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Assignment Brief and Guidance: Case Scenario Introduction Cafe Divine LLC was established in mid-1980 in Sultanate of Oman with the vision of "Joy in every sip". The company operates 30 high-end cafes in major cities of the country. The company employs 200 employees including factory workers, sales team, and head office employees. Your Role You are the Trainee Management Accountant of Divine Cafe LLC. You are directly reporting to Chief Management Accountant. Your tasks include the production of the annual budget, producing the monthly management accounts and providing information to management as required. Financial Performance of Divine Cafe During the meeting with you the Chief Management Accountant informed that due to current situation the Devine Cafe LLC encounters a decline in sales. Therefore, the company's management decided to reach the new customer segment through producing and selling instant coffee (Divine Instant) and coffee pods (Divine Pods). The new venture will be done through forming a subsidiary company Divine Coffee LLC. The subsidiary is expected to manufacture Divine Instant and Divine pods", with the high quality coffee beans sourced from major coffee growing regions of the world, including Colombia, Costa Rica, Ethiopia, Rwanda, Kenya, and even Yemen. The Chief Management accounted requested you to prepare a report that includes the functional and master budgets for the new subsidiary Divine Coffee LLC for the 6 month period ending on June 2021 (The board had decided to start the new venture on 01/01/2021) and calculation of relevant financial ratios considering benchmarks, key performance indicators and budgetary targets, identify variances for last two financial years of Divine Caf LLC by applying relevant strategic planning tools, financial governance to monitor strategy, management accounting skill sets and effective strategies and systems and comparing the ways in which Company can respond to financial problems effectively and efficiently. The estimated information collected from various departments related to new venture - Divine Coffee LLC is given below. Budgeted Sales for the 6 months ending 30/06/2021 Price per Product Packs pack (OMR) Divine Instant Divine Pods 5000 30 Information related to Budgeted Usage of Raw materials per pack Raw materials (in kgs) DC2 Divine Instant 0.50 0.25 0.25 Divine Pods 0.25 Cost per kg of material OMR 2 10000 10 DCI DC3 0.75 OMR 4 OMR 1 2 Information related to budgeted Raw materials for the 6 months period ending 30/06/2021 Raw materials (in kg) DCI DC2 DC3 Opening Stock (transferred from Divine Cafe) 500 200 Closing Stock 7000 2500 1000 250 Information related to expected finished goods inventories. Divine Instant Divine Pods Opening Inventory 0 Closing Inventory (in Packs) 5000 2500 0 Information related to expected labour rate and hour Divine Instant Divine Pods Expected labour hour per pack (in hours) Expected labour rate per hour (OMR) 2 Following additional information for the first six month ending 30/06/2021 for Divine Coffee is given. 1. Ordinary Share capital to be paid at 01/01/2021 is OMR 400,000 b. Cash outlay on purchase of machineries is as follows. Payable on 15/03/2021 OMR 150,000 Payable on 15/062021 OMR 150,000 c. Monthly expected sales revenue for the 6-month period is as follows. January 2021 OMR 12,500 February 2021 OMR 25,000 March & April 2021 OMR 37,500 April - June 2021 OMR 68,750 All sales are made on two months credit, as the customers are the well-established hypermarket chains there is no bad debts are expected. d. Monthly planned purchase cost of raw material are as follows: Mar-21 Apr-21 May 21 Jan-21 Feb-21 Jun-21 4.940 9,880 14,820 14,820 27.170 27,170 All the raw materials are bought on one month credit from the suppliers. e. The monthly wages and salaries expected to be OMR 16,000 f. The company expected to rent a factory space. The monthly rent payment is OMR 1000 & The closing inventory as at 30/06/2021 is expected to be OMR 22,500 h. Depreciation of the machinery for the six months is estimated to be OMR 30,000 Further you are provided with Divine Caf LLC's statement of financial position and statement of profit loss for the last two financial years (2019 and 2020) ended on 31" March. Divine Cafe LLC Statement of Profit/Loss for the year end 31" March 2020 OMR 2019 OMR Revenue 447.900 609,600 (227.850 (307.200) 220.050 302.400 Cost of goods sold Gross Profit Distribution expenses Marketing and administration expenses Operating profit (40.050) (56,400) (99.150) (133.400) 80.850 112,600 Finance cost (4.200) (6.800) 76.650 105,800 Profit before tax Tax Profit after tax (19.950) (27.600) 56,700 78,200 Divine Caf LLC Statement of Financial Position for the year end 31" March 2020 2019 OMR OMR Non Current Assets Property, plant and equipment 458.000 416,600 Intangible assets 144,200 137.400 602.200 554,000 Current assets Inventories 50.800 $1,200 Trade receivables 30,800 24,400 Cash and cash equivalents 32.000 33.000 113,600 108,600 Total Assets 715,800 662,600 Equity Share capital (OMR 1 per share) Retained earnings 10,000 10,000 470,300 413.600 480,300 423,600 Non-current liabilities Loans 161.500 147.000 161.500 147.000 Current liabilities Trade payables Current tax 48,600 65,800 25.400 26,200 74,000 92.000 Total equity and