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Read the Ivey case on Aztex chocolate studio and answer the following questions and show your writings with accounting transaction exercises using www.waveapps.com. you can
Read the Ivey case on Aztex chocolate studio and answer the following questions and show your writings with accounting transaction exercises using www.waveapps.com. you can join for free. From the proforma income statement and assumptions, enter transactions by creating suitable documents and show a report image of the dashboard after completion. The following questions are: ? write the case synopsis for a paragraph or two ? What challenge is Jim Norris facing? ? What options does he have? what are the trade-offs? ? which option do you recommend and justify? ? submit the reports of accounting transactions based on those transactions given in the case study.
AZTEK CHOCOLATE STUDIO: ACCOUNTING SYSTEM SOFTWARE Derrick Neufeld wrote this case solely to provide material for class discussion. The author does not intend to illustrate either effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G ON1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Copyright @ 2014, Richard Ivey School of Business Foundation Version: 2014-03-13 On a late Friday afternoon in 2013, Jim Norris stared at his computer screen, his tired mind racing. Norris had been having the time of his life converting his chocolate making passion into a business venture, Aztek Chocolate (Aztek), but he was exhausted. Over the past 30 days, he had managed to set up a functional commercial kitchen in Winnipeg, Manitoba, while successfully navigating the required inspections. Sales were starting to flow in, and chocolates were starting to ship out (see Exhibit 1). He was on the way to realizing his dream! Attending to the financial details of the new operation had been troubling. It was not as though record keeping was an afterthought. As a business school graduate, Norris understood how important it was to stay in tune with his firm's financial performance, and so he'd kept detailed paper records during the first weeks of Aztek's operations. But with customer orders starting to accumulate and financial transactions growing in complexity, he was already starting to feel as though he might be missing things. He glanced furtively at the accordion file folder perched on his desk. All receipts were carefully organized in there - sales invoices, equipment purchases, payables, receivables - all nicely separated in different pockets with detailed sticky notes attached. But when exactly should the data from those receipts be entered, and how should he extract and use the resulting financial information?Norris knew the answer to that question: the time was now. TH REE ALTERNATIVES As he had repeatedly turned to this question over the past couple of weeks. Norris had arrived at three possible solutions. First, he could hire an accountant to process the receipts and prepare nancial statements. Many small businesses took this approach and had their books prepared once per year for tax purposes. at a cost in the neighbourhood of $1,200. This annual approach did not sit well with Norris. however. since it meant having to wait until year-end to properly understand how Aztek was performing. A related option was to hire a bookkeeper to maintain the books on a monthly basis. at a cost of about $200 per month with a 50 per cent reduction in the year end tax preparation costs. Monthly statements would be preferable. but Norris worried that the information would still not be as timely as necessary. and he questioned whether these precious dollars would not be better spent on advertising to boost top line sales [see assumptions and pro forma projections in Exhibit 2]. Second. a technology solution could be implemented in-house. Since the company's initial needs were quite basic and Norris already possessed strong spreadsheet skills. he believed he should be able to build and maintain a simple set of financial statements in Microsoft Excel. His girlfriend Shannon Hunter had repeatedly offered to help with the business. and he was sure she would not mind spending a few hours each week updating the books. This would provide much more up-todate information. and it would be free! On the other hand. Norris vaguely recalled something from an introductory accounting course about the importance of "double entry" bookkeeping. and he was concerned about getting drawn into developing a homegrown system that might become increasingly complex to maintain over time. A related option was to purchase and install a commercial accounting software package on the company desktop computer. For example. QuickBooks claimed to "easily organize your business finances so that you can keep track of sales and expenses\" [see Exhibit 3}. Of course. Norris recognized that some set-up time would still be required to congure the software according to Aztek's needs. With either the spreadsheet or accounting software approaches. Hunter would either have to travel to the company ofce to access the necessary les, or Norris would have to copy and transport the les to her. probably via a thumb drive. A third solution was to use an online Software-as-a-Service (SaaS) provider. Norris was attracted to the \"anyone, anytime. anyplace" accessibility of this option. both in terms of entering transactions and reviewing results. The idea of being able to directly link bank and other electronic transactions to the accounting system also seemed to be a great way to ensure up-to-date reporting. With services residing in the \"cloud-" however, Norris wondered whether his nancial data would be secure. A Google search had m'ealed a number of SaaS bookkeeping options (see Exhibit 4). Norris's attention shifted as his computer speaker chimed. It was his oriline web store notifying him by email: an event planner had just ordered 200 boxes for a corporate party in Toronto early next week. This was outstanding news. but moulding 5.000 chocolates meant a busy weekend lay ahead. He shed out his smartphone; perhaps he could talk Hunter into lending a hand. AZTEK CHOCOLATE STUDIO Assumptions and pro forma ASSUMPTIONS: Pieces per box 25 Price per piece $1.25 Expected boxes year 1 6,000 Cost per piece (chocolate, ganache, etc.) $0.30 Cost per box (packaging) $1.50 Average shipping & handling cost per box $2.00 GST rate 13% Equipment (melters, moulds, utensils) $12,000 Depreciation rate 20% 2-month materials inventory (chocolate, packaging) $9,000 Advertising & promotion (% gross sales) 20% Provision for income taxes (% of NIBT) 33% Personal stake $24,000 Rent per month $600 AZTEK Pro Forma Income Statement Year One Sales (exd. shipping, taxes) $ 187,500 Cost of goods sold 54,000 Gross profit 133,500 Advertising & promotion 37,500 Amortization of property, plant, equipment 2,400 Operating expenses 39,900 Net income (loss) before tax 93,600 Provision for income taxes 30,888 Net income (loss) after tax 62,712EXHIBIT 3: SOME CANADIAN COMMERCIAL ACCOUNTING SOFTWARE APPLICATIONS Name Company Web page pitch Price Quickbooks quickbooks.intuit.ca, Intuit Inc. "Business runs better with QuickBooks, the $249.99 accessed 23 Feb, 2104 #1 accounting solution for small business." (1 user) "Sage 50 Accounting (formerly Simply Sage 50 Accounting) is easy-to-use accounting and $229.99 na.sage.com/ca Sage Software business management software that provides accessed 23 Feb, 2014 you with the tools you need to manage your (1 user) financial transactions and to streamline your business tasks." AccountEdge "Sales and purchases, inventory, payroll, time billing and contact management just scratch $399.00 ca.accountedge.com Acclivity Group accessed 23 Feb, 2014 the surface of what AccountEdge can do for (many users) your small business." Source: Company web pagesEXHIBIT 4: SOME CANADIAN SAAS BOOKKEEPING OPTIONS Name Company Web page pitch Price "With invoicing, accounting, payroll and even Free tools payment processing in one application, Wave Accounting (adware) Wave Inc. you're always organized and up to date. As www.waveapps.com your business grows, Wave grows with you. accessed 23 Feb, 2014 (Canada) Use only what you need today, don't pay for Payroll anything you don't want. Doesn't that just $5/month make more sense?" + $4 per employee "A simple accounting solution with a simple Kashoo Kashoo Inc. and affordable price. All your business www.kashoo.com (Canada) accounting needs for the price of one lunch $20/month accessed 23 Feb, 2014 or four lattes. And that includes our award- winning iPad app!" Xero "Try the world's easiest accounting software Xero Limited www.xero.com and you'll see why so many people around $20 to $40/month accessed 23 Feb, 2014 (New Zealand) the world love Xero - online accounting, bank reconciliation, invoicing, add-ons." Source: Company web pagesStep by Step Solution
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