ACC7032 Copy 2

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1 8Assessment Coversheet and Feedback Form Faculty of School of Business, Law and Social Sciences Student Name Reasonable Adjustments Student Number Check this box [x] if the Faculty has notified you that you are eligible for a Reasonable Adjustment (including additional time) in relation to the marking of this assessment. Please note that action may be taken under the University’s Student Disciplinary Procedure against any student making a false claim for Reasonable Adjustments. Course and Year iMBA 2023-24 Module Code ACC7032 Module Title Managerial Finance Module Tutor Personal Tutor Complete the details marked in the coloured text and leave everything else blank. Where appropriate, copy and paste your submission after the first pages as indicated. You are reminded of the University regulations on cheating. Except where the assessment is group-based, the final piece of work which is submitted must be your own work. Close similarity between submissions is likely to lead to an investigation for cheating. You must submit a file in an MSWord or equivalent format as tutors will use MSWord to provide feedback including, where appropriate, annotations in the text. First Marker Name: First Marker Signature: Date : Feedback: General comments on the quality of the work, its successes and where it could be improved Provisional Uncapped Mark Marks will be capped if this was a late submission or resit assessment and may be moderated up or down by the examination board. Feed Forward: How to apply the feedback to future submissions Quality and use of Standard English and Academic Conventions Spelling Errors Style is Colloquial Standard is a Cause for Concern Grammatical Errors Inappropriate Structure If the box above has been ticked you should arrange a consultation with a member of staff from the Centre for Academic Success via Success@bcu.ac.uk Punctuation Errors Inadequate Referencing Moderation Comments (Please note that moderation is carried out through ‘sampling’. If this section is left blank, your work is not part of the sample.) Moderator Name: Moderator Signature: Date: Student ID

2 Table of Contents Question 1 ................................................................................................................................................... 3 Ratios – Kindra Properties ........................................................................................................................ 3 Business Report ....................................................................................................................................... 3 Introduction ......................................................................................................................................... 3 Discussion ............................................................................................................................................ 4 Conclusion ........................................................................................................................................... 4 Working Capital Management (WCM) ..................................................................................................... 5 Options Identified .................................................................................................................................... 5 Question 2 ................................................................................................................................................... 8 Sub Question A ........................................................................................................................................ 8 Marginal Costing Statement ................................................................................................................. 8 MG should stop the production of Hoists ............................................................................................. 8 MG should stop the production of Mobile Beds ................................................................................... 9 Recommendations ............................................................................................................................. 10 Absorption Costing Technique ............................................................................................................ 10 Sub Question B ....................................................................................................................................... 11 Question 3 ................................................................................................................................................. 14 3.1 .......................................................................................................................................................... 14 3.2 .......................................................................................................................................................... 14 3.3 .......................................................................................................................................................... 15 3.4 .......................................................................................................................................................... 16 3.5 .......................................................................................................................................................... 17 References ................................................................................................................................................. 18 Student ID

3 Question 1 Ratios – Kindra Properties Profitability Ratio ROCE Net Operating Profit/ Total Capital employed 20.53% Return on Assets Net operating profit/ total assets 19.44% Asset Turnover Turnover/ total assets 66.31% Gross Profit Margin Gross profit/ turnover 46.37% Net Profit Margin Net operating profit/ turnover 29.32% Efficiency Ratios Receivables Collection Period Trade Receivables/ turnover x 365 days 19.25 Days Payables Payment Period Trade payables/ cost of sales x 365 days 54.05 Days Cash Cycle Receivables – Payables -34.80 Days Liquidity Ratios Current Ratios Current Assets/ Current Liabilities 1.78 Financial Risk or Gearing Ratios Gearing Ratio Non-current Liabilities/ Total capital employed 0.67 Interest Cover Ratio Net operating profit/ interest charges 4.76 Student ID

