1.plan the use of cash in a business
2.dicuss the financial aspects of assessing managerial performance.
case study Berry Ltd manufacture
This assignment accounts for 100% of the module marks for students on FIN2137M (who do not study Management Finance during Term 2). For students on FIN2037M, this Term 1 assessment accounts for 50% of their total module marks.
Learning outcomes assessed:
1. Plan the use of cash in a business.
2. Discuss the financial aspects of assessing managerial performance.
Your assignment should:
i) Make reference to appropriate theory, including journal articles and professional and regulatory body reports;
ii) Include detailed references to a variety of literature sources;
iii) Include a wide-ranging bibliography, including details of any published financial statements you have used in your research;
iv) Be submitted via Blackboard, using Turnitin.
Berry Ltd manufactures three products, X, Y and Z. Market research has identified that demand for products X and Y is relatively elastic whilst demand for product Z is relatively inelastic. Each product uses the same materials and the same type of direct labour but in different quantities. Berry Ltd uses full absorption costing and absorbs overheads on the basis of direct labour hours. Selling prices are then determined using cost plus pricing.
Budgeted production and sales volumes for X, Y and Z for the next year are 20,000 units, 16,000 units and 22,000 units respectively.
The budgeted direct costs of the three products are shown below:
Product X Y Z
£ per unit £ per unit £ per unit
Direct materials 25 28 22
Direct labour (£12 per hour) 30 36 24
In the next year, Berry Ltd also expects to incur indirect production costs of £1,377,400, which are analysed as follows:
Cost pools £ Cost drivers
Machine set up costs 280,000 Number of batches
Material ordering costs 316,000 Number of purchase orders
Machine running costs 420,000 Number of machine hours
General facility costs 361,400 Number of machine hours
The following additional data relates to each product:
Product X Y Z
Batch size (units) 500 800 400
Purchase orders per batch 4 5 4
Machine hours per unit 1•5 1•25 1•4
At a recent board meeting of Berry Ltd, there was a heated discussion on the need to improve financial performance. Berry Ltd wants to boost sales revenue in order to increase profits but its capacity to do this may limited if it uses cost plus pricing and a standard mark-up.
The Production Director argued that financial performance could be improved if the company introduced a more effective planning system in the form of a bottom up approach to the preparation of budgets. The Finance Director agreed that better cost control could lead to increased profitability. He suggested that the board should consider introducing activity-based costing (ABC) rather than the absorption costing system currently in place and it should also consider ways in which the company could monitor and assess performance on a wider basis. Many of the board members were unaware of terminology being used and requested that a paper be prepared to help them understand the technique so they could make an informed decision at the following board meeting.
a) Prepare a briefing note for the board that explains the key features of activity based costing. Within your writing, you should consider the impact on the selling prices and sales volumes of each product that absorption costing and ABC may have. You should only use figures to support your discussion.
b) Budgeting has a number of different purposes including planning, control, performance evaluation and motivation. Discuss the implications of this within Berry Ltd and how these purposes may conflict with each other.
The required word count for the assignment is 2,500 words in total. This represents 1,000 equivalent words in total for part a) and 1,500 equivalent words for part b).
Your performance in assignments
Your performance will be graded on a continuous numerical scale which ranges from 0 to 100 and is expressed in percentage terms (%). You will see below the division of the scale into the classifications used within the University of Lincoln together with an indication of the standard required to achieve each classification.
>79-100%: (exceptionally strong pass – first class honours standard) a range of marks which are consistent with a first where the work is of outstandingly high quality.
>69-79 %:( excellent pass – first class honours standard) a range of marks consistent with a first. Work which shows excellent content, organisation and presentation, reasoning and originality; evidence of independent reading and thinking and a clear and authoritative grasp of theoretical positions; ability to sustain an argument, to think analytically and/or critically and to synthesise material effectively.
>59-69% (strong pass – upper second class honours standard) a range of marks consistent with an upper second. Well-organised and lucid coverage of the main points in an answer; intelligent interpretation and confident use of evidence, examples and references; clear evidence of critical judgement in selecting, ordering and analysing content; demonstrates some ability to synthesise material and to construct responses, which reveal insight and may offer some originality.
>49-59% (sound pass – lower second class honours standard) a range of marks consistent with a lower second; shows a grasp of the main issues and uses relevant materials in a generally business-like approach, restricted evidence of additional reading; possible unevenness in structure of answers and failure to understand the more subtle points: some critical analysis and a modest degree of insight should be present.
> 39-49%: (basic pass – third class honours standard) a range of marks which is consistent with third class; demonstrates limited understanding with no enrichment of the basic course material presented in classes; superficial lines of argument and muddled presentation; little or no attempt to relate issues to a broader framework; lower end of the range equates to a minimum or threshold pass.
>34-39%: (marginal fail) achieves most of the learning outcomes required for a mark of 40% but falls short in one or more areas; not a pass grade but sufficient to warrant compensation.
>29-34% (clear fail) a fail; may achieve some learning outcomes but falls short in most areas; shows considerable lack of understanding of basic course material and little evidence of research.
0-29%: (weak fail) a fail; basic factual errors of considerable magnitude showing little understanding of basic course material; falls substantially short of the learning outcomes for compensation.
Source: University Marking and Grading Policy: (available on University Portal under University Registry / Secretariat and Legal Services / Academic Policies)
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