You have received an email from the Chief Executive Officer of Clark Casc Logistics plc, where you are employed as manager of the refrigerated goods division, inviting you to the first in a series of budget- setting meetings and asking you to submit a brief report in advance.

You are only permitted to submit your report once. Trial runs are not permitted and no spare, draft or test dropboxes will be provided. It is your responsibility to submit your own work and to ensure that your report is finalised, complete and properly edited before, not after, you submit it.

This is an individual assignment. The sharing of files or copying of work between students is not permitted.

You are only allowed to submit one document, which must contain your full report, including your reference list. Do not attempt to submit additional documents.

Your submission must be either a Word document in .doc or .docx format or a .pdf document.

Appendices are not permitted.

Report Assignment in Accounting and Finance

You have received the following email from the Chief Executive Officer of Clark Casc Logistics plc, where you are employed as manager of the refrigerated goods division, inviting you to the first in a series of budget- setting meetings and asking you to submit a brief report in advance.

Dear Laser,

For the last financial year Clark Casc Logistics plc made a profit of 32 million with profits of 18 million in the first six months of this year and the Board believes that there is scope for continuing expansion. We are therefore reaching out to all managers to provide realistic budgets for the income and costs for which they are responsible, so that we can plan ahead with confidence.

We will be holding a first round of budget-setting meetings on Thursday next week. As the manager of the refrigerated goods division, the income and expenditure for which you were responsible for the last financial year were as follows.

Your expenditure for the first six months of the present financial year is as follows, with a comparison with the budget which, I would remind you, you agreed to this time last year.

Year Ended April 30th 2022

Six Months to October 31st 2021

Refrigerated Goods

Next Year: Year Ending April 30th 2023

The purpose of next weeks meeting is not to congratulate ourselves on past profits but to plan for the future.

We already have a budget for the rest of this year and monitoring progress against this is an entirely separate exercise and not the purpose of this report, so do not include any budget monitoring information, as we already have that.

We need a realistic budget for income and expenditure, to tell us how much sales income we intend to make and how much we are going to have to spend to earn it. This year is already underway and what we need is a budget for next year. We need this budget to be agreed well in advance, so that we can make the necessary commitments and contractual arrangements for all our planned expenditure.

Please provide a report in advance of the meeting detailing your budget for the year ending April 30th 2023.

The format of the proposed budget is up to you, as is the method by which you arrive at the budget. However, please include the following sections in your report. We do not require an executive summary: 1. Introduction 2. Approach to evaluation of the proposed investment in a new depot 3. Evaluation of the proposed investment in the new depot 4. Approach to drawing up the refrigerated goods department budget 5. Relevant calculations to show that your budget for the year ending April 30th 2023 is realistic 6. Your proposed budget for the year ending April 30th 2023 with complete income and expenditure figures 7. A conclusion on the levels of income and expenditure in your department and on the likely result of building the new depot 8. Recommendations on the new depot proposal, including a recommendation on whether or not to proceed with it, and on the next steps in managing resources in the refrigerated goods department

Please make sure you provide a list of references to any published external material you refer to in your report.

Make sure your report is at least 2,250 words to prove youve done some work but Im not reading it if its more than 2,750 words apart from the references. I will not waste time reading appendices. If you have something to say, say it in your report.

Our growing sales income has already enabled the Board to give employment to the Chief Executives son and I was frankly astonished to find that he has been assigned to the Finance department. As I am struggling to find any real use for his talents, I will be reading your report carefully for signs that you need help with financial matters, in which case I will have no hesitation in sending young Tony to help you on a daily basis. Best Wishes, Iain _____

Further information

As manager of the refrigerated goods division you are responsible for sales income from the transport of refrigerated goods.

Note that the figures above are for six months. You are required to provide a budget for a full year and not for six months only.

You are responsible for pricing and negotiating each contract. You have complete discretion over pricing and all refrigerated goods contracts must be signed by you or somebody authorised by you. You usually start by offering a price based on 0.22 per tonne per kilometre. However, if a prospective client has asked for sealed bids in a competitive bidding process you submit a bid priced at 0.19 per tonne per kilometre, which is approximately the average price you are able to negotiate with customers.

Equipment Maintenance

Vehicle Maintenance

Clark Cascs vehicle maintenance department is under separate management. You are responsible for booking the vehicles in your department in for repairs, routine maintenance and annual testing. You are also responsible for ordering the recovery of any vehicles which have broken down or been involved in accidents. All of these

services are managed by the vehicle maintenance department. There have been no motor vehicle accidents in your department in the last 18 months.