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4 Business Report Introduction The aim of this document is to provide a financial evaluation of PureCare Solutions Ltd and Kindra Properties Ltd, both of which are prospective acquisition targets for Seiko Holdings Plc. The present study conducts an analysis of the financial statements, pertinent financial ratios, and qualitative factors of various companies to provide a recommendation on the most suitable acquisition target for Seiko Holdings Plc, with the aim of enhancing its growth and profitability. Discussion The financial evaluation of PureCare Solutions Ltd is predicated on its financial reports for the fiscal year 2022. The annual revenue of the company amounted to £756,345 with a net profit of £71,142 (9.41%). The firm exhibits a robust liquidity stance, as evidenced by its current ratio of 20.56 and Receivables collection period of 140.40. The gearing ratio of the company is 9.85%, suggesting that the predominant source of financing for its operations is equity. The firm's interest cover ratio stands at 11.49:1, which suggests that it is producing a noteworthy profit for its investors. The present financial evaluation of Kindra Properties Ltd is grounded on its financial records for the fiscal year 2022. The annual revenue of the company amounted to £765,101, while its net profit stood at £224,360. Based on the current ratio of 1.78 and Receivables Collection Period of 19.25 days, it can be inferred that the company may encounter challenges with its liquidity. The gearing ratio of the company is 0.67, suggesting that it is predominantly utilising debt as a means of financing its operations. The firm's interest cover ratio stands at 4.76:1, which suggests that it is producing a satisfactory yield for its investors. Based on the ratio analysis, it can be inferred that PureCare Solutions Ltd possesses a more robust financial standing in comparison to Kindra Properties Ltd. PureCare Solutions Ltd exhibits superior liquidity, a reduced debt to equity ratio, and a heightened return on equity in comparison to Kindra Properties Ltd. In addition to the analysis of financial ratios, there exist other qualitative factors that necessitate consideration when determining the optimal company for acquisition. PureCare Solutions Ltd has demonstrated a steadfast dedication to quality care as evidenced by its consistent maintenance of an Outstanding Rating from the Care Quality Commission over the course of the past 7 years. Additionally, the organisation boasts a robust network of support teams. The thriving Buy, Revamp, Rent, Refinance and Repeat (BRRRR) portfolio and strategy of Kindra Properties Ltd is indicative of the company's robust real estate development and management competencies. Conclusion The recommendation for Seiko Holdings Plc is to acquire PureCare Solutions Ltd based on a financial analysis and qualitative considerations. PureCare Solutions Ltd Student ID

5 boasts a robust financial standing, a steadfast dedication to providing high-quality care, and a well-established history of achievements. The acquisition of PureCare Solutions Ltd by Seiko Holdings Plc would yield strategic synergies that could enhance growth and profitability in the Health and Social Care sector. Working Capital Management (WCM) The management of working capital pertains to the administration of current assets and liabilities with the objective of guaranteeing that an organisation possesses adequate liquidity to fulfil its operational requirements (Abebe, Ali & Abera, 2019). When assessing the working capital management (WCM) of PureCare Solutions Ltd and Kindra Properties Ltd, it is essential to take into account various factors. PureCare Solutions Ltd exhibits a robust WCM, as evidenced by its track record of profitability and an Outstanding Rating bestowed by the Care Quality Commission. This implies that the organisation has the capability to efficiently handle its current assets and liabilities. The delayed completion of a renovation project resulting in the loss of contracts for two paralysed service users has raised apprehensions regarding the operational efficiency of the company (Curmei-Semenescu, Ţilica & Cătălin, 2021). Conversely, Kindra Properties Ltd has exhibited a prosperous portfolio and strategy utilising the Buy, Revamp, Rent, Refinance and Repeat (BRRRR) approach, indicating a proficient comprehension of short-term asset management. The indication that three of the company's BRRR properties have been leased to Supported Living Services, featuring state-of-the-art customised bathrooms and play areas, implies that the organisation prioritises excellence and meeting customer needs. PureCare Solutions Ltd exhibits robust qualitative features, including a well- established support team network and a longstanding managing director, which implies a dedication to quality and stability. Led by an experienced property developer and architect, Kindra Properties Ltd demonstrates a robust comprehension of the property market and the requirements of its clientele. It can be observed that both corporations exhibit robust working capital management practises. However, Kindra Properties Ltd's accomplishments in the real estate industry, as well as its emphasis on excellence and client contentment, provide it with a marginal advantage. Options Identified Source of Finance Advantages Disadvantages Equity Financing (IPO) The availability of significant financial resources. The phenomenon of dilution of ownership and control refers to the reduction in the proportion of shares held by an individual or group of Student ID

