Assessment information:
MOD004446 Introduction to Accounting and Finance
Assignment Brief 2017/18 Semester 1
NEW HAIR PRODUCT
SCENARIO:
You have developed a new hair product (shampoo, conditioner, balm, hair mask), which you believe could revolutionise the market. It is a healthy alternative to the existing range of hair products.
Following on from the Dragon’s Den success of Levi Root’s Reggae Reggae Sauce – (search the internet if you are unfamiliar with this story), you have decided to make a pitch to a small group of potential investors.
You know that any potential investor will expect you to have a good knowledge of how much your product will cost to produce and also of the expected level of sales and profit your product is predicted to make.
To keep things simple, you decide to produce your new hair product in one size only. (Students must choose the size of the product and also the type of packaging).
REQUIRED:
Part 1 – 10 Marks
List the assumptions you have used to produce your key financial data and introduce the product.
Part 2 – 5 Marks
Prepare a marginal costing cost statement for your product on a ‘per unit’ and 12 months sales/production basis.
Part 3 – 50 Marks (see details below)
Produce the following financial documents for the first 12 months of trading:
- Cash Budget (month by month) 20 marks
- Forecast Income Statement for the year 15 marks
- Forecast Statement of Financial Position (Balance Sheet) for the year 15 marks
Part 4 – 35 Marks
Write a 1,000 word ‘pitch’ explaining the costing and financial data from tasks 1-3 above, to your potential investors.
Total 100 marks
Rationale for assessment design:
The module is assessed by two elements: (1) in class exam in week 10 and (2) written assignment (an equivalent of 2,250 words). Both elements focus on learning outcomes set in this module. Written assignment is focused on a case study which describes a Business plan prepared by the student. This should help the students in the process of understanding and self-producing financial statements.
Links to module learning outcomes:
Both exam and assignment include all learning outcomes set in this Module.
Links to course learning outcomes:
The Module is studied by students from various courses as understanding Accounting and Finance is crucial for their future carrier in business.
Assessment information:
Introduction to Accounting and Finance – Guidelines for Costing data
Marginal Costing Statement / Income Statement
The net profit margin (net profit as a percentage of sales) for a hair product is anything between 12% and 18%. The difference between gross profit margin and net profit margin will be a good estimate of fixed costs. (Remember to include depreciation in your fixed costs.)
Other useful statistics:
Direct materials are usually approximately 22-27% of sales figure.
Direct labour is usually approximately 22-27% of sales figure.
More about the Income Statement:
Cost of Sales:
There are two options:
Option 1
Use a simplified Cost of Sales which is just materials.
Cost of Sales = opening inventory (which will be zero) + purchases – closing inventory
I recommend you use Option 1 if you have not done any accounting before.
Option 2
Calculate the cost of sales based on variable cost, ie: direct materials including packaging, direct labour and any direct overheads.
If you go for Option 2, you will need to show direct and indirect labour costs and direct and indirect overheads separately on your cash budget.
How your assessment is graded:
This assignment is in the form of a scenario, which covers all learning outcomes for this module.
Expectations and Assessment Criteria
| Task | Expectations / Marking Criteria |
| 1. List the assumptions you have used to produce your key financial data and introduce your product.
| Students must provide a list of assumptions and sources of information used. (10 marks)
Marking guide Excellent 9 – 10 Good 7 – 8 Satisfactory 5 – 6 Basic 3 – 4 Limited 1 – 2 Inadequate 0
|
| 2. Prepare a marginal cost statement for your product.
| The marginal cost statement should be presented in marginal costing format. (5 marks)
Marking guide · Selling Price per unit & total 1 · VC per unit & total 1 (note VC can be just materials, in which case it should be approx 25% of SP, or materials plus labour, in which case it should be approx 50% of SP) · Contribution per unit & total 1 · Profit 1 · FC 1
|
| 3. Produce the following financial documents: a. Cash Budget b. Forecast Income Statement c. Forecast Balance Sheet
| Students need to demonstrate understanding of the purpose of the three documents which all link together. The balance sheet should balance and link to the Income statement and the Cash budget.
Marking guide Cash Budget (20 marks) · Layout 4 · Sales and costs consistent with MC statement after allowing for closing stock and depreciation 6 · Evidence of extra effort, eg: credit sales/purchases, seasonality, closing inventory 10
Forecast Income Statement (15 marks) · Layout 4 · Consistent with MC statement 6 (ok if labour is VC on MC, but part of expenses on IS.) · Depreciation either included or n/a if NCA’s rented 5
Forecast Balance Sheet (15 marks) · Layout 4 · Consistent with CB & IS (bank balance & closing stock) 6 · BS balances correctly 5 |
| 4. Write a 1,000 word ‘pitch’ explaining the costing and financial data from tasks 2 and 3 above, to your potential investors.
| This document should be in a basic report format. Students must write the report in line with the assignment scenario, ie: the report is to be written TO your potential investors, FROM you (a potential entrepreneur). Essential components of the report: • Title Page • Introduction • Main Section • Conclusion
Main Section: ‘The Pitch’ The purpose of the main section is to sell the idea of your new product to your potential investors, to persuade them to invest in your new business. As this is an accounting and finance module, the emphasis of the pitch must be financial. (35 marks) Marking guide · Introduction 3 · Knowledge/Understanding of the contents/purpose of the data and financial documents produced: Excellent 26-30 Good 21-25 Satisfactory 16-20 Basic 11-15 Limited 6-10 Inadequate 0-5 · Conclusion 2
|
Other skills and competencies
You are required to follow Harvard referencing style. This style is used in all your future assignments submitted.