Project report: Accounting

Running Head: Accounting
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Project report: Accounting

Accounting
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Contents
Introduction.......................................................................................................................3
Case study.........................................................................................................................3
Cost statement and suggested sales price.........................................................................3
Break even analysis..........................................................................................................3
Cash budget......................................................................................................................3
Financial accounting statement.........................................................................................4
Capital investment appraisal.............................................................................................4
Alternative approaches.....................................................................................................4
Budgetary approach and variance analysis.......................................................................5
Conclusion........................................................................................................................5
References.........................................................................................................................6

Accounting
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Introduction:
Accounting is a process and approach which makes it easier for the accountants and
the company to record all the financial transaction and makes it easier for the business to
make a batter decision about the performance of the company (Hoye, Nicholson, Westerbeek,
Smith and Stewart, 2012). In the report, a case study of Sportech ltd has been studied where
the company is planning to diversify the business and start a plant of hybrid business.
Case study:
Sportech limited is a shoes manufacturing company which is planning to product
hybrid business. In order to start the new business, company has to buy new machineries, hire
new staff members and change the process of production of the shoes. Here, the cost
statement, break even analysis, budget, cash flow statement, financial statement and capital
investment appraise methods have been applied on the new business opportunity to measure
whether it will be a profitable venture for the business or not.
Cost statement and suggested sales price:
Cost statement (refer to excel file) tool over the business explains that the current cost
of each pair is quite higher. It would cost £ 50.46 to the company to produce a pair of shoes.
If the company tries to maintain profit margin of 30 on the cost of the product then the selling
price of the shoes must be £ 65.60. Currently, the company has decided to sell the shoes in £
60 which is nearest to £ 65.6 and indicates that company can maintain the desired profit
margin.
Break even analysis:
Break even analysis tool on Sportech limited explains that the selling price and
variable cost per unit of hybrid shoes are £ 65 and £ 28.07 which indicates that the
contribution margin per unit is £ 36.93. It further explains that the fixed cost of the company
is £ 110150 (Horngren, 2009). Hence, the break even units of the company should be 2983
units. If the company would be able to sell 2983 units then only company would be able to
recover the incurred cost. The break even amount in dollars would be £ 193880 (Refer to
excel sheet).
Cash budget: