You will be required to write a management report to the management of Jackson Ltd directors, discussing the following issues: Provide an
Management report (CASE STUDY: Jackson Limited)
CASE STUDY: Jackson LimitedJackson Limited is a UK subsidiary of Adams Group whose head office is in Kenya. The company has been operating in the UK for the past 20 years, providing a range of services to SME’s, namely investment property funds. Over the past two decades, Jackson has been a profit-making firm, retaining its previous clients, in addition to capturing an increasing share of the market. However, the finance director of Jackson has recently got in touch with your professional consulting firm and has engaged your firm to provide them with an explanation of the cash flow problem that Jackson Limited had been facing. The company is also dependent on the parent based in Kenya for and when required.Following recent meetings of the senior managements in London and Kenya, it has been agreed that Jackson Limited should do expand the business further and raise the required capital in the UK, or perhaps in Europe, so as not to depend so much on cash coming from the parent company all the time. Consequently, the management of Jackson is considering the followings:New information systemJackson’s current system that is used to provide specialised services to its clients’ needs to be updated. The company is considering an investment in a more modern system and two possible alternatives have been proposed as outlined below.Golden packageGolden PackageDraft figures£’000Year012345New system’s costs11,500Cumulative Working Capital800500700200600Sales Revenue1,4005,1006,5005,0003,500Less:Segment A(540)(600)(950)(980)(1,200)Segment B(1,150)(1,650)(1,800)(2,200)(1,800)Overheads(200)(250)(350)(320)(310)All of the above estimates have been prepared in terms of present day cost and prices. Assume that cash flows arise at the end of each period. In additionRevenues are expected to rise by 4% in price terms per year from year 1 (start of year 2) the budget estimated selling price at start was £120.Overheads and working capital are expected to rise by 4% per year from year 1 (start of year 1)The cost of Segment A and Segment B are expected to rise in line with inflation of 4% per year from the beginning of year 1The working capital is cumulative and will be recouped at the end of year 5The cost of System Experts (SE), who have come from the Kenya have not been taken into consideration in the forecast and are as follows:System Expert 1 (SE1): Will be paid £130 per hour and expected number of hours for SE1 are 1,300hrs. The rate paid is expected to rise in line with inflation at 4% per year from year 2 and the number of hours is expected to reduce by 3% per year, every year from year 2 onwards.System Expert 2 (SE 2): Will be paid £125 per hour and expected number of hours for SE2 are 1,400hrs. The rate paid is expected to go up in line with inflation at 4% per year from year 2 and the number of hours is expected to reduce by 4% per year, every year from year 2 onwards.If Jackson Limited invests in Golden Package, then the discount rate that would be required to assess the NPV would be 10%. The table above shows the estimated outgoings and inflows for the project.Premier CentreThe Sales Manager of Jackson has just informed your company that they plan to open a centre in the UK, with a possible start date of business on 1 August 2020. You have also been informed that to start with, the company will only sell 2 new types of service packages, that of Basic Level (BL) and the Professional Level (PL). The intentions here is to test the market and check whether they can achieve break-even in the same period. A recent market research has suggested that these two are the most popular systems and will be offered at £350 for BL and £450 for PL.You have also been provided with the following information regarding the costs and estimated sales for the period mentioned above.Jackson Limited intends to put in £6,000 as start-up capital and plan to sell a total of 1,200 (combined) of BL and PL for the same period. They are not sure which of the two types of service packages will produce the most profits for Jackson.Total budgeted sales for each month are as follows: August 400, September 400 and October 400, of which 40% of each month will be for BL. You will be required to assess the best product combination of sales for the period.To help with the setup of the new Centre, the company has just concluded a deal with one of the high street banks to get a loan of £30,000 on the 1st of August 2020. The interest on this loan will be 3.5% to be paid every month. The company will be required to make 12 equal payments to repay the loan starting end of September 2020.Financial informationAs mentioned above the company plans to sell a total of 1,200 units of the service packages between 1 August and October 2020. The fixed costs for the period are as below:Rent£ 18,000Cleaning£ 1,700Loan Interest£ 3,150General insurance£ 7,500Light and heating£ 4,200Local authority charges£ 4,550Fixed cost specific to each service packageBLFLMarketing20,500£ 25,000Admin costs£ 9,500£ 11,500Staff Salary£ 18,000£ 25,000From their costs estimates, the variable costs of the services are £150 for the BL and £200 for the PL. The fixed costs are for the whole period, so they are not affected by the level of service. However, the variable costs will increase with services output (ie sales output multiplied with variable cost per service package).Revenue from the sale of BL and PL will be on the basis of 40% cash in the same month, and the remaining 60% credit to be paid the following month. Requirement:You will be required to write a management report to the management of Jackson Ltd directors, discussing the following issues: Provide an explanation on the different sources of funding the company can have and their advantages and disadvantages. You should make recommendations as to how the company can manage the same to help in the planned expansion program. Analyse the Investment proposals by using NPV and provide recommendations. You should also briefly comment on other investment proposal techniques that Jackson Limited may use, and the limitations of using those techniques The use of management tools such as Breakeven analysis and Budgets. A computation of your breakeven analysis and the cash budget for the first 3 months.An evaluation of the estimated company performance or position during the same period.A detailed Literature Review of the tools you have used such as breakeven analysis and budgets and their importance to business.Other issues for management to consider that you think are vital for them to survive and make a profit. |
Assignment Guidelines
Structure
You have been asked to produce a report. It should contain the following:
- Appropriate coversheet (as attached in this document)
- Title Page, including the given title in full.
- Executive Summary
- Contents Page
- Introduction
- Literature review to support your accounting models used.
- Sources of Funding
- Investment appraisal
- Cash budgeting
- Breakeven analysis
- Evaluation
- Any other issues to be considered.
- Conclusions and Recommendations
- Appendices which should be numbered.
- Make sure you refer your reader to them as required.LayoutYour work should be word processed in accordance with the following:
- Font style, Arial, font size 12
- 1.5 line spacing.
- The page orientation should be ‘portrait’
- Margins on both sides of the page should be no less than 2.5 cm
- Pages should be numbered
- Your name should not appear on the script.
- Appendices which should be numbered.
Additional Skills
Attend a Spotlight session as advertised here on Moodle.
Marking Criteria/Rubric
Please see the attached rubric with breakdown of the evaluative criteria that will be used for assessing this assignment.
The required reading book in this course is Managerial Accounting: Decision Making and Performance Management
Try to use some relevant academic reference such as Journal article.. The reference style is Coventry Harvard style, Include citation and reference list. I suggest you use citethisforme.com to do it. THX
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