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Case Study Assignment You have recently been recruited by Velvet Chocolates Lid, a chocolate manufacturer, as an assistant management accountant reporting to the Management Accountant, Zoe Taylor. Your role involves helping in the preparation of future budgets and forecasts. Up until now they have only produced annual Financial Statements and a simple budget, however, given the need for better forward planning you have been asked to produce a five year profit forecast (Income Statement) for the years 2024 to 2028 and a detailed monthly cash flow for next year 2024 Zoe, has determined the future cost estimates without discussing these with other managers. The increase in sales in future periods is based on estimates produced by the sales manager. More relevant information will be extracted from their estimated Income Statement 2023 summarised in Appendix 1. Section 1: Management Accountant's cost estimates and Sales managers forecast information Velvet Chocolates Lid manufactures deluxe chocolates sold in a premium box, All sales are to customers within the UK and the sales manager predicts sales for 2023 to be 245,000 boxes of chocolates. The sales are seasonal and the sales manager is optimistic that sales will grow at 5% per annum for the next five years. The selling price is expected to remain at $18.50 per item. Cost of sales includes direct labour wages and raw materials and packaging. The boxes of chocolates are distributed to UK retailers using a distribution company that charges a fixed price per unit to deliver. Estimated shipping and distribution costs in 2023 are 60.50 per unit. These costs are expected to reduce in 2024 to 95% of the current level as fuel costs have fallen, in 2025 and onwards it is estimated the costs will inflate by 2% per annum. Raw material prices are expected to increase by 8% in 2024, then by 6% per annum from 2025. Packaging costs are $0.95 per unit. Packaging costs are expected to increase by 6% in 2024, then by 4% per annum from 2025. The fixed lease for the premises of $288,000 expires on 1" September 2024. A new 5 year lease has been agreed at a price of $312,000 p.a. The rent is paid quarterly in arrears. Rates are estimated as 40% of the rental value. I Utility costs to inflate by 3% p.a FOCUSACC2125 Pair Coursework Assignment 2023-24.docx Continued on next page e) Using the information provided in Section 2, prepare a brief report advising Velvet Chocolates Ltd whether to ACCEPT or REJECT the special order. This second report should include the following: A cost estimate using relevant cost principles for the special order. Give detailed notes explaining how each cost has been calculated and why some costs have been included and other costs excluded from your cost estimate. Discuss any other commercial factors that Velvet Chocolates Ltd should consider when making the decision whether to ACCEPT or REJECT the special order. The report should be 300 words maximum on Word document, submitted through Turnitin dropbox f) Important note on submission of word report and excel spreadsheet Clearly identify your STUDENT NUMBERS on all work submitted on both the excel spreadsheet and the word report. I Excel Spreadsheet Submission - part (a) to (c) Complete the one page summary of your individual contribution to this coursework using Appendix 2 to be included on 'worksheet 3' of your excel spreadsheet. Word Reports - part (d) and (e) Complete the summary of your individual contribution to this coursework using Appendix 3, this should be page one of your word report. D FOCUSACC2125 Pair Coursework Assignment 2023-24.docx Required : a) Produce a DETAILED 5 year Forecast Income Statement for the business showing 2023 for reference and covering 2024 - 2028 inclusive. b) Produce a DETAILED monthly Cash Flow for JUST 2024 based on 2023's Financial Statement and all of the information given above. You will need to use the 12 monthly information given above. You will need to expand the overhead section by making reasonable assumptions as to what other costs you would expect to be reflected in a manufacturing business and ensure you have accurately included all of the information given to you in Appendix 1. Please make sure your individual category totals for Sales, Cost of Sales, Distribution, Overheads etc. do actually reconcile to those given in the forecast Financial Statement. c) Clearly identify, on your excel spreadsheet, all assumptions used in your model as to how expenses or income have been inflated and translated and which costs you have treated as being fixed as opposed to variable costs. 