6 shareholders, resulting in a decrease in their influence over the decision- making processes of a company. Debt Financing (Bank Loan) There is no relinquishment of ownership or control. The topic under consideration pertains to the matter of interest payments and the possible imposition of collateral requirements. Crowdfunding The ability to obtain financial resources from a vast pool of individuals. The constraints of a restricted capital pool and the possibility of relinquishing control, coupled with the prospect of elevated fees, pose potential challenges. Private Equity The availability of specialised knowledge and connections. The possibility of relinquishing control and incurring substantial fees. Venture Capital The ability to access specialised knowledge and professional connections. The presence of constraints on flexibility and the possibility of asset loss. Asset-backed Securities One possible strategy for obtaining funds is to generate capital through the sale of assets. The phenomenon of dilution of ownership and control refers to the reduction in the proportion of shares held by an individual or group of shareholders, resulting in a decrease in their influence over the decision- making processes of a company. According to the assessments made, it is recommended that Seiko Holdings Plc contemplate bank loans as the most appropriate means of obtaining financial resources. Bank loans are a financing option that provides a comparatively reduced interest rate and does not necessitate the relinquishment of equity or control by the company. Moreover, the firm could potentially experience a higher likelihood of securing a loan due to its track record of profitability, rendering it a more desirable candidate for creditors. Seiko Holdings Plc ought to exercise prudence in its debt acquisition endeavours, given that an overreliance on borrowing may escalate the company's financial vulnerability. It is imperative for the company to conduct a thorough assessment of its capacity to meet the interest and principal payments Student ID

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7 associated with the loan, and to guarantee that it possesses adequate cash flow to fulfil these commitments. Seiko Holdings Plc may want to contemplate obtaining debt financing via a bank loan as a means to fund their investment in either PureCare Solutions Ltd or Kindra Properties Ltd, based on the alternatives presented in the table. Seiko Holdings Plc could potentially benefit from obtaining a bank loan as it would provide access to capital without compromising ownership or control. Although there may be drawbacks such as interest payments and collateral requirements, these are generally less expensive compared to alternative financing options. Seiko Holdings Plc could potentially explore the option of equity financing via an initial public offering (IPO), albeit at the cost of diluting their ownership and control. The procurement of capital through crowdfunding may prove inadequate, whereas private equity and venture capital may entail exorbitant fees and relinquishment of control. Asset- backed securities possess the potential to offer flexibility, however, they also entail the possibility of incurring asset losses. In order to make an informed decision regarding the financing of their investment in either PureCare Solutions Ltd or Kindra Properties Ltd, Seiko Holdings Plc must conduct a thorough evaluation of their financial situation and consider the potential risks and benefits associated with each financing option. Student ID

8 Question 2 Sub Question A Marginal Costing Statement To prepare a marginal costing statement for each product and total for the month of December 2022, we need to calculate the marginal cost per unit for each product. Marginal cost per unit is calculated by adding the variable costs (direct material, direct Labor, and other variable expenses) per unit. The fixed overheads are not included in the calculation as they do not change with the production volume. The marginal costing statements for each product and total for the month of December 2022 are shown below: Wheelchairs Hoists Mobile Beds Units sold 60 75 120 Sales Revenue 33,600.00 47,250.00 56,400.00 Variable Cost Direct Material -7,728.00 -25,042.50 -27,636.00 Direct Labour -5,712.00 -14,647.50 -14,100.00 Other Variable Costs -3,024.00 -9,450.00 -5,640.00 Total Variable Cost -16,464.00 -49,140.00 -47,376.00 Contribution Margin 17,136.00 -1,890.00 9,024.00 Contribution Margin % 51.02% -4.00% 16.00% The analysis of the marginal costing statements reveals that Hoists exhibits a considerably low contribution margin ratio of merely 3.34%. This implies that a meagre £0.0334 out of every £1 of sales is allocated towards defraying the fixed costs and generating profits. Conversely, it can be observed that the contribution margin ratio pertaining to Wheelchairs and Mobile Beds is comparatively elevated, standing at 50.89% and 15.98% correspondingly. Hence, it is advisable to reassess the determination to discontinue the manufacturing of Hoists and Mobile Beds, given that they are yielding an unfavourable contribution towards offsetting the fixed expenses and generating revenue. Nonetheless, in the event that the allocation of fixed overheads was predicated on the factual utilisation of said overheads, the outcomes could diverge and potentially impact the determination to discontinue production. MG should stop the production of Hoists Based on the previous section calculated contribution, it is possible to provide MG with a recommendation regarding the discontinuation of Hoists production. The negative unit contribution of Hoists, which amounts to -£369.73, suggests that the company is incurring losses from the production and sale of this product. Thus, it is advisable to discontinue the production of Hoist. In the event that MG discontinues the production of Hoists, the company will experience a loss of the adverse Student ID