Vehicle maintenance is a semi-variable cost.

The vehicle maintenance costs charged to your department over the last six months have been as follows:

The sales income generated by your department over the past six months has been as follows:

You presently have enough drivers and vehicles to meet demand up to 140 million tonne kilometres per year (26,600,000 sales income per year at 0.19 per tonne kilometre). To fulfil orders above this level you will need 2 extra drivers and 1 extra heavy goods vehicle for every 1.4 million extra tonne kilometres per year (266,000 sales income per year at 0.19 per tonne kilometre).

Proposed New Depot

If sales exceed 150 million tonne kilometres per year (28,500,000 sales income per year at 0.19 per tonne kilometre), your department will need a new depot of the same size and with the same number of depot operatives as the existing depot and you will also need 3 additional administrative staff with salaries of 27,000 per year each. It will take 12 months to build a new depot and bring it into use and Clark Casc will have to pay the builders before it is complete.

You are responsible for deciding whether to make this extra investment in a new depot or not. You are not responsible for deciding on how to finance it. However, you have been told that further investments are required to make a return of at least 9% per annum and that this is to be used as the discount rate in any discounted cash flow calculations.

Additional Information

You are the manager of the refrigerated goods department and you have full access to any additional information required. If more information is required from a published, broadcast or webcast source, you must present that information with a proper reference in the normal referencing format required in the business school. If further information would be required from internal sources at Clark Casc, you must create that information yourself for use in drawing up your report and provide your own indication of internal sources.

You must not present a report which concludes that information is incomplete, or that further information is required or which recommends that further information is obtained. This would be a clear indication that you have not completed your report as required.

Required:

Write your report, addressed to the Managing Director of Clark Casc and containing the following sections, as directed in the Managing Directors email.

1. Introduction 2. Budgeting Approach 3. Relevant Calculations, including any investment appraisal 4. Proposed Income and Expenditure Budget 5. Conclusion 6. Recommendations 7. References

