ACCOUNTING ANALYSIS

Case Study Assignment (HND Accounting)

Case Study Assignment (HND Accounting)

Stage 1 - Planning

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:

Project Name: Brewery Project Feasibility Assessment

Total Time for the Project: 4 weeks

Planned Activities

Duration

Objectives

Determining objectives to be achieved

1st & 2nd Week

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 ...