BFA312 Management Accounting Case: Plant-Based Pizza Business Model

This case study examines the management accounting practices of a newly established plant-based pizza business. It includes an analysis of budgets, sustainable sourcing, social and environmental responsibility, and ethical considerations related to manufacturing overheads. The report also features a breakeven point analysis, NPV calculation, and payback period assessment to evaluate the financial viability of the business model. The analysis considers the use of traditional wood-fired ovens and its impact on the environment and local community, ultimately providing insights into the business's potential for profitability and sustainability. Desklib provides access to similar solved assignments and past papers for students.

MANAGEMENT
ACCOUNTING

Contents
EXECUTIVE SUMMARY.............................................................................................................3
INTRODUCTION...........................................................................................................................4
TASK...............................................................................................................................................4
Analysis of Budgets so prepared:...........................................................................................4
Explanation of Sustainable sourced and how could it support the local community:............4
Analyses of social and environmental responsibility:............................................................5
Ethical issues related to application of manufacturing overheads:........................................5
Breakeven Point analysis of the Projected dataset along with NPV and Payback:................6
REFERENCES..............................................................................................................................10

EXECUTIVE SUMMARY
The report is based on the newly business model relating to Pizza baking which focuses on
preparation of pizza using the wood instead of oven. The statement shows the financial aspects
which includes preparation of budgets so that expected profit of such model are being evaluated.
The report shows the impact of usage of wood in the business as well as environment and the
society also.

INTRODUCTION
Management accounting plays the vital role in the success and failure of the organisation. It
is an important branch of the accounting which is related to identification, measurement, analysis
and interpretation of the accounting information so that it will support the management of the
entity with respect to taking operational decisions. This report consists of the business plan
relating to plant based pizza which is cooked under traditional wood fire system which is
considered to be healthy as compare to traditional wood fired oven. The business plan has been
designed considering the contribution made in the business of $50000 which is a capital in
business. This statement consists of sales budget, variable expenses budget, fixed expenses
budget, breakeven point analysis and application of various investment appraisal techniques to
check the viability of proposed business (ăpușneanu and et.al., 2019) .
TASK
Analysis of Budgets so prepared:
The sales so prepared show the expected increase in revenue by 5% annually and of the
other operational expenses are being increased with this rate only. With the increase in
production the cost per unit of the entity are being reduced and it is clearly evident in the variable
cost budget as well. The fixed cost budget does not change over the period of 3 years and all the
figures will remain fixed. The overall profitability is in higher side which shows that the prosed
business is profitable for the entrepreneurs.
Explanation of Sustainable sourced and how could it support the local community:
Sustainable sourcing is combination of communal, moral and ecological performance factors
into the process of selecting suppliers. Sustainable sourcing is critical across all the industries as
supply chain has been regularly expanding into the developing countries which requires lower
costs and higher production capacity which helps in exposing the companies in a wider array.
The sustainability helps the community by providing them better quality of life while
maintaining natures ability to function over the period of time with the help of minimizing waste,
preventing the pollution, promoting the efficiency and development of local resources to
revitalize the local economy of the country (Healy, Cleary and Walsh, 2018). The sustainable
community uses their resources in order to meet out the current needs while ensuring that the
sufficient resources are being available for the future generations. It helps in better quality of life

for all the residents and also maintaining the natures ability to function over the period of time by
minimizing the waste, preventing the pollution, promoting the efficiency and development of
local resources. The effect of sustainability will be seen with the help of the following examples:
 Car corporative to reduce the cost and necessity of the ownership of car.
 Sustainable environment plans to create the jobs.
 Private spending by spur and reduction in pollution with the help of public investment in
conservation of energy and audits (Kachelmeier, 2020).
 Increase in affordable housing supply through zoning codes that will promote the
multiple types of housing etc.
Analyses of social and environmental responsibility:
Social and environmental responsibility shows that the business must consider that due to
their business activities, the society and environment must not be affected. It is the responsibility
of the business to work for the society also in addition to maximising the wealth of the
shareholders. It is the responsibility of business such policies and procedures that will be
beneficial of the wellbeing of the society. It is important of the Pizza business to make sure that
such business also consider society and environment. However, by use of wood fired for baking
the pizza, outdoor and indoor pollution has been created which needs to be controlled with the
help of proper ventilation that needs to be made. However outdoor environment is being affected
due to this kind of business because the wood is at higher percentage to bake the pizza that will
lead to pollution the air at a higher rate which affects breathing of population. Further the use of
wood to bake the pizza is directly threat to the environment as around 30700 tons of wood is
burned every year to bake the pizza. Due to dependency of wood in such a business model, the
environment starts degrading at the higher rate along with polluting eminent in the environment,
therefore it is important for the business to adopt alternates that could be used so that business
model would survive in the market for the longer period of time (Ostaev, 2018) .
Ethical issues related to application of manufacturing overheads:
Absorption costing is one of the forms of accounting that deals with absorbing all the fixed
and variable overhead into the cost sheet for manufacturing the final product which includes
labour cost, material cost and overhead cost etc. If such form of costing is considered in the
income statement, then there are higher chances that cost has got manipulated along with the
assets and inventory values in the business and if reflects that the company has been performing