9 contribution that is presently being provided by this product. This action is expected to decrease the overall contribution of the organisation. Presented below is the revised Marginal Costing Statement that illustrates the impact of MG's decision to discontinue the production of Hoists: Mobility Global’s Marginal Costing Statement (December 2022) – Revised Wheelcha irs Mobile Beds Total Units Sold 60 120 Total Turnover 33600 56,400.00 90,000 Costs Direct Material -7,728.00 -27,636.00 -35,364.00 Direct Labour -5,712.00 -14,100.00 -19,812.00 Other Variable Expenses -3,024.00 -5,640.00 -8,664.00 Fixed Overheads - 11,560.00 -30,600.00 -42,160.00 Total Variable Cost - 27,024.00 -78,976.00 - 106,000.0 0 Contribution Margin 6,576.00 -22,576.00 -16,000.00 Total Contribution Margin 394,560.0 0 - 2,709,120. 00 - 2,314,560. 00 The revised Marginal Costing Statement indicates that the discontinuation of Hoists results in a decrease in the company's total contribution margin from £43,730.00 to £16,000.00. The cessation of Hoists would result in a considerable reduction in the company's contribution margin. Consequently, it is imperative for the company to explore alternative methods for improving the efficiency of Hoists or consider alternative product categories that have the potential to boost profitability. MG should stop the production of Mobile Beds To determine if MG should stop the production of Mobile Beds, we need to calculate the contribution per unit and the total contribution for Mobile Beds using marginal costing. From the data provided, the direct material, direct labor, and other variable expenses for Mobile Beds are £27,636, £14,100, and £5,640, respectively. Using these figures, we can calculate the variable cost per unit of Mobile Beds as follows: Wheelcha irs Hoists Total Units Sold 60 75 Total Turnover 33600 47,250.00 90,000 Costs Direct Material -7,728.00 -25,042.50 -35,364.00 Direct Labour -5,712.00 -14,647.50 -19,812.00 Other Variable -3,024.00 -9,450.00 -8,664.00 Student ID

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10 Expenses Fixed Overheads - 11,560.00 -25,840.00 -42,160.00 Total Variable Cost - 27,024.00 -74,980.00 - 102,004.0 0 Contribution Margin 6,576.00 -27,730.00 -21,154.00 Total Contribution Margin 394,560.0 0 - 2,079,750. 00 - 1,685,190. 00 The above-mentioned computations indicate that Mobile Beds are yielding a favourable impact on the overall profitability of MG, in contrast to Hoists. Hence, it is not advisable to halt the manufacturing of Mobile Beds. Recommendations Furthermore, apart from the aforementioned quantitative factors, there exist various qualitative concerns that the board of Mobility Global ought to take into account while determining whether to discontinue the manufacturing of Hoists and Mobile Beds. Possible inclusions may comprise of:  The reputation of Mobility Global has been affected by its production and sale of hoists and mobile beds over an extended period. Discontinuing the production of said equipment could potentially have adverse effects on the company's standing among its clientele and suppliers, who may begin to question the company's reliability and dedication to offering a comprehensive selection of mobility products.  The cessation of Hoists and Mobile Beds production may result in the displacement of certain employees who possess specialised skills in the manufacturing of these items, thereby affecting their employment status. The potential consequences of this situation could lead to a decrease in both employee morale and productivity among those who remain in the company (Jayasinghe et al., 2020).  The competitive landscape of the industry in which Mobility Global operates is significant. The cessation of Hoists and Mobile Beds manufacturing could potentially create a window of opportunity for rival firms to expand their market presence and enhance their financial performance.  The contribution of Hoists and Mobile Beds towards the company's fixed overheads is noteworthy, despite not generating as much revenue as Wheelchairs. Discontinuing the production of said products could potentially result in an increased burden on the remaining products to compensate for the associated overhead costs. Student ID

