The Sales Manager of Stones has just informed your company that they plan to open a centre in the UK, Central Hub, with a possible start date of business on 1 March 2023. You have also been informed that to start with, the company will only sell 2 new types of service packages, that of Standard Level (SL) and the Premier 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 400 for SL and 500 for PL. You have also been provided with the following information regarding the costs and estimated sales for the period mentioned above. Stones Limited intends to put in 7,000 as start-up capital and plan to sell a total of 1,500 (combined) of SL and PL for the same period. They are not sure which of the two types of service packages will produce the most profits for Stones. Total budgeted sales for each month are as follows: March 500, April 500 and May 500, of which 40% of each month will be for SL.

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 35,000 on the 1st of March 2023. The interest on this loan will be paid every month. The company will be required to make 12 equal payments to repay the loan starting end of April 2023. Financial information As mentioned above the company plans to sell a total of 1,500 units of the service packages between 1 March and May 2023. The fixed costs for the period are as below: Rent 17,000 Cleaning 1,600 Loan Interest 3,200 General insurance 7,600 Light and heating 4,100 Local authority charges 4,250 Fixed cost specific to each service package SL PL Marketing 20,000 21,000 Admin costs 9,000 10,000 Staff Salary 15,000 18,000 From their costs estimates, the variable costs of the services are 140 for the SL 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 SL 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 Stones 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 proposal by using NPV and provide recommendations. You should also briefly comment on other investment proposal techniques that Stones 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.