University Asset Management Report: Café B's Physical Assets

This report provides a comprehensive analysis of physical asset management for Café B, addressing key aspects such as asset acquisition, the implementation of an asset management system, and asset replacement strategies. The report begins with an executive summary and an introduction outlining the situation at Café B, including its goals and objectives. It then delves into the factors to consider for acquiring assets like the Alfresco Dining area, Impinger oven, and online booking systems, including post-tax returns, inflation, and effective annual rates. The report discusses the importance of aligning asset acquisitions with the company's objectives, and how the timing of these acquisitions impacts the cash budget. It also explores the use of depreciation methods, including the diminishing value method, and the factors that influence these decisions. The report further analyzes the impact of asset acquisition on the business and the importance of quality products and services. It also examines the costs associated with asset management, including finance, leasing, setup, and maintenance costs. Finally, the report concludes by discussing the asset replacement strategies. The report provides valuable insights into effective asset management practices for businesses like Café B.

Running head: MANAGE PHYSICAL ASSET
Manage Physical Asset
Name of the Student
Name of the University
Author’s Note

1MANAGE PHYSICAL ASSET
Executive Summary:
Assets are the resources used by business organizations to earn economic benefits in the
future. Making effective use of assets is not possible without ensuring proper management of
such assets. Thus, it is important to have an effective management system in place within an
organization to manage the physical assets of the organization. With the objective of developing
a suitable asset management system for Café B a detailed discussion on different aspects of
physical management of assets are enumerated below.

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Table of Contents
Executive Summary:........................................................................................................................1
Introduction:....................................................................................................................................5
Situation at café B:......................................................................................................................5
Goals and objectives of Café B:..................................................................................................5
Section 1- Asset Acquisition...........................................................................................................6
Answer to Part 1:........................................................................................................................6
Answer to Part 2..........................................................................................................................7
Answer to Part 3a.............................................................................................................................8
Answer to Part 4ai.....................................................................................................................10
Answer to Part 4bi....................................................................................................................11
Answer to Part 4bii...................................................................................................................12
Answer to Part 4ci.....................................................................................................................12
Answer to Part 5........................................................................................................................12
Answer to Part 6ai.....................................................................................................................13
Answer to Part 6aii....................................................................................................................13
Answer to Part 6aiii...................................................................................................................14
Answer to Part 6aiv...................................................................................................................14
Answer to Part 6b......................................................................................................................14
Answer to Part 6ci.....................................................................................................................14
Answer to Part 6cii....................................................................................................................15

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Answer to Part 6ciii...................................................................................................................16
Answer to Part 6di....................................................................................................................16
Answer to Part 7:......................................................................................................................16
Section 2 – Asset Management System (Asset Cloud by Wasp)..................................................17
Answer to Part 1a......................................................................................................................17
Answer to Part 2a......................................................................................................................18
Answer to Part 2b......................................................................................................................18
Answer to Part 2c......................................................................................................................18
Answer to Part 3ai.....................................................................................................................18
Answer to Part 3b......................................................................................................................19
Answer to Part 3c......................................................................................................................19
Answer to Part 3di....................................................................................................................19
Answer to Part 3 dii..................................................................................................................19
Answer to Part 4a......................................................................................................................20
Answer to Part 5ai.....................................................................................................................20
Answer to Part 5aii....................................................................................................................20
Answer to Part 5bi....................................................................................................................20
Answer to Part 5bii...................................................................................................................21
Answer to Part 5c......................................................................................................................21
Answer to Part 6a......................................................................................................................21
Answer to Part 6b......................................................................................................................22

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Answer to Part 7a......................................................................................................................22
Answer to Part 7b......................................................................................................................22
Answer to Part 7c......................................................................................................................23
Section 3 – Asset Replacement......................................................................................................23
Answer to Part 1ai.....................................................................................................................23
Answer to Part 1bi....................................................................................................................24
Answer to Part 1ci.....................................................................................................................24
Answer to Part 1cii....................................................................................................................25
Answer to Part 1ciii...................................................................................................................25
Answer to Part 2a......................................................................................................................25
Conclusion:....................................................................................................................................25
References and Bibliographies:.....................................................................................................27
Appendix:......................................................................................................................................31

