Planning holds an immense importance, as it shapes the steps that must be taken out to achieve the desired objectives (Dobie, 2007, p.63). This case presents a scenario of a brewery that needs to evaluate and present the feasibility of a project. Therefore, a planned is developed to assess whether the project is profitable and the activities that are planned to be carried out are as follows:
To know what must be achieved through analysis, what is needed to be analyzed and determined
Developing Cost Statement
To find out all the relevant costs associated with the given project
Determining breakeven point and analyzing
To find out when the brewery will start incurring profits
Forecasting a cash budget
To determine and assess the cash outflows and cash inflows in order to get the profitability picture
Using investment appraisal technique to assess the profitability of project
To determine the feasibility of a project i.e. whether the project is profitable or not
Analyzing the results
3rd & 4th Week
To determine the overall costs and profitability aspects of the project and find out whether the project must be accepted or not
Determining deficiencies or discrepancies
To get as accurate results as possible
Taking corrective measures and making amendments
To get accurate findings
Presenting final findings and making sound decision
To make a right decision about the project acceptance
Stage 2 - Developing
Cost Statement
Costing Statement (Absorption Costing) Variable Costs Per Unit Materials € 6.06 Selling price per unit € 12 Labour € 5.00 Number of units produced € 450,000 Variable O.H. € - Number of units sold € 450,000 Sell & Admin. € - Number of units in ending inventory € - Fixed Manufacturing Costs € 39,000 Fixed Sell. & Admin. Costs € 86,000 Sales € 5,400,000 Variable and Fixed Manufacturing Costs Materials € 6.06 € 2,727,000 Labour € 5.00 € 2,250,000 Variable Overhead € - € - Fixed Manufacturing € - € 39,000 Manufacturing Costs for 450,000 units € 11.06 € 5,016,000 Ending Inventory (0 units) € - Manufacturing cost of goods sold € 5,016,000 Gross Margin € 384,000 Variable selling and administrative expenses € 1.00 € - Fixed Selling and Administrative Expenses € 86,000 Net Operating Income € 298,000
The costing statement reveals different costs that will be occurred. Selling price is set to be € 12 per bottle. 450,000 bottles will be produced annually and thereby variable costs are calculated per this amount. The cost of material includes ingredients cost: Malted Barley, Hops, and yeast. We have also undertaken the cost of bottle. As amounts are given in tones or kilos, they are converted as per litre, since it is assumed that one bottle will be equal to 2 litres. Similarly, the cost of labour include per hour cost of production workers as well as per hour cost of packaging, labelling, and bottling. In addition, fixed production overhead costs as well as fixed ...