Trident ACC310 module 4 case and SLP

ANALYSIS OF PROFITABILITY AND CAPITAL BUDGETING

Case Assignment

This case has two separate parts.

Part I

Beautifully Fabulous Beauty Salon (BFBS) manufacturer has two stores. The most recent monthly Income Statement for BFBS.

BFBS is considering closing Store I. If Store I is closed, one-fourth of its traceable fixed expenses would continue unchanged. Also, the closing of Store I would result in a 20% decrease in sales in Store II. BFBS allocates common fixed expenses on the basis of sales dollars.

The following items will be assessed in particular:

1. Prepare a new monthly income statement for the company if Store I is closed.

2. Evaluate and discuss the impact of the decision of closing Store I.

3. Include in your discussion the relevance of traceable and common fixed expenses.

Part II

Beautifully Fabulous Beauty Salon manufactures two products, Beauty Gloss and Cocooning Spray. Beauty Gloss is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Cocooning Spray. Beauty Gloss is produced on an automated production line. Due to the forecast of economic growth, the BFBS is considering purchasing a new machine costing $40,000. The machine will have 10 years of useful life and a salvage value of $6,000. Using the straight-line depreciation method, the original machine cost will be depreciated over 10 years not considering the salvage value in the calculation of the depreciation. The new machine will generate $15,000 in annual net cash flows throughout its useful life (ordinary annuity). To maintain the machine it will require additional working capital of $3,000, which would be released at the end of the useful life. The company's tax rate is 40% and its discount rate is 10%. Present value tables can be accessed at the following link:http://highered.mcgraw-hill.com/sites/0072994029/student_view0/present_and_future_value_tables.html

The following items will be assessed in particular:

1. Prepare a NPV table based on the information given and using the table BFBS Cost Analysis format. The student may use Periasamy, P. (2010). Textbook of Financial Cost and Management Accounting, Global Media 2010 (read chaps 27-29) as a review source.

2. Analyze the data in the NPV table.

3. Discuss the decision that should be made concerning the investment in the new machine.

As an example, review the spreadsheet below:

When your discussion paper and spreadsheet analysis are done, upload them.

Assignment Expectations

It is important to answer the questions above. The discussion should be four to six pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.

When your paper is done, send it in.

ANALYSIS OF PROFITABILITY AND CAPITAL BUDGETING

This SLP has two separate parts.

Part I

The objective of Part I is for the student to become familiar with the cost-volume-profit analysis as a tool used for decision making.

Review the “Consolidated Statements of Income” In Hershey’s 2007 annual report (ignore all figures below net income, such as, per share information). Using the spreadsheet below fill in requirements 1 through 4 in the spreadsheet using the following data:

1. Units Sold

a. 2005 – 100,000,000 units

b. 2006 – 100,400,000 units

c. 2007 – 200,000,000 units

2. Variable Manufacturing Costs Percentage – 45% of Cost of Sales

3. Variable Marketing Costs Percentage – 15% of Cost of Sales

4. Fixed Costs Percentage – 40% of Cost of Sales

LENGTH: spreadsheet

The following items will be assessed in particular:

I. Instructions

a. Double Click on “Requirement 1”on the spreadsheet

b. Scroll down through the spreadsheet; you should see four (4) requirements

c. Fill in the spreadsheet with your analysis answers

d. Cut and Paste or save your completed spreadsheet into an excel file

e. Upload the excel file.

Part II

The objective of Part II is for the student to become familiar with the budget concepts as a tool used for decision making. There are primarily two types of Budgets; strategic and operational. Strategic budgets are more long term planning; operational budgets are short term. Either budget follows a process of compilation and revision. Revision is caused by feedback from those who are responsible for implementing the budget. The budget compilation process begins with developing a Master Budget. The Master Budget includes the operational and financial plans of the organization. Budgets are used to coordinate, communicate, and motivate managers and employees. Since this course is focused on managerial analysis, we will couch our discussion in the operational budget process.

The following items will be assessed in particular:

1. Review the analysis of the “Consolidated Statements of Income” in Hershey’s 2007 annual report completed in the Part I. In a 2 to 3 page written report, using the data requirements in 2 and 3 of Part I, create a hypothetical operational budget for 2008.

2. Evaluate and discuss the assumptions you made to compile the hypothetical operation budget. The changes made should take into consideration the “What if?” in the requirement 4 section.

SLP Assignment Expectations

It is important to answer the questions above. The discussion should be four to six pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.

When your paper is done, send it in.