Business Finance Project: Dysonica Cost Analysis and Forecast

This report delves into business finance, focusing on cost analysis and cash flow forecasting for Dysonica, a global creative organization. The report begins by examining and classifying costs, differentiating between fixed, variable, and semi-variable costs, and illustrating various costing methods like absorption, marginal, and activity-based costing. Task 2 discusses judgments and conclusions drawn from the analysis and recommendations. The report then prepares a 12-month cash flow forecast for Dysonica, detailing cash inflows and outflows. Finally, it evaluates Dysonica's performance based on prepared budgets. The report recommends using ABC or marginal costing to manage costs, improve payment terms, and explore digital alternatives. The cash flow statement is prepared to show the movement of inflows and outflows of cash for the organization. The report provides a comprehensive overview of financial management and strategic recommendations for the company.

Time constrained
project business
finance

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK...............................................................................................................................................3
Task 1...............................................................................................................................................3
Examining and classifying the cost to identify variable, fixed or semi variable costs and
illustrating the types of costing methods................................................................................3
Task 2...............................................................................................................................................7
Discussing the judgments and conclusions drawn from the analysis and recommendations.7
Task 3...............................................................................................................................................8
Preparing the 12 month cash flow forecast for the organisation till 30 April, 2023..............8
Task 4.............................................................................................................................................12
Evaluating the performance of Dysonica based on the above prepared budgets.................12
CONCLUSION .............................................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
Business finance are the funds and credits utilised by an enterprise. Funds are the base of
a company. Financial requirements are for raw materials, commodities, assets and other lines of
economical activity. The meaning of corporate finance consists of corporate activities related to
obtaining as well as maintaining capital resources to meet the financial requirements and overall
goals of the company. Business is equated with the creation and distribution of products and
services that meet the requirements of society. In order to successfully complete a business, it
needs funds called corporate finance. Therefore, finance is known as the lifeblood of an
enterprise. A business cannot function without sufficient money available (Beaumont, 2019).
Dysonica is a global creative organisation based in UK that now has a worldwide presence.
Many price efforts have been implemented because of the competitive pressure comprising of
the migration of operations in the UK.
TASK
Task 1
Examining and classifying the cost to identify variable, fixed or semi variable costs and
illustrating the types of costing methods
Cost is a monetary measure of the number of resources used to produce goods or provide
services. The term cost in accounting refers to the monetary price of expenses on raw materials,
supplies, equipment, services, products, etc. It is the amount recognized as an expense for
accounting purposes.
Costs fall into three categories based on volume as follows:
Fixed cost: It is the type of cost that remains constant despite changes in production within a
specified period and area of activity. The per unit fixed cost fluctuates as output volume changes.
If the production volume rises, the per unit fixed cost will fall, and if the production volume falls,
the per unit fixed cost will rise. Examples of fixed costs include rent and insurance for buildings,
depreciation for factories and machinery, and salaries for employees (Chris Kraft and PMP,
2018).
Rent of factory and storage: 18000 p.m. = 18000 * 12 = 216000
Insurance: 500 p.m. = 500* 12 = 6000

Machinery: 1500 p.m. = 1500* 12 = 18000
Sales and office staff: 9000 p.m. = 9000* 12 = 108000
Variable cost: These are costs that change in direct proportion to changes in output. Costs
increase or decrease at the same rate as the units produced and are called variable costs. Direct
materials, direct costs, and variable overheads are examples of variable costs.
Direct labour: 17500 p.m.
Raw material: 15000
Semi-variable cost: Cost rates contain both variable and fixed components and are hence
partially influenced by variations in activity levels. These are costs that are partly fixed at a
particular level of production and partly variable with changes in output, but not proportional to
changes in output (Gan and Chen, 2021).
Utilities: 500 p.m. = 500 * 12 = 6000
Logistics cost: 3000 p.m.
Absorption costing: It is also said as full costing, is utilised by a company to assess the
total cost of manufacturing a particular product. In this costing method, all fixed and variable
costs are assigned to cost objects and the company's total overhead costs are obtained based on
the activity level of the organization. In this type of calculation, manufacturing overhead is
distributed by product and included in the organisation's valuation of inventory, irrespective of
whether the good was sold in the time period covered. Types of costs inclusive in this type of
costing are wages of worker who bring together products, indirect costs related with
manufacturing products, raw materials necessary for manufacturing products (Ghosh and

