Wednesday, 10 June 2020 11:59pm

Scenario

You are working as a graduate within the engineering department of a manufacturing and

consulting focused public listed company. You and your team are working on the post-COVID

recovery and how best to allocate capital. Your team has $1,000,000 in capital at their disposal.

The entire department is going to have a conference call next week and you have been asked

to prepare a memo for the team regarding the financial options being considered. As the

accounting department will be joining your memo is to prepare the staff for the call.

The accountants are expected to use terms which may not be fully understood by the greater

department. So your memo will be distributed before the call or you may be asked to speak on

the call to assist everyone's understanding. The memo should discuss each of the following:

1. As there is still uncertainty about employees returning to work the capital may

need to be moved from its current interest bearing account elsewhere. Explain the

opportunity cost associated with leaving the money in a bank account as opposed

to other investment options that may mitigate that opportunity cost.

2. The stock price of your company has suffered due to the economic downturn. A

focus at the company may be to encourage both current and prospective

shareholders. Explain one way that the company could deploy company-wide

excess capital to directly incentivise these investors.

3. Your company has been using traditional costing and is considering moving to

Activity Based Costings for a number of product lines. Explain what is meant by

Activity Based Costings, how it differs from traditional costing, and how it may be

advantageous.

4. A new product line is also being proposed and it is expected that the accountants

will discuss this option. Explain the difference between fixed and variable costs

and state at least three examples of each that the company may incur.

Some employees have raised their concern that the new product line will not be

profitable and that it will cost more to produce the new product than will be made.

Explain the break even point with particular focus on why a break even point is

not immediate but rather is reached over time.

Task

Respond to the above questions in a memorandum format that would be suitable for

distribution. Each answer should be no more than a page, half page for each would be suitable.

Maximum of 5 pages in total.

Deliverable

You are to submit one deliverable. A maximum 5 page memorandum.

Optional: As some of you enjoyed the multimedia components of the prior assignment, You may

submit up to two questions as verbal/audio or a video media covering the question. The ideal

being to imitate your answer on the conference call explaining your answer to the team. As you

would answer on the call. Include the links to your media in the memorandum. You have the

discretion as to which you answer this way.

Answer guide

I Would expect each answer to be approximately 2-4 Paragraphs, no more than 1 page per

answer.