1) Using the information provided in Section 1, produce a brief report for your manager. The report should include the following: Recommendations that the business needs to consider going forward given your findings on the five year profit forecast and monthly cash flow forecast. Identify the differences between a cash flow statement and a profit forecast as to what items are included in one but not in the other. Explain the timing differences between receipts from sales and payments for purchases and the impact on the cash flow balances in 2024. Critical discussion of the budget method applied by Zoe Taylor, the management accountant, for determining the predictions of future costs. Suggest an alternative method to determine predictions of future costs. The report should be a brief summary of the points required, no more than 900 words maximum on Word document, submitted through Turnitin dropbox. Text Predictions: On Q SearchEditing ACCZ12> Pair Coursework Assignment 2025-24.docx work sheet 1' showing yearly profit forecasts and monthly forecast cash flow summaries produced under the assumptions described above. The idea of any model is that if say the key assumptions are altered all relevant figures will automatically change for all future years, similarly if the percentage of sales is changed then again any linked data also needs to reflect this. As far as possible ALL igures should be driven initially from last years results or the previous years forecast. It is important to work out which are fixed and which are the variable costs in putting together your forecasts and consider the cost driver. Section 2: Special Order Information Velvet Chocolates Lid has received a request from a new retail customer based in the UK to produce 5,000 boxes of chocolates to be made and supplied in September 2024 at a price of E15 per unit. The box will not contain the standard selection and will use some ingredients of lower quality than those usually used by Velvet Chocolates Lid. The following information has been provided concerning this special order: Ingredients used will cost 15% more than those usually purchased as the additional order will require a new supplier to be used. The customer has requested a different style of packaging which will cost 50% more than the usual used. In addition, a special machine will have to be hired for the month in order to package the chocolates at a cost of $12,500. The chocolates will be sent directly to the retailer which will result in shipping costs being double the usual amount for distribution. As September is traditionally in the low season the production manager has indicated that there would be spare capacity to produce the additional units. It is expected that there will be additional administration time taken to process the order. H Note :- IMPORTANT Students will be awarded 1 mark for Lab session attendance and lab quizzes completed with a maximum of 5 marks available for the 5 Excel lab sessions which begin in WEEK TWO of the module (for half of the students registered on the module) and WEEK THREE for the remainder. Your attendance will be monitored. Remember to write your both Student Numbers of your pair at the top of your Excel worksheet 1. D FOCUS W PACUZIZ Pair Coursework Assignment 2025-24.docx Direct labour Wages increase by 6% in 2024 and then by 3% per annum from 2025. Salaries to increase by 5% in 2024 and then by 3% per annum from 2025. Depreciation costs are expected to increase by 20% in 2024, then by 5% per annum from 2025. All other overheads are expected to increase in-line with UK inflation of 2.5% per annum. Corporation tax is charged at the rate of 25% on operating profits. The company pays tax for the 12 month period on the 1" September in the following year. The business pays a 5% dividend based on the profit with a minimum guaranteed distribution of $5,000 p.a. unless a loss is reported for the year in which case no dividend is paid for that year. The dividend is paid for the year ending 31* December in the following April each year. In order to achieve expected increased levels of output the company plans to install additional machinery in its factory, there will be an initial payment of $275,000 in March followed by another payment of $275,000 in August. At present the company has an arranged overdraft facility charged at 7.5% up to a balance of $600,000 and 10% for balances above $600,000. Retained earnings were $25,000 at the beginning of 2023. Information relevant to the preparation of the 12 month detailed 2024 Cash Flow Forecast: The opening cash balance is estimated to be $150,000 at the beginning of 2024. Sales are collected 25% in the current month and 74.75% the month after, the remaining 0.25% relate to uncollectable bad debts. It is current practice to produce sufficient units each month to meet sales required and to cover minimum closing stock requirements. It is company policy to maintain finished goods stock at 12% of the following month's requirement. The opening stock of finished goods is estimated at 1,600 units at the beginning of November 2023. Each unit requires 450g of ingredients at a present cost of $12.33 per kg in 2023. Raw material stocks are maintained at 20% of the following month's requirements. Opening raw material stocks were 1,800 kq at the beginning of November 2023. Purchases are paid for 40% in the following month and 60% the month after. All other costs are paid in the month they are incurred in. Each unit takes 3.5 minutes to complete and the company estimates idle time is running at 5%, Direct labour is currently paid $20 per hour in 2023, all direct labour is hired on zero hour contracts and hours can be adjusted to meet production for each period. Ignore sales tax Workings should to be done in 'work sheet 2' and driven to a front page summary Text Predictions On Q Search