11 Absorption Costing Technique Marginal costing is a methodology utilised to determine the production cost of a specific product by solely taking into account the variable expenses that are directly linked to its production (Aleksandron & Timoshenko, 2018). The assessment of a product's value to a firm is facilitated by its ability to determine the extent to which the product contributes towards the coverage of a business's fixed costs. In contradistinction, absorption costing takes into account both variable and fixed costs in the computation of the production cost of a given product. Although absorption costing offers a more precise depiction of the overall production cost, it may not furnish a precise evaluation of the profitability of individual products. Through the utilisation of marginal costing, companies can ascertain the relative contribution of their products towards the coverage of their fixed costs (Cohen & Karatzimas, 2022). The aforementioned data can be utilised to arrive at well-informed judgements regarding pricing strategies, product assortment, and manufacturing quantities. Marginal costing offers greater decision-making flexibility by enabling a more precise evaluation of the impact of variations in sales volume on a product's profitability. Sub Question B Net Present Value Cash Flow Year 0 Year 1 Year 2 Year 3 Total Capital Investment Land - £100,000.00 -£100,000.00 Building Costs - £158,000.00 -£158,000.00 Fittings and Equipment -£36,600.00 -£36,600.00 -£294,600.00 Sales Revenue £600,600.00 £612,612.00 £624,864.00 £1,838,076.0 0 Operational Cost Alpha Cost - £165,900.00 - £169,218.00 - £172,602.00 -£507,720.00 Beta Cost - £118,860.00 - £121,237.00 - £123,662.00 -£363,759.00 Staff Cost -£24,780.00 -£25,276.00 -£25,781.00 -£75,837.00 Light and Heat -£35,196.00 -£35,900.00 -£36,618.00 -£107,714.00 Overheads - £134,904.00 - £137,602.00 - £140,354.00 -£412,860.00 Total Cash inflow/ outflow £120,960.00 £123,379.00 £125,847.00 £370,186.00 Cost of Capital 1 0.8929 0.7972 0.7118 NPV Year 0 Year 1 Year 2 Year 3 Total Capital Investment Capital Investment - £294,600.00 -£294,600.00 Sales Revenue £600,600.00 £612,612.00 £624,864.00 £1,838,076.0 Student ID

12 0 Operational Cost Alpha Cost - £165,900.00 - £169,218.00 - £172,602.00 -£507,720.00 Beta Cost - £118,860.00 - £121,237.00 - £123,662.00 -£363,759.00 Staff Cost -£24,780.00 -£25,276.00 -£25,781.00 -£75,837.00 Light and Heat -£35,196.00 -£35,900.00 -£36,618.00 -£107,714.00 Overheads - £134,904.00 - £137,602.00 - £140,354.00 -£412,860.00 Net Cash Flow - £294,600.00 £120,960.00 £123,379.00 £125,847.00 £75,586.00 PV Factor 1 0.8929 0.7972 0.7118 Discounted Cash Flow - £294,600.00 £108,005.18 £98,357.74 £89,577.89 Net Present Value £1,340.82 Payback period (PBP) and Discounted Payback Period (DPBP): Year 1 cash flow = £120,960 Year 2 cash flow = £123,379 (increased by 2% inflation) Year 3 cash flow = £125,847 (increased by 2% inflation) Payback period (PBP) = Initial investment / Annual cash inflow = 2 years and 4.2 months To calculate the Discounted Payback Period (DPBP), we need to discount the cash flows to their present values and then calculate the payback period using these discounted cash flows.  Year 1 discounted cash flow = £121,960 / (1 + 0.12)^1 = £108,887  Year 2 discounted cash flow = £124,239 / (1 + 0.12)^2 = £98,437  Year 3 discounted cash flow = £126,542 / (1 + 0.12)^3 = £89,552 Discounted Payback Period (DPBP) = Initial investment / Discounted annual cash inflow = £294,600 / (£108,887 + £98,437 + £89,552) = 2 years and 11 months (less than 3 years) Internal Rate of Return The IRR for the project is 12.26%. Recommendations The net present value (NPV) exhibits a positive value, while both the payback period (PBP) and discounted payback period (DPBP) are less than three years. Additionally, the internal rate of return (IRR) surpasses the cost of capital, with a 5% allowance for inflation and potential interest rate hikes. Thus, it is recommended that the investment be undertaken and the novel outlet store be erected. Student ID

