ࡱ> XZW%` bjbj :̟̟^4D%%%hT&,&LD62&&:''''''w6y6y6y6y6y6y68hn:y6'''''y6''6)))'''w6)'w6))V52@2'& u%'u2 46062x ;(  ;22 ;{3 '')'''''y6y6)X'''6''''DDDDdDDDDDD  ABC Business Case Study - Small Business Finance ABC Business is a local business which: manufactures standard widgets buys and sells some types of specialist widgets and offers consultancy services to widget users. It has been in business for 15 years and has 15 staff in sales; administration, accounting and purchasing roles. ABC is preparing its budgets / financial plans for the coming financial year ORGANISATIONAL STRUCTURE ABC Business has a manager (you). Reporting to you are: Sales Manager Who has the following staff: 3 Sales People Production Manager Who has the following staff: 4 manufacturing staff 1 maintenance staff Administration Manager Who has the following staff: Accountant Accounts clerical officer Office Assistant Purchasing Officer COST OF GOODS SOLD (Item 1) Specialist Widget Costs Retail COGS Calculation They import boxes of specialist widgets from overseas at the cost of $20 per box. They pay import tax of 10 % on each box. (Item 2) Standard Widgets - Manufacturing Costs of Good Sold Calculation ABC manufactures standard widgets. It sells them in boxes of 1000 widgets. It has 4 staff involved in the manufacturing part of the business with wages of $100 000 last year. It made 20 000 boxes of widgets last year. From last years expenses it can see that it used the following raw materials to make them: $20 000 in sand $80 000 in iron $10 000 in water $15 000 in other raw material items Other costs directly attributable to the factory production process are: Factory rent $20 000 Electricity $12 000 Machinery costs $15 000 Depreciation and maintenance of machinery $20 000 (Item 3) Widget Consultancy (Service Costs of Goods Sold Calculation) ABC offer a half day consultancy service where one of their managers will spend 3 hours on-site at a customers premises observing their processes. Then they will go away and prepare a report advising on improvements that the customer can implement. They pay their managers on average $40 per hour; and as well as the 3 hours time on site it takes an additional 4 hours for each job. Ancillary costs include: Telephone calls - $2.00 Printing - $30.00 Taxi and travel - $40.00 Additional Considerations for Cost of Goods Sold ABC Business have used last years costs for their COGS calculations. They will need to add in for expected cost increases (inflation) of 10%; while there is expected to be an increase in wages of 5%. SALES HISTORY Item 1 Specialist Widgets Last years sales history is: JULAUGSEPOCTNOVDECJANFEBMARAPRMAYJUNTotal1,0001,0001,0001,0002,0002,0002,0002,0002,0002,0002,0002,00020,000 ABC Business predicts that the achieved monthly sales volume of 2000 units will be achievable for all months PLUS it will be expanding into a new geographical area from next January so it expects a 10% growth in monthly sales from then to 2200 pm for the remainder of the year. Item 2 Standard Widgets The sales team is largely responsible for selling manufactured widgets. They have submitted the following sales estimates for standard widgets JULAUGSEPOCTNOVDECJANFEBMARAPRMAYJUNTotal3,0003,0003,0002,5002,5002,5002,0002,0002,0004,0004,0004,00034,500 ABC decides to reduce these estimates by 10% as in the past the sales people have not achieved their ambitious targets. Item 3 Consultancy The plan is to only accept 10 consultancy jobs per month ie the same as the past year, as to take on more would require staffing number review and it is expected there may be difficulties in recruiting the necessary skilled staff. EXPENSE ASSUMPTIONS ABC are planning on increasing there marketing and advertising to $3000 pm Employee wages will increase to $12 000 pm from July under the Enterprise Agreement. End of year accounting fees on $12 000 are payable in September. Annual Insurances are due in February with an estimate of $12 000 as the annual premium, with an adjustment from last years premium of $4000 in September. ABC has a bank account balance of $50 000 at the beginning of July. OVERDRAFT DETAILS ABC will need to obtain an overdraft to address its cash flow problem. It will pay interest of 20% on the amount outstanding in the prior month. FUTURE PLANS ABC plans to implement 2 key items of machinery to its production processes. The machines will each result in a 25% production cost decrease in standard widgets from the time of purchase. Option 1 If it purchases them they will cost $40 000 each. They want to buy the first in August and the second in January. The money to purchase will be raised by a loan with interest payable month. The interest rate is 10% Option 2 The machines can be rented for $2000 per month.       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