The sales income generated by your department over the past six months has been as follows: As manager of the refrigerated goods division, you are responsible for the following costs: Salaries and Associated Payroll Costs In addition to the salaries below, Clark Casc is required to pay Employer's National Insurance Contributions. Employer's National Insurance Contributions are presently assessed as 13.8% of each employee's salary, including bonuses but excluding the first 8,840 of the employee's annual salary. Clark Casc is also required to pay an additional 0.5% of total salaries, including bonuses, as an apprenticeship levy. Clark Casc also contributes to an employees' superannuation scheme. Clark Casc's contribution is 8.5% of all staff salaries, including bonuses. All of these costs are part of your budget. Heavy Goods Vehicle Drivers: You have 202 drivers eaming an average base salary of 35,000 per year. Each driver can presently cover about 125,000 miles per year. Last year, all drivers also qualified for a bonus of 10% of base salary for accident-free driving and there have been no vehicle accidents this year. Employer's insurance is handled centrally and is not part of your department's budget. Refrigerated Goods Depot Operatives You have 97 operatives working at you refrigerated goods depot, earning an average salary of 19,000 per year. Administrative Staff You have 11 administrative staff in the refrigerated goods department, earning an average salary of 27,000 per year. Property Plant and Equipment Vehicles Your department uses 151 heavy goods vehicles and 16 other vehicles, all of which are owned by Clark Casc. Each vehicle has an estimated useful life of 12 years in the company after which it can be resold for an estimated 10% of its original cost. The average replacement cost of a heavy goods vehicle is presently 120,000 and the average replacement cost of other vehicles is 24,000 per vehicle. You are responsible for the cost of depreciation on these vehicles. Depreciation is to be charged at current replacement cost. Vehicle Excise Duty Vehicle Excise Duty varies from vehicle to vehicle but is an average of 560 per vehicle per year for heavy goods vehicles and an average of 220 per vehicle per year for other vehicles. Vehicle Insurance Your vehicle insurance costs average 2,400 per vehicle per year for heavy goods vehicles and 400 per vehicle per year for other vehicles. Other Equipoment You have just completed a major exercise with the finance department to establish what equipment you are using at the refrigerated goods depot and in the office. The annual depreciation cost at current replacement cost for this equipment is 228,000. Equipment insurance other than vehicle insurance is handled by another department and is not part of your budget responsibilities. Buildings Depreciation The depot and office which you occupy have a current replacement cost of 3,500,000 and a useful life of 50 years. The land which they occupy has a current resale value of 600,000 and the scrap value of the building materials is estimated at 100,000 at current prices. You are required to budget for depreciation on the buildings on a straight-line basis. Buildings Maintenance Buildings maintenance, including cleaning, is carried out by the in-house Buildings Maintenance Department and recharged to your department. It is a fixed cost and averages 7,000 per month. Other Equipoment Maintenance Depot and office equipment maintenance is a fixed cost and averages 12,000 per month. Fuel and Power Costs Vehicle Fuel Vehicle fuel is a semi-variable cost. Total vehicle fuel costs for the last six months have been as follows: Other Power Supplies Gas and electricity supplies to the depot and office are a fixed cost and average 15,000 per month. Staff Training The cost of drivers' training averages 1,225 per driver per year, including fees for Certificates of Professional Competence. Depot operatives' training costs average 225 per operative per year. Administrative staff training costs average 275 per person per year. Other Costs There are no other costs in your budget. All other costs, including legal costs, employer's insurance, public liability insurance and insurance of buildings and nonvehicle equipment, are handled by other departments and you are not responsible for managing them. The sales income generated by your department over the past six months has been as follows: As manager of the refrigerated goods division, you are responsible for the following costs: Salaries and Associated Payroll Costs In addition to the salaries below, Clark Casc is required to pay Employer's National Insurance Contributions. Employer's National Insurance Contributions are presently assessed as 13.8% of each employee's salary, including bonuses but excluding the first 8,840 of the employee's annual salary. Clark Casc is also required to pay an additional 0.5% of total salaries, including bonuses, as an apprenticeship levy. Clark Casc also contributes to an employees' superannuation scheme. Clark Casc's contribution is 8.5% of all staff salaries, including bonuses. All of these costs are part of your budget. Heavy Goods Vehicle Drivers: You have 202 drivers eaming an average base salary of 35,000 per year. Each driver can presently cover about 125,000 miles per year. Last year, all drivers also qualified for a bonus of 10% of base salary for accident-free driving and there have been no vehicle accidents this year. Employer's insurance is handled centrally and is not part of your department's budget. Refrigerated Goods Depot Operatives You have 97 operatives working at you refrigerated goods depot, earning an average salary of 19,000 per year. Administrative Staff You have 11 administrative staff in the refrigerated goods department, earning an average salary of 27,000 per year. Property Plant and Equipment Vehicles Your department uses 151 heavy goods vehicles and 16 other vehicles, all of which are owned by Clark Casc. Each vehicle has an estimated useful life of 12 years in the company after which it can be resold for an estimated 10% of its original cost. The average replacement cost of a heavy goods vehicle is presently 120,000 and the average replacement cost of other vehicles is 24,000 per vehicle. You are responsible for the cost of depreciation on these vehicles. Depreciation is to be charged at current replacement cost. Vehicle Excise Duty Vehicle Excise Duty varies from vehicle to vehicle but is an average of 560 per vehicle per year for heavy goods vehicles and an average of 220 per vehicle per year for other vehicles. Vehicle Insurance Your vehicle insurance costs average 2,400 per vehicle per year for heavy goods vehicles and 400 per vehicle per year for other vehicles. Other Equipoment You have just completed a major exercise with the finance department to establish what equipment you are using at the refrigerated goods depot and in the office. The annual depreciation cost at current replacement cost for this equipment is 228,000. Equipment insurance other than vehicle insurance is handled by another department and is not part of your budget responsibilities. Buildings Depreciation The depot and office which you occupy have a current replacement cost of 3,500,000 and a useful life of 50 years. The land which they occupy has a current resale value of 600,000 and the scrap value of the building materials is estimated at 100,000 at current prices. You are required to budget for depreciation on the buildings on a straight-line basis. Buildings Maintenance Buildings maintenance, including cleaning, is carried out by the in-house Buildings Maintenance Department and recharged to your department. It is a fixed cost and averages 7,000 per month. Other Equipoment Maintenance Depot and office equipment maintenance is a fixed cost and averages 12,000 per month. Fuel and Power Costs Vehicle Fuel Vehicle fuel is a semi-variable cost. Total vehicle fuel costs for the last six months have been as follows: Other Power Supplies Gas and electricity supplies to the depot and office are a fixed cost and average 15,000 per month. Staff Training The cost of drivers' training averages 1,225 per driver per year, including fees for Certificates of Professional Competence. Depot operatives' training costs average 225 per operative per year. Administrative staff training costs average 275 per person per year. Other Costs There are no other costs in your budget. All other costs, including legal costs, employer's insurance, public liability insurance and insurance of buildings and nonvehicle equipment, are handled by other departments and you are not responsible for managing them