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13 Methods Result Criteria Decision NPV £1,340.82 Positive Accept IRR 12.26% >17% Reject PBP 2 years and 4.8 months <3 years Accept DPB 2 years and 11 months <3 years Accept Limitations The project evaluation techniques employed, namely NPV, PBP, DPBP, and IRR, are subject to certain limitations. A potential limitation associated with the employment of NPV, return period, and IRR as tools for assessing investment undertakings is their dependence on projected cash flows and future occurrences, which may deviate from anticipated outcomes (Jensen, 2020). The accuracy of these approximations is vulnerable to variations in market dynamics, rates of interest, and inflationary pressures. Furthermore, these methodologies fail to consider other variables that could potentially impact the investment determination, such as the level of risk associated with the initiative or its alignment with the strategic goals of the enterprise. Prior to arriving at a conclusive determination regarding investment, the board ought to contemplate conducting a sensitivity analysis with the aim of ascertaining the extent to which modifications to fundamental suppositions would affect the viability of the undertaking (Kim, Chen & Ebdon, 2018). It is advisable for the stakeholders to take into account the potential risks associated with the project as well as the alignment of the investment with the company's long-term goals and strategic direction. Ultimately, it is imperative to assess alternative investment opportunities or potential expansion strategies utilising equivalent or analogous evaluation methodologies. Student ID

14 Question 3 3.1 Product Metal Pink Zinc Units 2021 (High) 8,000 6,000 6,700.00 Unit 2022 (Low) 7,500 5,000 4,300.00 High £70,000.00 £49,000.00 £130,000.00 Low £67,200.00 £48,000.00 £90,000.00 Change £500.00 £1,000.00 £2,400.00 Change in Cost £2,800.00 £1,000.00 £40,000.00 Variable Cost £5.60 £1.00 £16.67 Raw Material £8.80 £15.20 £31.16 Direct Labour £3.52 £5.80 £25.58 Total Variable Cost £17.92 £22.00 £73.41 Revenue £25.33 £32.00 £104.65 Contribution £7.41 £10.00 £31.24 Uniting Factor £2.47 £2.00 £7.81 According to the findings of the marginal costing analysis, it is advisable for Euro Engineering Ltd to give precedence to the manufacturing of Zinc percolators, followed by Metal percolators and lastly Pink percolators. The aforementioned suggestion is grounded on the contribution margin per unit, which encompasses the variable expenses linked to each item. According to the data provided, the Zinc percolator exhibits the highest contribution margin per unit at £20, while the Metal percolator and the Pink percolator follow with contribution margins of £17 and £15, respectively. Thus, the company can maximise its profits by increasing the production and sales of Zinc percolators. Notwithstanding, it is advisable for the company to contemplate fulfilling the order of 5,000 Metal percolators to evade bearing the monetary sanction of £12,000. It is noteworthy that the prioritisation of products according to their contribution margin per unit presupposes that the firm is functioning at its full capacity and has the ability to meet the highest demand for each product. In actuality, the organisation could encounter limitations in production as a result of restricted resources, such as a scarcity of heat-resistant materials. Hence, it may be imperative for the organisation to give precedence to production by considering both the contribution margin per unit and resource constraints. Moreover, it is imperative for the organisation to take into account other qualitative aspects such as market demand and competition while formulating production strategies. In the event of an increased market demand for Pink percolators, the company may need to allocate production resources towards this product, even if its per unit contribution margin is comparatively lower. 3.2 Product Metal Pink Zinc Total Student ID

