UNIVERSITY CANADA WEST

ACCT 621: ACCOUNTING FOR MANAGERS

INDIVIDUAL ASSIGNMENT 20%

SUBMISSION DEADLINE: 28 MAY 2023

SECTION: 67

Housekeeping Homa

After graduating from a diploma of business administration in Vancouver, Homa got hired as an executive assistant to Fred, the director of operations at a local tech company. She has been working at the job for the past three months. Her role includes scheduling and attending meetings, sending emails, and booking travel and entertainment for visitors to the company headquarters in Vancouver. She works part-time 5 days a week from 8 am to noon and is paid about $30,000 a year.

During her free time, Homa volunteers as a cleaner for a non-for-profit organization called Keeping It Clean. The organization supports people with mental and physical disabilities by helping to keep their homes clean. The organization is run by donations made possible by large corporate donors and community partners, as well as volunteers like Homa.

Although she enjoys the hustle and bustle of the corporate environment, Homa feels much more satisfied by her volunteer work with Keeping It Clean.

Sensing that she may not be happy, Fred has offered Homa a full-time position with the company, upping her salary to $65,000 per year plus benefits.

At the same time, due to her enthusiasm and great effort at Keeping It Clean, the President of the non-for-profit organization has offered her a position as Head Coordinator. This position would entail working more complex jobs and scheduling/coordinating the other volunteers within the organization.

Even though Homa is excited about both offers, she has always wanted to pursue entrepreneurship. Hence, she is contemplating starting her own cleaning business. To kick things off, she has done some research and gathered some numbers. Admittedly, accounting was her worst subject in her diploma, so she is seeking your help in analyzing her options.

Homa sees a trend of individuals getting busier, and consequently, lacking the time or energy to keep their homes clean and organized. With her home cleaning/organizing business, she could help people maintain tidy and organized homes. Also, due to the pandemic, corporations and larger residential complexes are seeking more frequent cleaning in an effort to reduce pathogens, viruses, and bacteria.

With the help of her parents, Homa has saved $7,500 to invest in her business.

If she were to start her own housekeeping business, Homa forecasts these figures:

Type	Cost	Frequency	Average Time	Tasks
House cleaning for individuals	$60/hour	Once a week	2 hours	General Housekeeping, dusting, bathrooms, kitchen deep scrub, mopping floors, and vacuuming.
Common Areas of Residential Building	$40/hour	Twice a week	4 hours	Vacuuming hallways, spraying down windows and doors, cleaning walls and floor of elevators, cleaning gym or common facilities in apartment buildings.
Corporate Cleaning	$35/hour	Five days a week	2 hours	Daily dusting and cleaning floors, cleaning surfaces, and restocking supplies and emptying trash cans. Cleaning individual offices, restrooms, break rooms, and common areas.
Special Projects	$75/hour	As needed, likely once a season	Minimum of 16 hours (usually spread across a weekend)	Specialized cleaning or organizing projects, such as deep cleaning carpets or organizing files.
CloudBnB	$100 per job	Higher frequency during tourism seasons winter and summer	Flat $100 per cleaning. Varies from 1 hour to 3 hours	Vacation short term rental properties that need to be cleaned between stays.

For the CloudBnB, Homa plans to find short-term rental property owners in the local vicinity and directly market her cleaning services. She has seen job postings for CloudBnBs located in Whistler. Although these would be a bit far to travel to from her home in Coquitlam, they could offer lucrative opportunities to generate sizeable profits. However, Homa is aware that CloudBnB rentals depend on tourism and usually spike in the winter for ski season and the summer for hiking.

Homa estimates that, based on her existing connections and some word of mouth marketing, she can generate some quick success in her first year. She believes she can book 15 individual houses on a weekly basis, 5 residential buildings, 4 corporate cleaning clients, 10 special projects, and 4 consistent CloudBnB contracts in the summer and winter.

She informs you her ideal workweek includes 30 hours of work (including commuting). She wants to continue volunteering one day a week with Keeping It Clean. She is wondering about her companys service mix and how it can be used to maximize revenues in relation to the work hours invested. She is also wondering if its better to charge per hour or on a per project basis.

To get her business started, Homa will need about $500 in supplies including gloves, masks, cleaning material, dusters, garbage bags, liquid bleach, and the like. She will likely need to replenish these supplies once a month.

She currently uses public transport but wants to purchase a gas vehicle to drive to and from various places and to help carry her supplies. She is thinking about doing a pros and cons analysis of purchasing versus leasing a vehicle. She has found a 2019 used car on sale for

$17,500 but she is also looking at maybe leasing a hybrid vehicle from the dealership for $80 a month at 6.99% interest with $3,000 as a down payment. She thinks either car will last her 5 years.

Homa is also planning to purchase an industrial vacuum cleaner for $900. Shes unsure whether this and the vehicle would be recognized on the balance sheet or the income statement.

Homa is looking into different methods of advertising to boost sales and believes the best method is to start a website. She has a friend, Toto, who is a tech wiz and is willing to help create and host a website for a one-time fee of $3,300. She plans on boosting her website through Google Ads and anticipates it will cost $120 per month to boost.

With the additional investment in advertising, Homa expects the number of customers to increase by 25% for each type of service.

Toto has also offered to be brought on as a 33% business partner and is willing to cover the cost of creating the website and the advertising costs with Google. If Homa bumps the partnership share to 50%, Toto will also take on the accounting tasks. Homa is uncertain whether to accept

Totos offer- he has a bachelors degree in software engineering and tends to have a stubborn personality at times.

Homa has also spoken to the bank and it is willing to provide her with two products:

a 7-year loan of $20,000 at 7.25% per year requiring monthly repayments, or

a revolving line of credit of 18,000 at 7.00% per year

Homa wants a detailed analysis on how much she will need to borrow and which structure is better for her. She doesnt understand the difference between a business loan and a line of credit, so an explanation there would also help.

Since Homa isnt great with projections and numbers, she is asking you for help in deciding if this business is lucrative enough to pursue and if she should quit her executive assistant job and/or volunteer role. She is also wondering about the importance about maintaining accurate records in general. She has never run her own business and isnt sure which business structure to implement and how to start dealing with bookkeeping. She wants some quick advice on journal entries, T-accounts, and the components of an income statement. Homa also wants some ratio analysis, such as profitability indicators and return on investment or assets.

Required:

Homa wants specific advice on what she should do. She wants to know if pursuing Homa's Housekeeping business is a good idea or if she should accept one of the other jobs offers on the table. She wants detailed advice on business strategy, financing, ethical considerations, etc. She is open to advice beyond what is discussed in the case, but it should be relevant to her situation.