liabilities 715,800 662,600 5 Assignment Brief and Guidance: Case Scenario Introduction Cafe Divine LLC was established in mid-1980 in Sultanate of Oman with the vision of "Joy in every sip". The company operates 30 high-end cafes in major cities of the country. The company employs 200 employees including factory workers, sales team, and head office employees. Your Role You are the Trainee Management Accountant of Divine Cafe LLC. You are directly reporting to Chief Management Accountant. Your tasks include the production of the annual budget, producing the monthly management accounts and providing information to management as required. Financial Performance of Divine Cafe During the meeting with you the Chief Management Accountant informed that due to current situation the Devine Cafe LLC encounters a decline in sales. Therefore, the company's management decided to reach the new customer segment through producing and selling instant coffee (Divine Instant) and coffee pods (Divine Pods). The new venture will be done through forming a subsidiary company Divine Coffee LLC. The subsidiary is expected to manufacture Divine Instant and Divine pods", with the high quality coffee beans sourced from major coffee growing regions of the world, including Colombia, Costa Rica, Ethiopia, Rwanda, Kenya, and even Yemen. The Chief Management accounted requested you to prepare a report that includes the functional and master budgets for the new subsidiary Divine Coffee LLC for the 6 month period ending on June 2021 (The board had decided to start the new venture on 01/01/2021) and calculation of relevant financial ratios considering benchmarks, key performance indicators and budgetary targets, identify variances for last two financial years of Divine Caf LLC by applying relevant strategic planning tools, financial governance to monitor strategy, management accounting skill sets and effective strategies and systems and comparing the ways in which Company can respond to financial problems effectively and efficiently. The estimated information collected from various departments related to new venture - Divine Coffee LLC is given below. Budgeted Sales for the 6 months ending 30/06/2021 Price per Product Packs pack (OMR) Divine Instant Divine Pods 5000 30 Information related to Budgeted Usage of Raw materials per pack Raw materials (in kgs) DC2 Divine Instant 0.50 0.25 0.25 Divine Pods 0.25 Cost per kg of material OMR 2 10000 10 DCI DC3 0.75 OMR 4 OMR 1 2 Information related to budgeted Raw materials for the 6 months period ending 30/06/2021 Raw materials (in kg) DCI DC2 DC3 Opening Stock (transferred from Divine Cafe) 500 200 Closing Stock 7000 2500 1000 250 Information related to expected finished goods inventories. Divine Instant Divine Pods Opening Inventory 0 Closing Inventory (in Packs) 5000 2500 0 Information related to expected labour rate and hour Divine Instant Divine Pods Expected labour hour per pack (in hours) Expected labour rate per hour (OMR) 2 Following additional information for the first six month ending 30/06/2021 for Divine Coffee is given. 1. Ordinary Share capital to be paid at 01/01/2021 is OMR 400,000 b. Cash outlay on purchase of machineries is as follows. Payable on 15/03/2021 OMR 150,000 Payable on 15/062021 OMR 150,000 c. Monthly expected sales revenue for the 6-month period is as follows. January 2021 OMR 12,500 February 2021 OMR 25,000 March & April 2021 OMR 37,500 April - June 2021 OMR 68,750 All sales are made on two months credit, as the customers are the well-established hypermarket chains there is no bad debts are expected. d. Monthly planned purchase cost of raw material are as follows: Mar-21 Apr-21 May 21 Jan-21 Feb-21 Jun-21 4.940 9,880 14,820 14,820 27.170 27,170 All the raw materials are bought on one month credit from the suppliers. e. The monthly wages and salaries expected to be OMR 16,000 f. The company expected to rent a factory space. The monthly rent payment is OMR 1000 & The closing inventory as at 30/06/2021 is expected to be OMR 22,500 h. Depreciation of the machinery for the six months is estimated to be OMR 30,000 Further you are provided with Divine Caf LLC's statement of financial position and statement of profit loss for the last two financial years (2019 and 2020) ended on 31" March. Divine Cafe LLC Statement of Profit/Loss for the year end 31" March 2020 OMR 2019 OMR Revenue 447.900 609,600 (227.850 (307.200) 220.050 302.400 Cost of goods sold Gross Profit Distribution expenses Marketing and administration expenses Operating profit (40.050) (56,400) (99.150) (133.400) 80.850 112,600 Finance cost (4.200) (6.800) 76.650 105,800 Profit before tax Tax Profit after tax (19.950) (27.600) 56,700 78,200 Divine Caf LLC Statement of Financial Position for the year end 31" March 2020 2019 OMR OMR Non Current Assets Property, plant and equipment 458.000 416,600 Intangible assets 144,200 137.400 602.200 554,000 Current assets Inventories 50.800 $1,200 Trade receivables 30,800 24,400 Cash and cash equivalents 32.000 33.000 113,600 108,600 Total Assets 715,800 662,600 Equity Share capital (OMR 1 per share) Retained earnings 10,000 10,000 470,300 413.600 480,300 423,600 Non-current liabilities Loans 161.500 147.000 161.500 147.000 Current liabilities Trade payables Current tax 48,600 65,800 25.400 26,200 74,000 92.000 Total equity and liabilities 715,800 662,600 5