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Introduction:
Situation at café B:
Subsequent to the change in the ownership of Café B, certain specific issues in relation to the
record keeping of assets and physical management of these assets have been observed.
Incomplete and improper record keeping of assets is a very serious concern for the café as this
can lead to significant loss of revenue in the future. In order to manage the physical assets
effectively an effort has been made to answer the queries in relation to the asset management in
Café B.
Goals and objectives of Café B:
Financial:
 Achieving an annual growth of 4% in the amount of revenue from the next financial
year.
 Earn a profit before tax of 8% on revenue in next two year with shall increase to 10%
from the 3rd year.
 Payment of $35,000 as dividend to the owners.
 Increase in sales by 10% annually subsequent to alfresco refurbishments in the café.
Expansion of business:
 To promote the café as pizza place by alfresco refurbishments.
 Increase the ability of the café to produce pizza by acquiring new impinge oven.
 Online booking system shall be introduced to support the expansion strategy of the café.
The assets shall be acquired from the following suppliers the reason for such decision has been
explained below:

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Asset acquisition Names of suppliers Cost estimations and/or
quotes
Refurbishment of dining area Renovation Kingdom $15,000
SHAPE $14,000
Impinger Oven Euroquip Catering Equipment $6,334
Petra Equipment $5,964
POS systems INFINITePOS $1,250
Impose Sydney $999
Section 1- Asset Acquisition
Answer to Part 1:
There are certain factors to be considered for the acquisition of Alfresco Dining area,
Impinger oven and online paperless booking system and iPad POS system and they are discussed
as follows:
Post-tax return:
Café B needs to think about the possible returns to be generated; however, it is
noteworthy to mention that the returns would be lower, if taxation is considered (Gitman, Juchau
and Flanagan 2015). Therefore, it would be wise to compute post-tax returns before investing in
the above-stated financial instruments.
Inflation:

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The purchasing power of money is always minimized due to inflation. Therefore, when
there is chalking out of a savings plan, inflation needs to be considered for asset acquisition.
Effective annual rate:
Basically, the annual rate of return on investment varies from the nominal rate of return at
the time there is occurrence of compounding for more than once a year,
Answer to Part 2
The mandated acquisitions are considered in such a manner that they have direct
relevance to the key objectives of the company. These are needed to be considered in terms of
the various types of the objectives which are relevant to the revenue growth, profit margin and
production capacity. Fixed asset register has been further considered as per the asset
management systems, general ledger and accounts payable. This will be depicted as per the
objectives such as POS ordering, relying on paperless inventory control and increasing the
dividend payment in a time period of 5 years.
Refurbishment of alfresco dining area:
The date of acquisition is proposed to be June 1 as this is the month where the sales is
reduced to the minimum. As a result it would be easier to implement the refurbishment with
minimum noise and disturbances to the guests who will be visiting the café during that time.
Also the fact that the café is expected to have a closing cash balance of $60,320 will help the
organization to finance the alfresco dining area in the month of June.
Budget:
As a result of implementing the above decision the net cash flow will be in negative of $27,782
as can be seen in the cash budget in June. However, since, June is the month where the café

8MANAGE PHYSICAL ASSET
experiences significant downturn in sales thus, this is the best time to effect the changes as the
café will not loss any customer during this time even with significant amount of work in the café.
Straight Line Method of depreciation shall be used to calculate the annual depreciation on the
refurbished area. Annual depreciation of 25% on the amount of $ 45000 shall be charged to
determine the diminished value of the asset after passing of each year. Thus, annual depreciation
will be (45000 x 2.5%) = $1,125.
Impinger oven:
The oven (impinger) shall have the following technical specifications:
I. Stainless steel
II. Shall operate in natural gas.
III. 60 x 12” pizzas per hour at 6 minutes as the minimum capacity.
IV. 130oC to 300oC temperature adjustment provision.
V. Fan cooling
VI. Reversible belt
VII. Height and width should 1500 each Width: 2000

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Answer to Part 3a

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Answer to Part 4ai
Factors guiding the chosen time for the construction of the alfresco dining are as following:
The impact on cash budget:
As per the facts provided in the case scenario it is clear that a substantial amount of cash is
required to construct alfresco dining area. As per the preliminary estimation an amount of
$45,000 is expected to be invested to construct alfresco dining area. Thus, significant amount of
cash will be needed to construct the dining area. With $45,000 investment required to construct
alfresco dining area the cash position which is already very concerning for the café will be
further deteriorated with the investment.