Chowdhury, 2018). Companies using absorption costing have balance sheets with high ending
balances. The expense on the income statement will be lesser. To better understand the concept
of fixed costs and their impact on the company's overall profitability, consider the example of a
company where management proposes to produce 10000 units per month. Let suppose out of his
10,000 produced, 8,000 are sold to consumers, leaving the remaining 2,000 of his as final stock.
In this case, management will incur some costs. However, there are certain overhead costs that
may be associated with the manufacturing facility where the products are manufactured. In this
case, the company pays him $20,000 as rent for the facility and treats the same as a fixed
overhead emission.
For instance, let suppose XYZ is a computer enterprise. The information provided relates to
the production procedure. Profits are evaluated utilising the traditional costing method. Total
10,000 units were manufactured, with 9000 of them sold. Each product will cost $50 to buy.
Direct labour cost = $5
Direct material cost is $20
$5 in other variable costs
Fixed overheads= $5
$30,000 in fixed costs
Marginal costing: It is a type of costing that evaluates the effect of changeable costs on
the total amount of production. This costing method adds more units to output so managers can
define the effect of different quantities and costs on the business total operating profit. This type
of costing is often utilised to make short-term financial conclusions and evaluate the profitability
potential of new commodities, advertising campaigns, and current selling prices of present
products. There are several factors that must be considered when applying the marginal cost
method to assess a company's profit and overall market position related to manufacturing and
production processes (Grabowski and Cunningham, 2018). By managing these factors and the
revenues calculated from them, the company can best estimate the rate of return to sustain sales,
thereby increasing profits. If the marginal cost per unit is high, we know that increasing
production capacity leads to unnecessary costs. For example, a tire manufacturer might make
100 of his car tires and then offer to make another tire that costs $80. These are then considered

marginal costs of the product and certainly affect other related business items, whether directly
or indirectly (Grossmann and Dugan, 2019).
Marginal cost = ∆ in cost / ∆ in Quantity
Let suppose XYZ Ltd. is a bottle-manufacturing business organisation. The following
information related to its production facilities are given.
10,000 units manufactured in the 1st month.
Month 2: 15,000 Units manufactured
Variable Costs = $50,000
Month 2 Variable Costs = $ 80,000
∆ in price + quantity = Marginal Cost = Marginal Cost (80,000 – 50,000)/ (15,000 – 10,000).
Hence, the marginal cost per-unit is $6 (30,000/5,000).
Activity based costing: This type of costing is often said as ABC, is when a business
allocates indirect costs to particular product or services. This type of costing depends on the
enterprise activities like a unit of work or design of product. These activities are called cost
drivers because they are usually the most costly in the manufacturing process. In ABC
accounting, rather than simply assigning costs based on common measures, companies perform
activity valuations to identify cost drivers. This type of costing usually gives a more accurate
idea of the overall cost of production and the company's profitability achieved through that
production. As an activity-based costing method, procedures must be implemented and carried
out that can have a positive impact on the company's profit calculated under the activity-based
costing method (Julien, 2018). To understand this, consider the example of ABC Ltd., a fabric
manufacturing company that specializes in selling different types of fabrics to create finished
garments. Here, the company incurs an annual electricity bill of $50,000 with 2,500 hours of
work involved. This 2500 figure is based on actual hours worked and can be identified as a cost
driver or electricity bill for such activities. Additionally, the cost of the coaster can be calculated
by dividing the $50,000 cost by 2,500 hours. The cost is $20 and simply represents the
percentage the company pays for the electricity bill for each unit produced.

Task 2
Discussing the judgments and conclusions drawn from the analysis and recommendations
Among the many costing strategies mentioned above, Dysonica Plc recommends using
ABC or marginal costing to help businesses manage costs arising from various processes. This
allows organizations to allocate costs by procedure and determine who is responsible for various
costs, helping managers reduce costs and streamline suitable strategies. Activity-Based Costing
is a one-stop shop for businesses looking to reduce costs. This allows organizations to track
incurred costs instead of totalling them with other specific costs. As a consequence, the right
source of price is determined, allowing companies to emphasise on effectively controlling that
particular cost item instead of additional static factors. Overhead allocation is more accurate and
objective because overhead is classified and categorized based on the number of operations
(Kara and Zhou, 2021). Instead of aggregating all prices to assess a company's associated costs,
ABC organizes costs by purpose to simplify the process. Previously obscure costs, like
depreciation, can be traced back to particular actions with performance-based billing. By shifting
administrative costs from increased products to lower products, the ABC method can influence
the unit price of low-volume products.
Another suggestion for Dysonica is to choose an activity-based costing method. This is a
good way of predicting the price of goods or services and helps us make more accurate and
reliable decisions. Dysonica takes this approach. This makes it easier for the company to spread
costs across the many tasks performed during the production process. A thorough understanding
of the tasks that add cost without providing value has helped Dysonica to better understand their
spend.
Other Strategies Dysonica improved payment terms with vendors to negotiate prices for
base components. By ensuring that the value of the supply chain is not compromised. If these
costs are reduced, the company will benefit greatly from being able to buy products in bulk for
no further consideration. Dysonica looks at digital alternatives that can increase corporate
spending and be costly at first. However, by implementing new technological innovations,
companies can reduce long-term operating costs while increasing productivity (Liu, 2019). The
corporation must account for all expenses incurred during the normal operation of its business.
Monitor utility bills, land, warehouses and other expenses. They develop reasonable estimates so

