Instructions For Cookie Business Final Project

Instructions Cookie Business Final Project now That Your Cookie Business

Now that your cookie business is well underway, you are going to use the knowledge that you have gained in this course to evaluate the financial information for the company. You will be creating a series of reports and analyzing the results using the templates provided to guide you through the project. The learning objectives of this project are as follows: Apply accounting concepts and standards to the creation of accounting information and reports. Analyze accounting information used to make strategic business decisions. Apply ethical behavior to accounting-related situations.

Make business decisions based on analyzing accounting data. Prepare a four page written report (including spreadsheets) with at least three scholarly sources. Your report will provide the following information:

Paper For Above instruction

Introduction

In this comprehensive financial analysis, we evaluate the viability and profitability of a small-scale cookie business using a variety of accounting methods and decision-making tools. The analysis is structured into six key parts, each focusing on different facets of the company's financial data. The goal is to inform strategic decisions regarding product profitability, inventory valuation, special orders, equipment purchases, cash flow, and variances, culminating in recommendations for future business improvements.

Part 1: Contribution Margin Analysis and Breakeven Point

Using the provided Excel data from the CM Breakeven tab, the contribution margin (CM) for each of the three cookie products is calculated as sales price per unit minus variable costs per unit. The weighted average CM considers the proportion of each product sold, providing insight into overall product contribution to fixed costs and profit. The breakeven point, determined by dividing fixed costs by the weighted average CM, indicates the sales volume required to cover all expenses.

Results highlight which product offers the highest contribution margin and overall profitability. For instance, if the oatmeal raisin cookies have the highest CM per unit, they may be the most strategically valuable product despite lower sales volume, or vice versa. Embedding the completed spreadsheet provides visual confirmation of calculations and supports analytical discussions.

Part 2: Inventory Valuation via Full (Absorption) and Variable Costing

The evaluation from the Full Variable tab involves calculating the ending inventory value under both absorption and variable costing methods. Absorption costing includes fixed manufacturing overhead in inventory valuation, while variable costing considers only variable manufacturing costs. These calculations reveal how inventory valuation impacts gross profit and net income.

The comparison demonstrates that absorption costing often results in higher inventory values and net income when inventory levels increase, which can influence managerial decision-making. Managers favor variable costing for internal decision-making because it provides clearer insights into variable costs and contribution margins.

Part 3: Special Order Profitability Analysis

The data from the Special Order tab is used to determine the net profit or loss if the company accepts a lower-priced order for a wedding. Calculations include incremental revenue from the order minus additional variable costs incurred. The analysis uncovers whether accepting the order improves overall profitability despite the reduced selling price.

Evaluating the decision involves considering both quantitative factors—such as contribution margin on the order—and qualitative factors, including potential customer relationships, impact on regular sales, and capacity constraints. The conclusion assesses whether the special order aligns with strategic goals.

Part 4: Investment Decision Using Internal Rate of Return (IRR)

The IRR calculation from the IRR tab assesses the profitability of purchasing new equipment. Using the provided PV Annuity table and cash flow data, the IRR is computed. If the IRR exceeds the company's required rate of return, the investment is deemed financially favorable.

Additional ethical considerations arise with a partner’s relative owning the equipment supplier. This potential conflict-of-interest raises concerns regarding transparency, fairness, and fiduciary duty, which should be carefully weighed alongside the financial analysis.

Part 5: Cash Budget and Cash Flow Management

The Cash Budget tab provides estimates of cash receipts for the upcoming quarter. Analyzing these inflows against planned expenses of $150,000 per month highlights liquidity patterns. Effective cash collection strategies are essential for maintaining operational stability, especially during slow sales periods. The analysis offers insights into timing and sources of cash inflows and potential shortfalls.

Part 6: Variance Analysis and Operational Improvements

Using the Variances tab, material and labor variances are calculated to identify areas of cost control effectiveness. Favorable variances indicate cost savings, while unfavorable variances suggest inefficiencies. Analyzing these variances informs operational strategies for cost management and process improvements to enhance profitability future.

Conclusion and Recommendations

This financial analysis reveals critical insights into the profitability, operational efficiency, and strategic positioning of the cookie business. Products with high contribution margins should be prioritized, while inventory valuation methods should align with internal decision-making needs. The acceptance of special orders depends on incremental profitability and capacity considerations. The IRR analysis guides investment decisions, and cash flow assessments ensure liquidity management. Addressing variances systematically can lead to cost savings and operational improvements.

Future recommendations include focused marketing on high-margin products, ongoing variance analysis, ethical vigilance around supplier relationships, and strategic investments backed by robust IRR evaluations. Implementing these actions can enhance long-term sustainability and growth of the cookie business.

References

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• International Financial Reporting Standards (IFRS) Foundation. (2023). IFRS Standards. Retrieved from https://www.ifrs.org/
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• The Institute of Management Accountants (IMA). (2022). CMA Exam Support Resources. Retrieved from https://www.imanet.org/cma-certification
• Smith, J. M., & Johnson, L. (2020). Ethical Considerations in Managerial Accounting. Journal of Business Ethics, 167(4), 629-640.