Reference no: EM132371297
Assessment :
Scenario
You have been approached by a client to assist them in planning for a new business venture. The client has developed a new drone to take aerial photos of land for surveying, building and development purposes. The client has commissioned market analysis and possible demand for their product. They have also completed a budget to determine the cost of manufacturing the new technology.
The client requires you to prepare the business plan for 3 separate scenarios they have determined are the most likely to occur in the new marketplace. The client has provided the following information:
Scenario 1 Scenario 2 Scenario 3
Cost of Goods (per unit) 500.00 550.00 600.00
Mark up 45% 45% 45%
Number of Units to be sold 3,000 2800 2,550
Staff
Sales staff - 2 Staff $50,000 Each (i.e. per staff member)
Commission - For sales staff only 2.0% of GST Exclusive sales
Manager $110,000.00
Bookkeeper $65,000.00
Receptionist $45,000.00
Factory
Assets Equipment Computers Office Fit Out
Original cost of asset (GST Excl.) $650,000.00 $50,000.00 $25,000.00
Expected Residual Value $50,000.00 0.00 0.00
Useful Life 10.00 4.00 5.00
Depreciation Method Straight Line Diminishing Value Straight line
NOTE: The Factory Equipment will be purchased on 1" September 2019. All other assets were purchased on 1 July 2019.
Loan
Initial Value of the loan $200,000.00
Interest Rate applicable 3.5% per annum, compounded monthly
Repayment Loan is to be repaid over 3 years in equal monthly
instalments. Loan begins on 1/7/2019.
Factory rent is $9,000 per calendar month. Operating expenses are $42,000. These remain the same across each scenario. When calculating income and expense items for this analysis, you are analysing the period from 1/7/2019 to 30/6/2020. Please include all items relevant for this period for each scenario, including Sales, cost of goods sold, loan expenses, rent expense and operating expenses. Loan expenses is the interest on the loan that accumulates in that period.
Your Tasks:
Part A (using the excel file provided on the Moodie)
1) Calculate the GST exclusive and GST inclusive sales price for the drone.
2) Produced a projected profit/loss value for each scenario. To do so you will need to calculate:
a. Sales commission
b. Depredation on Factory Equipment
c. Depredation on Computers
d. Depredation on Office Fitout
e. Interest on the loan.
3) Calculate the tax payable for the Company (assume Company Tax is 30%)
4) Calculate the tax payable for each of the employee (using the tax rate table for the 2019¬2020 year. Please refer to the ATO website to establish the current tax rates).
Part B
1) Advise your client on which scenario you would suggest they select. Explain why you would advise this selection (approx. 300-400 words).
2) Comment on the variance noted between the scenarios (approx. 200-250 words).
3) Explain the difference between straight line depreciation and diminishing value depreciation to your client (approx.150 words).
4) Break Even Analysis
a. You must calculate the break even analysis mathematically.
b. Show the break even analysis graphically.
c. Explain what this break even analysis means. (approx. 100 words)
d. Why is a break-even analysis important tool for business (approx. 150 words)
5) Produce a Pie Graph showing the break-up of expenses in the business. Comment on the pie graph. (approx. 100 words)