Management Accounting

Management Accounting

Introduction

The new business setup report will provide an analysis of the predictions of starting a new company that will offer two products to its customers. The company will be incorporated by the name of HBK Ltd. that will provide footwear products of simple shoes and trainer shoes. The new business setup report will be presented to the bank manager to have an overview of the financial position of the company. The company will predict the future sales, break-even, different costs, prepare budget and predict the income in the years to come. The report will also provide the analysis of the environment in which the company will operate by defining social costs and benefits of the company.

Discussion

Company Overview¸

According to the British Footwear Association footwear industry is a large part of the UK`s economy which has more than 130 companies that are selling, manufacturing, importing their products for the consumers of UK. The footwear sector will be a challenging sector for the HBK Ltd. to enter into the market and make its market position. The products that will be offered by HBK Ltd. are casual shoes and sports or trainer shoes. Both the products have a demand in UK and customers are increasing day by day for the footwear products either casual or trainer shoes. The business analysts have predicted that the sales of both the products will rise as the sport activities and people`s demand of comfortable footwear is increasing. HBK Ltd. will setup their manufacturing plant in UK and preferably it will cater the UK market but will try to enter the US footwear industry for sports shoes because US has the largest amount of athletes in different kind of sports. As there are 130 companies offering their products in UK so the HBK Ltd. will have competitors in the casual shoe market and the sportswear shoe market. The casual shoe market competitors will include Gucci, ECCO, Bata, Nine West and etc. In the sports wear market the competitors will be Nike, Addidas, Reebok and Puma. The sportswear industry is presently in the growth phase and still has potential to grow in the years to come. Apart from the threat within the industry the company will also have to face threat from the cheap imports coming in the UK from China, India and other parts of the world.

Product Cost Estimate

In order to manufacture the shoes the company will require cheap material, labour, selling and administration expenses so that HBK Ltd. is able to provide its customers best quality product at a reasonable price. All the products selling prices cost and expenses are estimated at an increase of 10 percent per anum. The variable cost estimated per unit will be:

Variable Cost:

 

 

Direct Material

1000

1500

Direct Labour

1500

2000

Variable selling and distribution expense

500

800

Total Variable Cost

 

 

Fixed Cost

20,000

30,000

Selling Price Estimate

The average selling prices of casual shoes in UK are £ 45 and price of trainers will be £ 55. The price that will be able to cover all the costs and expenses and will earn the profit ...