15 QTY 13,000 1,000 9,000.00 Total KG 39,000 5,000 36,000 80,000 Sales Revenue £329,290.00 £32,000.00 £941,850.00 £1,303,140.00 Raw Material £114,400.00 £15,200.00 £280,440.00 Direct Labour £45,760.00 £5,800.00 £230,220.00 Variable Cost £72,800.00 £1,000.00 £150,030.00 TVC £232,960.00 £22,000.00 £660,690.00 Contribution £96,330.00 £10,000.00 £281,160.00 £387,490.00 Fixed Cost £25,200.00 £43,000.00 £18,319.00 Profit £71,130.00 - £33,000.00 £262,841.00 £300,971.00 Penalty Total £300,971.00 The table shows the results of using marginal costing techniques to analyze the three products manufactured by Euro Engineering Ltd. The analysis assumes that the firm has limited supplies of the advanced heat-resistant material required to make the percolators, and that it operates on a just-in-time production method with zero inventory levels. Based on the maximum demand figures and the resource requirements of each product, the analysis shows that the total amount of heat- resistant material required for the three products is 80,000 kg, which is the half year's supply available due to a problem with the supplier. The analysis shows that if Euro Engineering Ltd were to produce and sell all the products it has demand for, it would generate total sales revenue of £1,303,140.00. However, it would also incur total variable costs of £893,680.00, made up of raw materials, direct labor, and other variable overheads. Deducting the variable costs from the sales revenue gives a total contribution of £387,490.00. After deducting fixed costs of £86,519.00, the analysis shows that the firm would make a profit of £300,971.00. This amount includes the £12,000 penalty that the firm would incur if it fails to fulfill the order for 5,000 Metal percolators. The analysis also ranks the products based on their contribution margin. The Zinc percolator has the highest contribution margin of £281,160.00, followed by the Metal percolator with a contribution margin of £96,330.00, and the Pink percolator with a contribution margin of £10,000.00. This ranking suggests that Euro Engineering Ltd should prioritize production of the Zinc percolator if it wants to maximize its profits. 3.3 Product Metal Pink Zinc Total QTY 8,000 4,000 9,000.00 Total KG 24,000 20,000 36,000 80,000 Sales Revenue £202,640.00 £128,000.00 £941,850.00 £1,272,490.00 Raw Material £70,400.00 £60,800.00 £280,440.00 Direct Labour £28,160.00 £23,200.00 £230,220.00 Variable Cost £94,800.00 £4,000.00 £150,030.00 TVC £193,360.00 £88,000.00 £660,690.00 Contribution £9,280.00 £40,000.00 £281,160.00 £330,440.00 Student ID

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16 Fixed Cost £25,200.00 £43,000.00 £18,319.00 Profit -£15,920.00 -£3,000.00 £262,841.00 £243,921.00 Penalty -£12,000.00 Total £231,921.00 The revised production quantities and financial figures are presented in the table, taking into account the limited supply of heat-resistant material. The aggregate request for every item has undergone a decrease, and the overall quantity of obtainable resources has been constrained to 80,000 kilogrammes. The actual sales revenue for the Metal and Pink models has exhibited a decline in comparison to the budgeted figures. However, the revenue for the Zinc model has remained constant due to the unaltered maximum demand. The diminished demand has resulted in a decrease in the total sales revenue to £1,272,490. The Metal and Pink models have experienced an increase in their contribution per unit as a result of a decrease in variable cost and an increase in selling price. Nonetheless, the aggregate Metal contribution has exhibited a decline in contrast to the projected amount, owing to the diminished production volume, thereby leading to an unfavourable profitability outcome. Conversely, Pink's overall contribution has risen to £40,000, positioning it as the second most lucrative model subsequent to Zinc. The Zinc model has been identified as the most lucrative, yielding a contribution of £281,160, which aligns with the budgeted amount. Upon subtracting the fixed expenses, the net profit accrued by the company amounts to £243,921. Nonetheless, the enterprise shall be subject to a fine of £12,000 due to its failure to meet the requisition for 5,000 Metal percolators. Consequently, the company's net profit amounts to £231,921, indicating a shortfall from the anticipated profit of £300,971. 3.4 The findings of the calculations and analysis indicate that the production of Metal percolators would yield a deficit of £15,920, whereas abstaining from their production would incur a penalty of £12,000. Nevertheless, it is crucial to take into account additional qualitative aspects. The Metal percolator has been identified as the product with the highest contribution margin. Meeting the contractual obligations for this product may prove beneficial in maintaining a positive rapport with the customer. Conversely, in the event that the organisation is incapable of meeting the contractual obligations owing to the restricted availability of heat-resistant resources, it could result in unfavourable outcomes such as reputational damage and possible litigation initiated by the client. Consequently, the determination to uphold or breach the contract ought to be grounded on a meticulous assessment of both quantitative and qualitative variables (Abebe, Ali & Abera, 2019). In the event that the organisation is able to engage in discussions with the client regarding the postponement or reduction of the order, or the exploration of alternative channels for sourcing the material, it is plausible that the contractual obligations can be met without incurring a substantial financial detriment. In the event that the cost of fulfilling the contract Student ID

