MAA103 Accounting for Decision Making

Description

In this assignment, you need to produce a budget report for a business based on one proposal you choose among the three proposals. This assignment includes preparing two budgets (a budgeted income statement and a cash budget) and a report based on the forecasted numbers from these two budgets. The case study background is described in detail below.

You (and your team) work in a business advisory firm called ‘Gliding Solo’, a business that provides strategic and financial advice to other businesses. Your role in the firm is that of a business consultant. To this end, you are often required to produce financial forecasts and budget reports for clients.

Tracie Morris and Conor Wu are equal owners in the business trading under the name ‘Ebike City’ and have approached your firm looking for business advice for the year 2022. They would like to take this opportunity to bring their business to the next level.

Their business is a brick-and-mortar store located in Brunswick, Melbourne. It retails two kinds of electric bikes (ebikes): one is the Pedal Classic that comes with one electric motor, and the other is the Folding Urban Dream that is a compact design with two electric motors. The business also provides repair services to customers. Repairs are charged at a set price per hour. Conor spends most of his time looking after the repairs, and Tracie primarily focuses on the retail side.

Tracie and Conor have come up with three (3) different proposals. However, they can’t decide on which ONE proposal to take to run the business in 2022. They have approached your team for advice.

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#1 Expansion Project: Tracie and Conor believe that they can improve business by expanding the storefront. Specifically, they would like to increase the floor space of the existing store, aiming to increase both ebike sales and repair hours. Both owners have some reservations about this project as it would require large initial setup capital investment (i.e. cost of project or called “initial setup cost”) and loan.

#2 Cost Management Strategy: Tracie suggests that selling Folding Urban Dream ebikes does not produce enough margin. She has proposed that the business focus on Pedal Classic sales and further increase the margin by changing the supplier of ebikes. The new supplier will provide slightly inferior products but will be much cheaper than the current supplier. Tracie and Conor would like to also introduce several other cost-cutting initiatives such as reducing wages of some staff, getting rid of some features on the insurance policy, reducing marketing expenditure, and reducing utility costs by going ‘green’.

#3 Target Marketing Strategy: Conor suggests taking a more aggressive marketing strategy. To do this, Tracie and Conor have found a marketing agency to run some social media campaigns regularly using influencers to drive traffic. They believe that such marketing efforts will bring more customers to the store and increase the ebike sales and repairs hours. Tracie is concerned though because the marketing agency needs to be paid every month and this is on top of any existing marketing expense that ‘Ebike City’ currently incurs.

Additional Notes:

• Note that for the purposes of the financial forecasts and budgets, you can assume all items are GST free.
• Due to the planning period, ‘Ebike City’ is effectively shut down and the owners are planning to re-open on 1st January 2022. This effectively means year 2021 is a write-off and you can assume there to be no sales, costs, or purchases in December 2021.
• The exact data/details on the various changes to the business can be found in the Excel Budget Template “MAA103 Budgeting xlsx” after you enter in your Student ID along with the Cloud Deakin Group Number and further select the project that you and your team have nominated to analyse under the Group_Information worksheet.

To assist with your financial forecasts, the owners have provided you with information on 2020’s figures as it is probably the most accurate representation of their ‘normal’ business activities. These figures have been provided to you in the FactSheet worksheet. This worksheet can be found in the Excel Budget Template that you need to fill out (i.e. MAA103 Budgeting Assignment.xlsx).

Note that all values in the FactSheet are based on your Student ID and Group Number from the Group_Information worksheet. Please make sure you enter in the correct information first before reading this FactSheet.

Requirements

Part A - Budget Report Spreadsheet (36 + 36 = 72 marks):

Your manager would like you to examine and assess the financial viability of one of the proposals. Specifically, your manager would like you and your team to complete the ‘Budgeted Income Statement’ and the ‘Cash Budget’ for the proposal your team has selected and for the period between January 2022 to December 2022 inclusive.

For this part of the assessment, you need to complete the Cash Budget and Budgeted Income Statement. All the 'other' budgets will not be marked and have only been included to help you carry out any calculations you might need to fill out the Cash Budget and Budgeted Income Statement.

Your manager would like you to use the ‘usual’ Excel Budget Template, which can be found online via Cloud Deakin. Simply navigate to Content -> Assessment Resources -> Assessment 3 - Budget Report -> “MAA103 Budgeting Assignment.xlsx”.

Part B - Written Letter of Advice (18 marks):

In addition to the budget report spreadsheet, your manager would like your team to provide a letter of advice to the client (max. 900 words with approximate word break down for each part).

In the letter, your manager has asked you to:

• clearly outline which proposal you chose to analyse (50 words),
• discuss the key results from the prepared budgeted income statement and cash budget (250 words),
• make one suggestion on how the client could improve the financial success of the chosen proposal (250 words),
• identify and discuss one non-financial factor that might affect the client’s decision to proceed with the chosen proposal (250 words), and
• clearly state whether the client should proceed with the chosen proposal and why (100 words).

Learning Outcomes

This task allows you to demonstrate achievement towards the unit learning outcomes. The ULOs are aligned with specific graduate learning outcomes – that is, the skills and knowledge graduates are expected to have upon completion of their studies – and this assessment task is an important tool in determining achievement of those outcomes. If you do not demonstrate achievement of the unit learning outcomes, you will not be successful in this unit.