Please See Below For Information On The Paper And Element

Please Be See Below For Information On The Paper And Elements That You

Please be see below for information on the paper and elements that you should focus on. Please do not hesitate to contact me with any questions. FOCUS OF THE PAPER You’ve just been hired onto ABC Company as the corporate controller. ABC Company is a manufacturing firm that specializes in making cedar roofing and siding shingles. The company currently has annual sales of around $1.2 million, a 25% increase from the previous year.

The company has an aggressive growth target of reaching $3 million annual sales within the next 3 years. The CEO has been trying to find additional products that can leverage the current ABC employee skill set as well as the manufacturing facilities. As the controller of ABC Company, the CEO has come to you with a new opportunity that he’s been working on. The CEO would like to use some of the shingle scrap materials to build cedar dollhouses. While this new product line would add additional raw materials and be more time-intensive to manufacture than the cedar shingles, this new product line will be able to leverage ABC’s existing manufacturing facilities as well as the current staff.

Although this product line will require added expenses, it will provide additional revenue and gross profit to help reach the growth targets. The CEO is relying on you to help decide how this project can be afforded. Provide details about the estimated product costs, what is needed to break even on the project, and what level of return this product is expected to provide. In order to help out the CEO, you need to prepare a six- to eight-page report that will contain the following information (including exhibits, but excluding your references and title page). Refer to the accompanying Excel spreadsheet (available through your online course) for some specific cost and profit information to complete the calculations.

Paper For Above instruction

I. An overall risk profile of the company based on current economic and industry issues that it may be facing.

II. Current company cash flow:

  • a. You need to complete a cash flow statement for the company using the direct method.
  • b. Once you’ve completed the cash flow statement, answer the following questions:
    • i. What does this statement of cash flow tell you about the sources and uses of the company?
    • ii. Is there anything ABC Company can do to improve the cash flow?
    • iii. Can this project be financed with current cash flow from the company? Why or why not?
    • iv. If the company needs additional financing beyond what ABC Company can provide internally (either now or throughout the project), how would you suggest obtaining financing—equity or corporate debt—and why?

III. Product cost:

  • a. ABC believes it has an additional 5,000 machine hours available before expansion is needed. Machine hours are used to allocate fixed factory overhead and sales expenses. Producing the expansion product will take twice as long as existing products.
  • b. What is the product cost for the expansion product?
  • c. How does adding this new product help absorb fixed factory and sales expenses? How much does this reduce the cost of the existing product?
  • d. Assuming a 40% gross margin target, what should be the selling price for the expansion product?
  • e. With a similar sales mix, what are the contribution margins and break-even points for each product?

IV. Potential investments to accelerate profit:

  • a. ABC considers purchasing equipment costing about $42,000, which will generate savings of $15,000, $13,000, $10,000, $10,000, and $6,000 over five years.
  • b. Using net present value (NPV) at a 12% minimum rate of return, what is the NPV of the investment? Ignore taxes and depreciation.
  • c. How would a straight-line depreciation over five years impact fixed costs and product costs annually?
  • d. Considering cash flow and NPV, should ABC purchase the equipment? Why or why not?

V. Conclusion:

  • a. Identify the major risk factors for this project.
  • b. As controller and management accountant, what are your responsibilities regarding this project?
  • c. What do you recommend the CEO do?

Please write a six to eight-page APA formatted paper answering these components, using the provided financial data and analysis, with appropriate citations and references.

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