that they can advise the company on how to allocate costs based on activities in various
departments. Such management costs can be reduced.
Task 3
Preparing the 12 month cash flow forecast for the organisation till 30 April, 2023
The statement of cash flow is the statement which concise the movement of inflows and outflows
of cash of an organisation. This statement assesses how good a business controls its position of
cash. It implies how well company is generating cash to pay off debt and cover operating
expenses. This statement is one of 3 main statements of finance and this statements complements
the income statement and balance sheet. This statement emphasises on a company's cash
management, including how much cash a company generates (Mayer, 2018). The main
components of cash flow are divided into three type of activities that are operations, investments
and financing. There are two approaches of preparing cash flow: direct and indirect method.

According to the table above, the cash inflows and outflows from the company's
operating activities, external investment flows, and expenditures and investment payments for a
given quarter are all included in the financial statements. The cash flow statement shows positive
or negative cash flows. Negative cash flow, even if beneficial, should not be an immediate alarm.
A company's success with investments can be assessed by looking more closely at its cash flows
over various time periods. Earnings consistency can be determined, among other things, by
comparing net income in cash from operating and cash flow statement valuations. For example,
profit is considered higher if cash from operating activities exceeds net profit. The cash flow
statement is an important indicator of a bank's earnings position and current and long-term
forecasts. It determines a company's stability and provides information on whether it has
sufficient funds to cover its costs (Tchuigoua and Durrieu, 2022).

Task 4
Evaluating the performance of Dysonica based on the above prepared budgets
The cash flow statement above implies that Dysonica's business is going good. The company can
produce major cash flow over a given time period, resulting in cheap financing. At such times of
the year, the company's sales are expected to increase rapidly, indicating that it is likely to sell
enough items to survive in a highly competitive market. With a total cash injection of £2,465,187
for the company in the first year, it will be a notable opportunity for the company as his
involvement in numerous scenarios will allow him to help Dysonica succeed. The company
needs to cut costs wherever possible, especially those incurred by exchange rates among nations
like UK and China. Financial derivatives can be utilised to price trades at a predetermined rate,
enabling the company to better manage the costs associated with operating this part. It's worth
noticing that the business reported negative cash flow in his first seven months, and from
December he reported positive cash flow through April. For the company to generate more cash
income than his total December-to-April expenses. This means that the company had working
capital for the first 6-8 years of its existence. The company's financial position is affected by
complex economic sectors and the continued increase in investments that are truly necessary for
any company to thrive around the world. Optional equity tie-ups help reduce costs by identifying
which drives fail and are costing the company (Vernimmen and Le Fur, 2022). To maintain good
functional results over an extended period of time, functional workouts should be performed at a
constant rate.
Cash outflows have an indirect impact on a company's economic performance. This is a key
criterion for a company's success in today's competitive global marketplace. Costs can be
reduced by using alternative supply chains and examining which initiatives are profitable and
which are costly under the organization's control.
CONCLUSION
It is concluded from the above evaluation and report that corporate finances and funds
management are an integral and important part of the company's performance. Global companies
like Dysonica face stiff competition. To stay ahead of the competitors in a highly competitive
sector, the business must reduce numerous running costs. A cash flow forecast is a great manner

to evaluate the inflow or outflow of cash of the company at the period end and can be used by a
company to prepare its own budget. Two of the most general cost accounting methods that
businesses may use are marginal spending and activity-based spending. Dysonica eliminates the
possibility of error and tracks all payable expenses. It also helps the company reduce costs by
leveraging total expenses and cost heads that does not contribute to the organisation's core
revenue.

REFERENCES
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