well but in actual it under performer in the market. Therefore, to avoid such malpractice it is
necessary of the organisation to avoid using absorption costing in their business structure and
adopt ABC costing method which divides the cost according to cost drivers and such drivers are
being arrived on the basis of different products and processes. This will lead to allocation of cost
in a proper way and over and under absorption of cost is reduced that reduces the burden on the
final price of the product
(Patten and Shin, 2019).
Breakeven Point analysis of the Projected dataset along with NPV and Payback:
Breakeven point analysis is carried out by the business to check that what level of output
the cost and profits are being achieved by the organisation. Breakeven point gives the clear idea
to the entity how much level of production they need to achieve to achieve the desired level of
profits. The below is the breakeven analyses calculation of Pizza business model based on the
projected data or information covered in spreadsheet: -
Break-even point = Fixed expense / (sales revenue per unit – variable expense per unit)
Break-even point = £19700 / (£50 - £7.1)
= £19700 / (42.9)
= 460 units
Desired profit = £250000
Required sales units = fixed cost + target profit / Contribution margin per unit
= 19700 + 25000 / 42.9
= 44700 / 42.9
= 1042 units
The above level of units shows that the business needs to sell 1042 units of the Pizza to
cover up all the operational cost in the business and if such target level in not achieved in
the operational year then they do not earn profits from such business plan.
Contribution per unit = Sales per unit – Variable cost per unit
= £50 - £7.1
Calculation of Net Present Value and Payback period:
(Figures are in $)
Expected Cash Flows

Year
Annual
Cash
Inflow
Cumulativ
e Cash
Inflows
0 -50000 0
1 184800 184800
2 194575 379375
3 202889 582264
Payback Period: It simply shows that how much time the business will require to recover their
initial investment they have made at the period. Those business models are always being selected
whose payback period is lower as it shows that higher returns are being generated by the
corporation. The calculation of payback period is being mentioned below:
= Number of years + (Cash inflows – initial investment) inflow of same year
= 0 + (184800 – 50000) / 184800
= 134800 / 184800
= 0.72 years
This shows that .72 years or around 7 months such business will take to recover the amount
of investment they have made in such business plan. Therefore, the project of Plant based
pizza generates profits for the company over the longer period of time which also increase
their market share as well as such business model is new and unique as compare to others.
Net Present Value:
Discounting Factor @ 8% (Figures are in $)
Years Net Cash
Inflows Discounting @ 8% PV of Cash Inflows
1 184800 0.926 171124.8
2 194575 0.857 166750.775
3 202889 0.794 161093.866
Present Value of Cash
inflows 498969.441
PV of Cash Outflow
(B) 50000
Net Present Value (A-
B) 448969.441

Interpretation: From the above the analysis the conclusion can be made that the business model
is financial viable because the NPV is positive and it shows that the returns generated by the
business is higher as compare to their investment of $50000. However, the returns are being
considered on the basis of estimations and judgements thereof.

CONCLUSION
Management accounting is the process of creating the goals of the business by identifying,
measuring, analysing, interpreting and communicating the information to the managers. These
statement comprises of the business plan relating to suitably cooked plant based pizza which is
considered to be healthy as compared to conventionally cooked pizza. These pizzas are being
prepared using traditional wood fired oven and for carried out such business the investment is
made around $50000. Further the statement consists of various budgets such are sales, fixed
overhead, variable overhead for the period of years. At the end of this report the analyses of such
data set has been carried out purpose of the report, findings and how such model support the
local community are being explained.

REFERENCES
Books and Journals
Căpușneanu, S. and et.al., 2019. Throughput Accounting: Decisional Informational Support for
Optimizing Entity Profit. In Throughput Accounting in a Hyperconnected World (pp.
27-56). IGI Global.
Healy, M., Cleary, P. and Walsh, E., 2018. Innovativeness and accounting practices: an empirical
investigation. Qualitative Research in Accounting & Management.
Kachelmeier, S.J., 2020. Financial Accounting and Auditing Experiments in the Journal of
Accounting Research: Historical Background and Recent Advances. Journal of
Accounting Research.
Ostaev, G.Y., 2018. Management accounting: Mechanisms for managing an agricultural
enterprise. [Upravlencheskiy uchet: Mekhanizmy upravleniya selskokhozyaystvennym
predpriyatiem]. /G. Ya. Ostaev. Bukhgalterskiy uchet v byudzhetnykh i
nekommercheskikh organizatsiyakh.- Accounting in budget and non-profit
organizations, (13), p.445.
Patten, D.M. and Shin, H., 2019. Sustainability accounting, management and policy journal’s
contributions to corporate social responsibility disclosure research: a review and
assessment. Sustainability Accounting, Management and Policy Journal.
Peysakhova, E.I. and Anyushenkova, O.N., 2018. The role of accounting in the economic
security system of an economic entity. Наука и образование: новое время, (5),
pp.232-236.
Shaffer, K.J., Gaumer, C.J. and Bradley, K.P., 2020. Artificial intelligence products reshape
accounting: time to re-train. Development and learning in organizations: an
international journal.