What are the major risk factors that you see in the project

Assignment Help Accounting Basics
Reference no: EM131231385

Principles of Accounting

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 skillset 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 the 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.

Financial information is contained in this document Final Paper Spreadsheet

Write a five- to seven-page financial statement analysis of a public company, formatted according to APA style as outlined in the Ashford Writing Center. Your paper should consist of the following sections:

1. Introduction

2. Risk Profile

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

3. Cash Flow Statement

o You need to complete a cash flow statement for the company using the direct method.
o Once you've completed the cash flow statement, answer the following questions:

- What does this statement of cash flow tell you about the sources and uses of the company funds?
- Is there anything ABC Company can do to improve the cash flow?
- Can this project be financed with current cash flow from the company? Why or why not?
- If the company needs additional financing beyond what ABC Company can provide internally (either now or sometime throughout the life of the project), how would you suggest the company obtain the additional financing, equity or corporate debt, and why?

4. Product cost

o ABC Company believes that it has an additional 5,000 machine hours available in the current facility before it would need to expand. ABC Company uses machine hours to allocate the fixed factory overhead, and units sold to allocate the fixed sales expenses. Bases on current research, ABC Company expects that it will take twice as long to produce the expansion product as it currently takes to produce its existing product.

- What is the product cost for the expansion product under absorption and variable costing?

- By adding this new expansion product, it helps to absorb the fixed factory and sales expenses. How much cheaper does this expansion make the existing product?

- Assuming ABC Company wants a 40% gross margin for the new product, what selling price should it set for the expansion product?

- Assuming the same sales mix of these two products, what are the contribution margins and break-even points by product?

5. Potential investments to accelerate profit

o ABC company has the option to purchase additional equipment that will cost about $42,000, and this new equipment will produce the following savings in factory overhead costs over the next five years:

- Year 1, $15,000
- Year 2, $13,000
- Year 3, $10,000
- Year 4, $10,000
- Year 5, $6,000

o ABC Company uses the net-present-value method to analyze investments and desires a minimum rate of return of 12% on the equipment.

o What is the net present value of the proposed investment (ignore income taxes and depreciation)?

o Assuming a 5-year straight-line depreciation, how will this impact the factory's fixed costs for each of the 5 years (and the implied product costs)? What about cash flow?

- Considering the cash flow impact of the equipment as well as the time-value of money, would you recommend that ABC Company purchases the equipment? Why or why not?

6. Conclusion

o What are the major risk factors that you see in this project?

o As the controller and a management accountant, what is your responsibility to this project?

o What do you recommend the CEO do?

Section heading titles should be centered and in bold. Your paper needs to include a minimum of two scholarly resources in addition to the textbook as references. Be sure to integrate your research rather than simply insert it.

Writing the Final Paper

1. Must be five to seven double-spaced pages in length, and formatted according to APA style as outlined in the Ashford Writing Center. Excluding the title page and reference page.

2. Must include a title page with the following:

a. Title of paper
b. Student's name
c. Course name and number
d. Instructor's name
e. Date submitted

3. Must use at least two scholarly sources in addition to the course text. Be sure to integrate your research rather than simply insert it.

4. Must document all sources in APA style as outlined in the Ashford Writing Center and here and here.

5. Must include a separate reference page, formatted according to APA style as outlined in the Ashford Writing Center.

Carefully review the Grading Rubric for the criteria that will be used to evaluate your assignment.

Reference no: EM131231385

Questions Cloud

Source of mutual fund versus private equity fund : Which type of fund do you think would be better able to capitalize on a weak, publicly traded firm that has ignored all forms of shareholder activism?
Write a paper on foreign exchange rate specifically to honda : Accounting One page of paper double space. Write a paper on Foreign Exchange Rate specifically to Honda and Brexit. Yen exchange rate during exporting 2015.
Premises and assumptions of industrial organization : Compare and contrast the premises and assumptions of the industrial organization (I/O) and resource-based (RBV) models of strategic planning. What benefits does each model offer that aids in strategic planning for the organization?
Calculate the heat-removal factor for a collector : The cover transmittance to solar radiation is 0.9 and is independent of direction. The solar absorptance of the absorber plate is 0.9, the collector is 1 m wide and 3 m long, and the water flow rate is 0.02 kg/s. The water temperature is 330 K.
What are the major risk factors that you see in the project : What are the major risk factors that you see in this project? As the controller and a management accountant, what is your responsibility to this project? What do you recommend the CEO do?
Derive an expression for the heat loss conductance : Derive an expression for the heat loss conductance Uc for a flat-plate collector in which convection and conductance are completely eliminated in the air layers by use of a hard vacuum.
Quantity flexibilty contract : Discussed several strategies that allow the manufacturer and retailer to share risk. Consider one that is widely used in the electronics and high tech industries: „Quantity Flexibilty Contract“.  Let C_Normal denote the wholasale price that the manuf..
Calculate the overall heat-transfer coefficient : Calculate the overall heat-transfer coefficient, neglecting edge losses, for a collector with a double glass cover, with the following specifications:
Under what condition would the reclassification be ethical : Which reporting makes Moss look better? Under what condition would the reclassification of the receivables be ethical? Unethical? Support your response.

Reviews

Write a Review

 

Accounting Basics Questions & Answers

  Use the following information to prepare the july cash

use the following information to prepare the july cash budget for anker co. it should show expected cash receipts and

  What is a liquidating distribution what is a nonliquidating

what is a liquidating distribution? what is a nonliquidating distribution? provide an example of each.what is an

  Describe the services that netezza offered and why ibm

Describe the services that Netezza offered and why IBM decided to purchase the company.

  Adam corporation purchased 3000 shares of ozark companies

Adam Corporation purchased 3,000 shares of Ozark Company's common stock for $12 per share as a long-term available-for-sale investment on June 30, 2014. Ozark declared and paid a cash dividend of $1.00 per share on its common stock on September 30, a..

  Journalizing the entries

On January 1, 20xx, Alpha Corporation issued $800,000 of 10%, 30-year bonds to lenders at par (100). Interest is to be paid semiannually on July 1 and January 1. Journalize the following entries:

  Purchased merchandise on credit from maras company terms

vargo company engaged in the following transactions inaugust 2011aug. 7 sold merchandise on credit to ken smith

  Getting a sample mean problem

The average cost of a one bedroom apartment in a town is $550 per month. What is the probability of randomly selecting a sample of 50 one bedroom apartments in this town and getting a sample mean of less then $530 if the population standard deviat..

  Redo this analysis above using macrs 10 years depreciation

you have been asked to help a local company evaluate a major capital expenditure. the company is a new internet company

  Compute the return on common stockholders equity

Compute the return on common stockholders' equity ratio.

  A cash budget by quarters for the carney company is given

a cash budget by quarters for the carney company is given below note that some data are missing. missing data amounts

  Indicating appropriate income tax allocation

Develop a memo to Texaco Inc’s chief accountant indicating the appropriate income tax allocation required for the above items, comprising the appropriate balance sheet presentation.

  Find the present value of 4800 under each of the following

find the present value of 4800 under each of the following rates and periods. if you solve this problem with algebra

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd