Cost Analysis And Business Planning: Write A Paper Between 7

Cost Analysis and Business Planning Write a paper between 700 and

1st Assignment( I believe there is a Case Study, I need to send tommorow for this one) Cost Analysis and Business Planning Write a paper between 700 and 1,000 words addressing the following: Part 1, Sections 1-2: Provide calculations and a solution for total variable costs, break even in sales volume (number of members), break even in sales (in dollars), and margin of safety. Part 1, Section 3: Respond to the questions included with the case study. Part 1, Section 4: Assume you decide to invest in the franchise. Provide a description and estimates in dollars for monthly sales, variable and fixed expenses. Explain how you determined each number and provide a written list of assumptions. A case study and instructions are provided during week five. Format the paper consistent with APA guidelines. Deliverables: Paper (MS Word) and Excel File (optional). Review your Originality Report generated from SafeAssign. A new originality report is created with each attempt. Your last attempt is used for grading. 3rd Assignment( will have to send this information tomorrow, not sure where it is) Budget Preparation/Variance Analysis The purpose of this assignment is to evaluate and prepare a budget. Resources: Excel File. Tutorials and links to Excel help files were provided during week one of our class. Instructions: 1. Download the Excel file provided. The file is available at the end of week five. 2. Read the instructions tab. 3. Complete the Budget and Variance Analysis tab. 4. Submit the completed Excel file. Extra info General Instructions : Download the Excel file provided. Your responsibility is to calculate prior year actual results and prepare a flexible budget. Use prior year data to complete the 2018 variable costing income statement. The flexible budget includes several changes to the data. The changes are listed in the Excel file / Instructions Tab. Excel : In order to minimize errors, improve accuracy, and increase efficiency use formulas in all cells. If you need assistance with Excel review the week one questions thread. Included therein are three options to help you advance your Excel skills. Two links at the bottom are titled “Formula Overview†and “Excel - Basic Mathâ€. The third option is Excel Essential Training (week one learning activities). The tutorials will help you with, in part, formulas and spreadsheet format. Video : In order to gain experience and insight please review the following video. It is a simple presentation and will help everyone develop a basic understanding of flexible budgets. The video was created by a third party. There are additional videos included with the Bing search as well. Flexible Budget Example Flexible Budget Guidance : For additional information regarding flexible budgets please review the following. What is a flexible budget? Based on the example, fixed expenses do not change with volume. Contrary, variable expenses change with volume. With respect to the case study the same principles apply. The only difference is that our variable expenses will change based on sales volume instead of machine hours. Example: Sales Volume 2,640 Feed cost per animal 3.13 Total feed cost = 3,000*3.23=8,263 Advertisement, Bedding and Specialty Food Expense: Advertisement is a fixed expense at the 2,640 volume level (column F). As a result, column F, row 17 is equal to -0-. However, the expense is considered a mixed cost (fixed and variable) with the flexible budget (column H). Bedding and specialty food does not apply to the prior year income statement (column F). As a result, column F, rows 18 and 19 is equal to -0-. For further clarification my suggestion is to read the instructions tab. Variance and Variance Explanation : A variance is the difference between two numbers. From a budget perspective we typically compare actual business results to our budget. Material deviations are analyzed to help us plan, in part, cash flow, revenue projections, expense levels, and to make informed business decisions. Calculate the variance for all items listed on the spreadsheet (i.e. sales, all variable and fixed expenses, contribution margin, net income, and the break even computation). Column J: Enter the difference between actual results and the budget. Column L: Explain the difference.

Paper For Above instruction

The comprehensive analysis of cost management and business planning remains vital for organizational success, especially when oriented toward new ventures or franchise investments. This paper synthesizes the crucial components of cost analysis, break-even calculations, and flexible budgeting, providing insights into financial decision-making processes essential for strategic planning in business operations.

Introduction

Effective business planning requires a detailed understanding of costs, sales volumes, and profit margins. When evaluating a potential franchise investment, it is crucial to analyze variable and fixed costs meticulously, identify the break-even point, and assess safety margins. These financial metrics serve as fundamental indicators of a business’s viability and growth potential, guiding investment decisions and operational strategies.

Part 1: Cost Calculation and Break-even Analysis

Total Variable Costs

Total variable costs are calculated by summing variable expenses that change directly with sales volume. For instance, if the variable cost per unit or per member is known, multiplying this rate by the number of units or members provides the total variable costs. For example, if the variable cost per member is $20 and the expected members are 500, the total variable costs amount to $10,000. Accurate calculation requires detailed expense breakdowns and data from financial statements or case specifics.

Break-even in Sales Volume and Dollars

The break-even point in sales volume identifies the number of members or units needed to cover all fixed and variable expenses, resulting in zero net income. This is calculated using the formula:

Break-even volume = Fixed costs / (Sales price per unit - Variable cost per unit)

Similarly, the break-even sales in dollars is derived by multiplying the break-even volume by the sales price per unit. These calculations provide critical thresholds for business sustainability and growth planning.

Margin of Safety

The margin of safety indicates how much sales can decline before the business reaches its break-even point. It is expressed as a percentage and calculated as:

Margin of Safety = (Actual or projected sales - Break-even sales) / Actual or projected sales

A higher margin of safety signifies better risk coverage, essential for strategic planning and risk management.

Part 1: Responding to Case Study Questions

Responding to case study questions involves analyzing specific scenarios related to costs, revenues, and market conditions presented in the case. This includes evaluating operational efficiencies, pricing strategies, and market demand. Each response should be grounded in financial principles, utilizing data from the case to support recommendations or insights. For example, if the case suggests a decline in sales, analyzing whether variable costs have increased proportionally can pinpoint issues affecting profitability.

Part 1: Investment in Franchise – Estimations and Assumptions

Assuming an investment in the franchise, realistic estimates for monthly sales, variable expenses, and fixed expenses are required. For example, if monthly sales are projected at $50,000 based on market research or comparable franchise data, variable expenses might be estimated at 40% of sales, resulting in $20,000. Fixed expenses could include rent, salaries, and insurance, totaling around $10,000. These estimates should be justified with assumptions such as market size, pricing strategies, and operational efficiencies.

Determining these figures involves market analysis, historical data review, and industry benchmarks. For instance, average franchise profit margins, customer traffic patterns, and cost ratios inform these estimates. Clear documentation of assumptions ensures transparency and aids in scenario analysis or sensitivity testing.

Conclusion

In conclusion, rigorous cost analysis and budgeting are indispensable tools for sound business planning. Whether assessing break-even points, margin safety, or prospective franchise investments, financial metrics enable informed decision-making and strategic growth. Further, leveraging flexible budgets and variance analysis enhances adaptability amidst market fluctuations, ensuring long-term sustainability and profitability.

References

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