle running expenses 700,000 750,000 175,000
Depreciation of plant machinery and building 40,000 50,000 10,000
Repairs and maintenance insurance Total operating expenses
Operating Profit /
Loss (-) 1,600,000 1,650,000 400,000
11,640,000
12,850,000
2,910,000
1,360,000 2,150,000 340,000
1. Analyse the income statement for Folkstone above and develop a spreadsheet to forecast a quarterly budget using best practice which meets the legal and professional financial reporting requirements of New Zealand for the year ended 30 June 2019 using the following additional information:
• sales are expected to increase by 2% ,2.5% ,5% and 2.5% from the preceding quarters respectively
• management considers that COGS are generally 45% of Sales
• four additional staff members are expected to join the company in first quarter. Their combined annual salaries are $200,000
• for the second quarter a 0.5% increase on total salaries and wages is estimated from the preceding quarter and expected to remain constant in remaining quarters
• heating and lighting expenses are predicted to rise by 2% in each quarter from the preceding quarter
• vehicle running costs are estimated to increase by 1% in each quarter from the preceding quarter
• the company has negotiated a discount on the repair and maintenance contract which will see these expenses dropping by 0.5% in each subsequent quarter
• the remaining expenses are expected to be same in each quarter
(LO3, LO5, LO6) 2. Develop your spreadsheet to generate a cashflow forecast for quarter 1 to quarter 4 ending on 30th June 2019 using the information from question 1 above and the instructions given below. You must present your cashflow forecast using best practice which meets the legal and professional financial reporting requirements of New Zealand.
Forecast Quarter 1 (July-Sep) Quarter 2
(Oct-Dec) Quarter 3
(Jan-Mar) Quarter 4
(Apr-June)
Receipts from
Cash sales
$6,000,000
$5,900,000
$6,300,000
$6,200,000
Cash Payments
to suppliers
$2,350,000
$2,205,000
$3,000,000
$2,900,500
• $2,000,000 worth of total account receivables will be paid by debtors in each quarter equally
• salaries paid to employees will be $900,000 in each quarter; the remaining will be accrued as a provident fund in “other liabilities”
• annual rent for all the warehouses will be paid on 15 June 2019. Rent is constant for each quarter at $500,000/quarter
• heat and lighting: a fixed amount of $500,000 will be paid in quarters 1,2 & 3 and remaining heating and lighting charges will be settled in quarter 4 as at 30 June 2019. (see budgeted expenses)
• interest of $200,000 will be paid in the third quarter
• vehicle running costs will be paid as budgeted in each quarter
• office consumables will be bought and paid for in advance in Q1 for year ended 30 June 2019 worth $1,000,000 and will be included in prepaid expenses in the balance sheet. Folkstone has got a 25% discount voucher for buying in bulk & paying in advance
• $600,000 tax will be paid in the third quarter
• cash balance to be carried forward is $5,000,000 as at 30 June 2018
(LO3, LO5, LO6)
3. Submit your calculations for 1 & 2 above as an appended electronic spreadsheet file along with the soft copy of your report
4. Prepare a summary (minimum 300 words) for senior management which interprets the quarterly income statement budget and cashflow forecast
(LO3, LO5, LO6)
Conclusions/Recommendations
1. In light of your analysis of costing techniques in Section A, recommend with justifications, which method Folkestone should apply to most accurately calculate selling prices and margins along with an explanation of why current method might or might not be suitable.
2. In light of your interpretation of the quarterly income statement budget and cashflow forecast in Section B, make recommendations to management on any areas that may need attention.
3. In the light of the financial analysis and conclusions make recommendations for improvements for Folkstone Limited. These must include but are not limited to the feasibility of raising a bank loan or other finance.
(LO3, LO4, LO5, LO6)
Marking Cover Sheet
Name: Date: Student Number: __________
Assessor’s Name: Assessor’s Signature: __________________ Date:________
Section Comment First Sub
A/NA Resub
/Reass
A/NA
Introduction
Introduction includes:
• terms of reference,
• relevant background information
• financial procedures used in the report.
Analysis
Section A: Cost Accounting
Calculations for each product:
• per machine hour
• Per labour hour
• selling price, and
• amount of profit and profit percentage (GST exclusive)
Appended electronic spreadsheet
Description and analysis the following costing techniques:
i. Activity based costing ii. Traditional absorption costing (current method used by Folkstone)
iii. Job Costing
iv. Process costing
Section B: Budgeting &
Forecasting
• Quarterly budget forecast
• Quarterly cashflow forecast Appended electronic spreadsheet
Summary for senior management interpreting the quarterly cashflow forecast.
Conclusions/Recommendations Costing technique recommended
with justifications
Recommendations on any areas that may need attention re:
cashflow
Final Recommendations
Make recommendations for improvements for Folkstone
Limited. These must include but are not limited to the feasibility of raising a bank loan or other finance
Overall Result
