Introduction to Accounting and Finance

Introduction to Accounting and
Finance

Table of Contents
PART A...........................................................................................................................................3
PART B............................................................................................................................................7
a. Determining the contribution of the each microwave in regard to covering the fixed cost....7
b. Computation of BEP and the margin of safety if microwave is sold at the price of £40........7
c. Computation of profit that Parks mead Ltd would make by selling 60000 units of
microwaves at the price of £40...................................................................................................8
d. Evaluating and analysing the new strategy of Parksmead Ltd................................................9
e. Underpinning assumptions attached to the BEP model........................................................10
Part C.............................................................................................................................................11
a. Computing payback, ARR, and NPV of the firm .................................................................11
b. Explaining benefits and limitation of different capital budgeting tools ...............................13
c. Explaining main advantages and disadvantages of making use of the budget as the strategic
technique ..................................................................................................................................15
REFERENCES .............................................................................................................................17

PART A
Income Statement
For the year ended 31 December 2018
Particulars £ £
Revenues:-
Sales(604800+154800) 759600
Other income 0
Total Revenues 759600
Expenses:-
Cost of goods sold or cost of sales 291600
64800 356400
Depreciation 11000
Wages paid 140400
Add Outstanding wages at the end of the year 2610 143010
Electricity Expenses 9270
Van running expenses 40320
Bad debts 1800
Rent paid 135000
Less:- prepaid rent at the end of the year 27000 108000
Total Expenses:- 669800
Net profit before tax 89800
Less:- Tax paid 6930
Net profit after tax 82870
Working Notes

1 Total Sales
credit sales 604800
cash sales 154800
759600
2 Depreciation
Purchase Price of Van 72000
scarp value 6000
life in years 6
Depreciation 11000
3 Tax Computation
Tax upto 31 march 2018 2880
Add:- Tax from 1 april 2018 to 31 march 2019 5400
Less:- prepaid tax of 3 months
(from 1january 2019 to 31 march 2019) 1350
6930
4 Electricity Expenses:-
Expenses paid 6840
Add:- Outstanding expenses at the end of the year 2430
9270
Balance Sheet
For the year ended 31 December 2018