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1 Questions and guidance on preparing case study Managerial Finance ACC08402 Assignment – Part 2 This document provides the assignment brief, specification and assessment criteria for your second...

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Questions and guidance on preparing case study
Managerial Finance ACC08402
Assignment – Part 2
This document provides the assignment
ief, specification and assessment
criteria for your second assessment on the module: Managerial Finance.
2
Case Study
This Case Study will form 45% of your overall mark for this module
The Kalgan Driftwood Company
Background
The Kalgan Driftwood Company (Kalgan) was established in 1950. It is located on a 100
hectare site in a beautiful scenic location on the banks of the Kalgan River. The company
has built its reputation on making quality furniture at affordable prices from cast-off ja
ah
wood from a nea
y timber mill.
Re- cover service
Kalgan, which sources its fa
ics from Indonesia and Vietnam, offers a choice of over 50
different fa
ics. Kalgan is considering offering a re-cover service to supply replacement
cushions when the existing ones wear out or customers wish to change their fa
ic since
a recent study found that customers kept their Kalgan furniture for an average of 18 years.
The re-cover service will make three sizes of covers: large, medium and small.
The company accountant has ca
ied out an investment appraisal of the new re-cover
service assuming a project life of 5 years. The net cash flows on a relevant cost basis for
each of the five years were as follows:
Year Net cash flows
0 £(140,000)
1 £23,240
2 £45,780
3 £54,320
4 £54,320
5 £54,320
3
Budget data for the first year of the re-cover service are as follows:
Large Medium Small
Sales (units) 2,300 1,500 2,800
Selling price per unit £112 £84 £56
Direct labour cost per unit £12.60 £8.40 £6.30
Fa
ic cost per unit £44.80 £32.20 £21
Contribution per unit £54.60 £43.40 £28.70
Specific Fixed Costs:
• Factory power costs: £84,000 per annum
• Lease of equipment for re-cover service: £70,000 per annum
The expected time to produce each size of cover is as follows:
Re-cover Service Large Medium Small
Time to make each cover 0.6 hour 0.4 hour 0.25 hours
The production director has now informed the board that the supply of skilled labour for
year 1 will be restricted to a maximum of 2,500 hours.
The company’s cost of capital is 10% per annum.
Question A
(i) Calculate the budgeted profit after specific fixed costs, for year 1 of the re-cover
operation, assuming demand can be met in full.
(5 marks)
(ii) Calculate the sales mix that will maximise budgeted profit for year 1 of the re-cover
operation based on the limited availability of labour.
(10 marks)
(iii) Suggest two actions that the company could take to overcome the shortage of labour.
(5 marks)
(iv) Calculate the payback period for the re-cover project.
(5 marks)
(v) Calculate the net present value for the re-cover project.
(5 marks)
Total for this part = 30 marks
4
Question B
The Kalgan Driftwood Company has decided to that it needs to use the budgeting process
much more substantially to manage its activities. You are a graduate trainee who has just
started work in the accounting department of Kalgan. In your degree studies, you
completed a module called Managerial Finance and learned that budgets serve a number
of useful purposes including:
(i) Planning annual operations;
(ii) Coordinating the activities of the various parts of the organisation;
(iii) Communicating plans to the various responsibility centre managers;
(iv) Motivating managers to strive to achieve the organisational goals;
(v) Controlling activities;
(vi) Evaluating the performance of managers
You are asked to select four of these purposes and explain in a presentation to your
Kalgan work colleagues about how budgets achieve these aims. Write an essay that will
form the basis of your presentation.
Total of 1,000 words for this part = 60 marks
Note: The report should be word processed (Arial font size 12) and well presented.
Referencing and bibliographies should use the APA 6th System (name and date). For
detail of the APA 6th System refer to Learning Information Services (i.e. the Li
ary’s)
Referencing web page and Guide or Napier web pages on plagiarism.
http:
www2.napier.ac.uk/ed/plagiarism/
(10 marks)
(Total 100 marks)
5
Marking Schedule
The following report assessment feedback sheet will help you identify the key
elements of the report and the manner of evaluating them by your lecturer.
Managerial Finance ACC08402
Report Submission
Matriculation Number:
Tutor:
Very
Poor
Weak Satisfactory Good Very
Good
Excellent Marks
Question A XXXXXXXXXX
Question B XXXXXXXXXX
Presentation
of work
XXXXXXXXXX
Overall mark
Comments
6
Assessment criteria for the module report assignment
Below we give you a schedule, which is used as the basis for marking your assignment
in Managerial Finance. This will help you to judge what you need to do to achieve any
given mark range.
Less than 40% - a very poo
weak assignment, the student has not answered the
assignment properly. There may be a number of e
ors including insufficient
explanation of the theory, and a limited ability to interpret the ideas to practical
situations.
40-49% - a satisfactory assignment, the student shows partial understanding of the
issues but possibly combined with e
ors and/or insufficient or unclear explanation of
the key points. There is limited interpretation of the issues in relation to the real world.
50-59% - a good assignment, with most of the key points co
ectly stated, the
student demonstrates an ability to interpret at least some of the issues and makes a
easonable attempt at explaining the theoretical concepts.
60-69% - a very good assignment with minimal e
ors. Demonstrates an
understanding of the key issues and is thorough in its analysis of the issues and
theoretical concepts. The student shows strong critical and analytical ability.
70-79% - an excellent assignment which is well written and explained. It will
demonstrate a clear understanding of the issues, using a high level of critical and
analytical ability.
80% + - an exceptional assignment, which is sophisticated in its approach while
eing co
ect in every particular detail. Extremely high level of critical ability is
demonstrated with original thought being evident.
Note that in ALL categories above it is expected that you will provide a bibliography
(where applicable) of the material used in preparation of your assignment.
References and bibliography should use the APA 6th System (name and date). You
must also be careful not to plagiarise. Help is available for both referencing and
plagiarism by following the links from your Edinburgh Napier Student Portal ‘Don’t
plagiarise’. If material is simply reproduced from report and accounts using the same
words, this will be treated as plagiarism and a fail mark will be given. Material copied
from websites or other sources that provide ready-made solutions to report will be
deemed an academic offence and subject to disciplinary action.
Answered Same Day Aug 20, 2021

Solution

Sumit answered on Aug 20 2021
132 Votes
Cover Page
Student Name:
Assignment Code: Managerial Finance ACC08402
Question A
(i)
    
    Particulars
    Large
    Medium
    Small
    Total
    
    Sale Units
    2300
    1500
    2800
    
    
    Selling Price/Unit
    112
    84
    56
    
    Less:
    Direct Labou
Unit
    12.6
    8.4
    6.3
    
    
    Fa
ic Cost/Unit
    44.8
    32.2
    21
    
    
    
    
    
    
    
    
    Contribution/Unit
    54.6
    43.4
    28.7
    
    
    Total Contribution
    125580
    65100
    80360
    271040
    Less:
    Specific Fixed Costs
    
    
    
    
    
    Power Costs
    
    
    
    -84000
    
    Lease Costs
    
    
    
    -70000
    
    
    
    
    
    
    
    Budgeted Profit for the Yea
    
    
    
    117040
Hence the Budgeted Profit for the year is $117040.
(ii).
Let the Units produced of Large be x
Let the Units produced of Medium be y
Let the Units produced of small be z
Objective function:
Maximize Z = 54.60x + 43.40y + 28.70z
Subject to following constraints:
0.60x + 0.40y + 0.25z = 2500 (Maximum Labour hours available)
x <= 2300 (Maximum Demand constraint)
y <= 1500 (Maximum Demand constraint)
z <= 2800 (Maximum Demand constraint)
On Solving the equations, we get the optimal sales mix for the company is:
Large: 2000 Units
Medium: 1500 Units
Small: 2800 Units
(iii)
Two Actions the company can take to overcome the shortage of labour are:
(a). Outsourcing Labour: To overcome the problem of labour shortage the company can outsource the labour from recruitment agencies. This is a very good option for the company since company can retain highly efficient labour on long term basis and remove the inefficient labour easily as well.
(b). Reducing Labour Turnover Rate: Labour turnover rate is the rate at which employees are leaving a company. Reducing labour turnover enhances the motivation of cu
ent employees and encourages them to work harder for the company. Companies that have low turnover rate also attract the new workers towards them.
(iv)
The formula to calculate the Payback Period for the year is:
Initial Investment / Cashflow per Year
Initial Investment = $140000
Cash Flow for Year 1 = $23240
Cash Flow for Year 2 = $45780
Cash Flow for Year 3 = $54320
Cash Flow for Year 4 = $54320
The cumulative Cashflow at the end of 3rd year will be = $123340
Since only $16660 of the initial investment is left, this amount will be earned in year 4 in:
16660/54320
= 0.307 or 3 months and 21 Days.
Hence total Payback Period is 3 years 3 months and 21 days.
(v).
    Year
    Net Cash Flows
    PV @ 10%
    DCF
    0
    -140000
    1
    -140000
    1
    23240
    0.909
    21125.16
    2
    45780
    0.826
    37814.28
    3
    54320
    0.751
    40794.32
    4
    54320
    0.683
    37100.56
    5
    54320
    0.621
    33732.72
    
    
    
    
    
    NPV...
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