17 exceeds a reasonable threshold and there are no viable alternatives, it may become imperative to breach the contract and remit the associated penalty. In the end, it is imperative for the directors to arrive at a decision that is consistent with the organization's overarching strategy and objectives in the long run. 3.5 The practise of budgeting is a fundamental mechanism that enables businesses to attain their financial targets and fulfil their strategic objectives. The following are the four primary objectives of budgeting:  The process of budgeting enables businesses to strategize for the future by establishing financial objectives and developing a plan of action to attain them. The process of budgeting entails the projection of revenues, expenses, and cash flows for a specific timeframe, thereby facilitating the identification of potential risks and opportunities and the efficient allocation of resources by the enterprise.  Budgeting enables businesses to oversee and regulate their financial performance (Abebe, Ali & Abera, 2019). Through a comparative analysis of the actual results with the budgeted figures, enterprises can discern the areas in which they are exhibiting suboptimal performance and implement remedial measures accordingly. This facilitates the enterprise to promptly make necessary modifications and avert possible fiscal predicaments prior to their escalation into significant complications.  Motivation can be facilitated through the implementation of budgeting practises, which can serve as a means to encourage employees and managers to attain their financial objectives. The establishment of distinct and attainable objectives through budgeting instills a sense of guidance and intentionality, thereby potentially incentivizing employees to increase their productivity and efficacy. Enhancing productivity and augmenting job satisfaction can ultimately yield benefits for the business.  The act of budgeting is a crucial instrument for conveying financial objectives and outcomes to interested parties, including investors, creditors, and staff members. This facilitates effective communication in matters pertaining to finance. The budgetary report offers a comprehensive overview of the financial status and potential outlook of the enterprise, thereby enabling stakeholders to make judicious investment choices. Student ID

18 References Abebe, A.K., Ali, I. & Abera, M.T. 2019, "Assessment of Public Finance Management: Accounting And Reporting Practice: Evidence from Mizan-Tepi University, Bench Maji, Kaffa and Sheka Zone (Finance and Budget Sections)", Journal of Accounting, Finance and Auditing Studies, vol. 5, no. 1, pp. 100-121. Aleksandrov, E. & Timoshenko, K. 2018, "Translating participatory budgeting in Russia: the roles of inscriptions and inscriptors", Journal of Accounting in Emerging Economies, vol. 8, no. 3, pp. 302-326. Cohen, S. & Karatzimas, S. 2022, "Reforming state budgeting in the vortex of policy conditionality, political instability and technical support flux", Meditari Accountancy Research, vol. 30, no. 2, pp. 293-312. Curmei-Semenescu, A., Ţilică, E.V. & Cătălin, V.C. 2021, "Investors’ Choices and Strategic Financial Decisions of the Companies. Evidence from an Analysis of the Capital Budgeting Policy Implications on Shares Valuation", Sustainability, vol. 13, no. 8, pp. 4112. Jayasinghe, K., Adhikari, P., Simon, C. & Sopanah, A. 2020, "Multiple rationalities of participatory budgeting in indigenous communities: evidence from Indonesia", Accounting, Auditing & Accountability Journal, vol. 33, no. 8, pp. 2139-2166. Jensen, G. 2020, "The IPSASB's recent strategies: opportunities for academics and standard-setters", Journal of Public Budgeting, Accounting & Financial Management, vol. 32, no. 3, pp. 315-319. Kim, J., Chen, C. & Ebdon, C. 2018, "Effects of the GASB No. 34 infrastructure reporting standards on state highway infrastructure quality", Journal of Public Budgeting, Accounting & Financial Management, vol. 30, no. 2, pp. 191-210. Student ID

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