Simulation :

Kevin launched his own business - a mobile coffee cart nestled near a stunning park in northern Sydney. To bring his business to life, Kevin used his savings to acquire equipment such as a coffee cart, an espresso machine, and a coffee grinder. As a legal requirement, he paid for the license to operate the business in his local area. He also stocked up on premium coffee beans, milk, cups, lids, stirrers, and other consumables, allowing him to create a diverse selection of coffee to cater to the different tastes of customers.

Kevin has acquired coffee-making skills and earned a certificate from a reputable coffee school. He has also had three years of experience as a barista at a caf near his home. Despite his experience in making coffee, Kevin feels less confident when it comes to accounting, which he believes is useful to help him with managing his business. Facing various confusions around the application of certain accounting tools in his business, Kevin has decided to seek advice from his friend, Lisa, who graduated with a degree with a major in accounting from the University of Sydney several years ago.

Kevin has recently launched his own business, a mobile coffee cart near a park in northern Sydney. He used his savings to acquire equipment and paid for the license to operate the business. He has coffee-making skills but feels less confident in accounting and seeks advice from his friend who graduated with a major in accounting. He mentions four issues related to accounting tools in his business.

Kevin has mentioned four issues including

Issue 1

Kevin has heard about cost-volume-profit (CVP) analysis. However, he has not been able to find any relevant Australian generally accepted accounting principles (GAAP) that could guide him in conducting a CVP analysis. If you were Lisa, how would you respond to Kevin? (200 words)

Issue 2

Kevin has struggled with categorizing the costs associated with his business operations as either fixed or variable costs for the purpose of conducting a CVP analysis. He believed that all the costs would inevitably rise over me due to inflation. If you were Lisa, how would you address Kevin's concern, drawing on one illustrative example of costs in Kevin's business? (250 words)

Issue 3

Kevin has heard about budgets and intended to prepare budgets for his business for the upcoming year. He reckoned that es ma ng the amount of coffee beans he needs to purchase next year would be a logical star ng point. This is because, he believed, if he did not purchase any coffee beans first, he would not be able to make and sell any coffee to customers. If you were Lisa, what advice would you provide to Kevin? (200 words)

Issue 4

Kevin was not entirely sure whether he should conduct budgeting for his business, as he has recently come to know of some adverse viewpoints on the budge ng process from an ar cle featured in INTHEBLACK, the digital magazine of CPA Australia.: https://intheblack.cpaaustralia.com.au/accounting?icid=new-thinking-for-budgeting-forecastsKevin has passed on this ar cle to Lisa to read. If you were Lisa, having read this ar cle, what advice would you offer to Kevin? Your advice should focus on explaining to Kevin whether it is worthwhile for him to prepare budgets for his business. (300 words)

practice task:

Practice writing a report on behalf of Lisa to Kevin, addressing the four issues he raised above. when doing this practice you might want to be clear, concise and maintain the word limit as suggested.