All work must be submitted in report format. No hand written work will be accepted. All reports must conform to the format explained in the lecture notes.

Scenario

CV Olive Oils Pty Ltd.

CV (Central Victorian) Olive Oils are centralised wholesalers of olive oil products. They are considering exporting Australian olive oil products overseas as an expansion project to two cities,one in continental Europe and the other in the UK.

Their initial research indicates that Australian olive oil product sales are popular in European and British markets. This is because the Australian product is superior to their standard market range in taste and quality and second to none to its counterparts (in Europe) and therefore can attract a profitable market sector as well as a global expansion.

CV has contacted some distributors and believes that they will be price competitive and profitable despite taking on the responsibility for paying all transport costs in both locally consolidation and delivery to overseas distributors.

Distribution

The distributors are based in Paris and London. Arrangements have been made with distributors in both cities.  The London and Paris distributors will cover transport costs and responsibilities from their warehouses to their local wholesalers and retailers. CV have confirmed that local costs within Australia and main shipping costs will be covered by them  (CV).

The operation

Negotiations have been conducted across 3 independent Victorian producers, each providing 3 standard market quality levels of product in which orders will be placed for all 3. The olive oil are packaged in class bottles designed to be both storage and a serving device, with contents of 275mil per bottle.

The olive oil orders will be transported to CV’s warehouse in Laverton from each producer at CV’s cost. They will then be mixed to give each shipment to the two overseas cities a 1/3 of a container each for the different quality levels of olive oil. It is therefore decided that the fixed operational costs should be split evenly between the three lines of olive oil as an indicative costing. All other costs can be directly linked to each of the products and need to be analysed as such.

This is a new venture for CV as a wholesaler and is set to analyse potential expansion outside of their normal business operations and hence will be recorded separately. This will the case until it can be proven that the export of olive oil under an export business structure can be/is a viable stand-alone operation. The venture will leverage off the current experience and assets of the local distribution business pending profitable results.

Assumptions

CV plans to ship one container to each city each month starting from February 2019. All revenue will be received and all costs paid in the month in which they occur. All olive oil will be sold in the month of shipment.

All orders (and quality levels) are provided in 275mil class bottles and will be transported in reinforced cartons and crated pallets.  Each carton will contain 24 bottles, each crated pallet will be packed with60 cartons and each container will hold 6 pallets.

The Financials                                                                                   The following exchanges rates

                                                                                                            apply to this analysis

                                                                                                            GBP 0.5500                Euro 0.6900

Requirements: 

CVwants an assessment and reportof the financial viability of this venture and any issues to consider.

a)    Based on the data and assumptions provided, prepare a columnar statement of financial performance to include with the report for Feb next year. Thereport(one report) of financial assessment and viability forboth London and Paris can be presented, these also need to be inclusive of the following.

b)    Show the break even sales required for the total venture in both dollar and volume terms.

c)    Calculate the break even sales required for London and Paris in both dollar and volume terms.

d)    Show the margins of Safety for Paris, London and the entire operation.

e)    If the Australian dollar appreciated (strengthened) by 5% against Sterling anddepreciated 10% against the Euro, advise CVwhat effect this would have on profits and breakeven point.

f)     Comment on the viability of the venture, and which of the two proposals (London or Paris) will be more profitable for the exporter. Be sure to include as part of your report, risk of exchange rate exposure.

All working must be shown in the calculations of breakeven analysis

Clearly show the exchange rate and date of the rate

Where

This assessment will take place in class/out of class.

How

The task  must be completed and presented correctly for you to be assessed as competent or not yet competent  for this assessment task

·         This is an open ‘book’ assessment.

·         Ensure that you submit assessments on or before the due date.

·         Always retain a copy of your assessment tasks. (hard copy and soft copy)

·         When you submit work for assessment at RMIT University you need to use this task document as the  cover sheet which includes a declaration and statement of authorship.

·         You must complete and submit this task document with all work you submit for assessment, whether individual or group work. On this task document and submission via Canvas you declare that the work you are presenting for assessment is your own work.

Please make arrangements with your assessor at least one week prior to the assessment due date if you feel you require special allowance or allowable adjustment to this assessment (e.g. verbal assessment or additional time).

·         Please write your full name on the student version of the assessment task (do not use nicknames or abbreviations)

·         You are allowed support only from your assessor e.g. asking for clarification of a question

·         You must submit your work to your assessor/ online

·         You must answer all questions correctly to be deemed satisfactory in this assessment

·         You will be assessed as competent or not yet competent

You can appeal the assessment decision according to the RMIT Assessment Policy and Procedures

·         Computer and Internet access

·         Appropriate space to complete the assessment

CVwants an assessment and report of the financial viability of this venture and any issues to consider.

a)    Based on the data and assumptions provided, prepare a columnar statement of financial performance for Feb next year. Also, prepare a reportof financial assessment forboth London and Paris as well as providing a combined result.

b)    Show the break even sales required for the total venture in both dollar and volume terms.

c)    Calculate the break even sales required for London and Paris in both dollar and volume terms.

d)    Show the margins of Safety for Paris, London and the entire operation.

e)    If the Australian dollar appreciated (strengthened) by 5% against Sterling anddepreciated 10% against the Euro, advise CVwhat effect this would have on profits and breakeven point.

f)     Comment on the viability of the venture, and which of the two proposals (London or Paris) will be more profitable for the exporter. Be sure to include as part of your report risk of exchange rate exposure.

1.    Calculate foreign currency sales and costs first, then convert to $A.

2.    Calculate the revenues and costs in each of the cities, then the totals.

3.    Group costs into variable and fixed.

4.    Complete a profit statement for Paris and London and then total them. Using Excel to complete this assignment will be beneficial

Calculate the revenues and costs in each of the cities, then the totals.

Group costs into variable and fixed.

Complete a profit statement for Paris and London and then total them. Using Excel to complete this assignment will be beneficial

·        Students must use this document as their cover sheet, which is also to be used for grading their assessment.

• Students must fill in all required information in this document, and include their assessment at the end of this document.
• Students must submit their assessment online through Canvas
• All students must submit a copy of the assessment.

START YOUR REPORT HERE……