INTSRUCRTIONS RUBRICS:
1. The breakeven point and profit, as well as the payback period and the NPV, are clearly identified in an Excel worksheet. Calculations are correct, and the Excel worksheet is compiled using formulae and hyperlinks (Weight = 5 Marks) –
Clearly identifies the breakeven point and profit analysis, as well as the payback period and NPV, in the Excel worksheet, with more than 90% of calculations correct. Makes comprehensive use of formulae and hyperlinks in compiling worksheets.
2. Report has appropriate structure and content. (Weight =3 Marks)
Presents an executive summary that accurately captures the subject matter, analytical methods (both quantitative and qualitative) and key findings, as well as the report’s limitations. Uses the introduction of the report to comprehensively and accurately explain terms of reference and methods, and to clearly outline the structure of the report. Concludes the report with a clear and comprehensive summary of findings, comments, and recommendations.
3. The discussion is supported by evidence from the Excel file and relevant management accounting literature. Citations comply with Harvard Style. 1(Weight= 5 Marks).
Provides comprehensive discussion, which is strongly supported by evidence from Excel file and relevant management accounting literature. All citations comply with Harvard Style.
4. Report uses appropriate business terminology, formal register and style, and correct grammar; it meets word count (maximum1600 words), including direct quotes. (Weight= 2 Marks).
Consistently uses precise business terminology and formal register and style to clearly communicate meaning. Consistently adheres to grammatical conventions. Has word count of between 1,400 and 1,600, with direct quotes accounting for 5% or less of the total number of words.
5.REPORT SHOULD BE WRITTEN TO DENIS:
Denise’s take-away business venture
Denise is planning to open a take-away business in Hobart, which will sell healthy hamburgers prepared with fresh, local ingredients. These will come in two sizes: regular and large, and each order will be served with hot chips and a soft drink. The business will be open 4pm-8pm, 7 days a week, with all orders being filled and served on a drive-through basis
Denise has two options: to buy an existing take-away business or open a new one. If she goes with the first option, she envisages financing the purchase cost ($160,000) with a bank loan. The furniture and kitchen equipment will need to be replaced at 5-yearly intervals. If she goes with this first option, sales for the first quarter are expected to be:
| Regular | Large | Total | |
| Sales (unit) | 18,000 | 16,500 | 34,500 |
The sales growth is expected to be 5% per quarter.
If Denise goes with the second option, she will buy standard furniture and fittings at a cost of $25,000. She estimates that these will need to be replaced every 10 years. She also plans to purchase kitchen equipment, at $100,000, to be financed with a bank overdraft. This equipment will also need to be replaced at 10-year intervals. With this option, Denise has been advised that sales will be 20% lower than with the first option in the first year only. The business will also need a website, and advertising space in the local newspaper.
Irrespective of the option she finally chooses, Denise anticipates that sales will increase by 10% per year. She plans to hire 4 part-time staff, so that on any given day, two will be available to cook and fill orders. These will be paid an hourly rate, while Denise, as manager, will draw a monthly wage of $3,000. She will also employ a cleaner, who will be paid $1,000 a month. The building, which will have no seating capacity, will be leased from a local real-estate company. Denise aims to make an annual profit, before tax, of not less than $50,000.
She has now approached you, a highly capable and reputable team of management and cost accountants based in Hobart. Your team was chosen because of its excellent reputation, and extensive knowledge of local council regulations. Denise asks you to research the financial viability of the proposed project.
You are required to:
- Develop a projected budget (sales, purchases, expenses etc) for the next three years for both options.
- Determine, for both options, the breakeven point, in dollars and units, for the expected sales mix;
- Calculate the Payback Period and Net Present Value for Denise’s investment options.
- Based on the annual profit for years 1, 2 and 3 for the best option, decide which of the existing burgers should be promoted more aggressively than the others to achieve the target profit.
- In your report, explain first whether you should use Traditional Costing System or Activity-Based Costing?
- In your report, advise Denise, on the basis of your calculations for points 1, 2 and 3 above, whether she should buy an existing restaurant or establish a new one;
- Advise Denise, in the written business report, whether she could maximise profitability by changing sale prices or the mix of existing sales, or both.
Your advice must be supported both by your Excel workbook calculations and qualitative evidence. Before starting to develop your excel workbook, you need to use a real case such as the McDonald or Mykonos Takeaway, and statistical information about Australian small business to estimate the following: product prices, costs of direct materials and labour, cost of utilities (water and electricity) and Internet, rent and tax (assuming the business is going to operate as a sole trader), as well as any other costs that will be incurred.
The length of the report is limited to a maximum of 1,500 words, including the executive summary. DO NOT copy and paste .jpg and other image files into your word document to circumvent the word count, or you will be penalised. Reference your Excel workbook rather than copy and paste tables and diagrams into your written report. The report and accompanying spreadsheet will be marked strictly according to the rubric supplied. Information not provided in the case or the need to be estimated should be obtained from industry sources, which should be appropriately referenced.
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