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You are employed as a senior administrator in the Finance Section of Dresden Office Furniture Limited, a manufacturer of office furniture. You are asked to provide some information for other managers about costing, budgetary techniques and accounts within the business. Some of the managers do not understand this information and the associated processes having never had any training in this area. Produce an easy to use handbook for managers, which provides the following details.

Unit 4.33    Finance for Administrative Managers

Level 4       10 Credits

Sample Assignment

Related Qualifications

ATHE Level 4 Diploma in Business and Administrative Management (QCF)

ATHE Level 6 Extended Diploma in Business and Administrative Management (QCF)

Scenario

You are employed as a senior administrator in the Finance Section of Dresden Office Furniture Limited, a manufacturer of office furniture. You are asked to provide some information for other managers about costing, budgetary techniques and accounts within the business. Some of the managers do not understand this information and the associated processes having never had any training in this area. Produce an easy to use handbook for managers, which provides the following details.  You should use examples where appropriate to illustrate the explanations and analysis you are providing:

Activity 1

The first section of the handbook must ensure managers understand the relationship between cost accounting and management accounting. You must include:

  • a definition of cost accounting and management accounting together with an explanation of the purpose and scope of these techniques
  • an analysis of the information provided by a cost accounting system that will be used to take business decisions.  Use the example scenario 1 below as an example to illustrate the sort of information that managers can collect to support decision making.
  • an illustration of how cost information supports decision making. Use example scenario 2 below as an example.

Example scenario 1

A decision needs to be made on whether to shut down the bespoke office furniture division. Costs for the division are high and profits are falling. There are premises, equipment and long serving staff associated with the business. For your example, analyse what cost information you would require to make the decision.

Example scenario 2

Dresden Office Furniture Limited currently makes three different desks – The Executive, The Director and The Manager. The annual income related to each product is currently as follows:

 

Executive

Director

Manager

Total

£

£

£

£

Sales

25000

20000

30000

75000

Variable costs

15000

12500

17500

45000

Contribution

10000

7500

12500

30000

Fixed Costs

  8500

  9000

10000

27500

Profit

  1500

(1500)

  2500

2500


i) In this scenario the management are concerned about ‘The Director’ desk and are wondering whether to stop making the product or looking for an alternative design. If they stop making ‘The Director’, they will still incur fixed costs related to the product of £6500 (these are costs that cannot be stopped in the shorter term). On the information provided, should they stop producing ‘The Director’? In the handbook explain the decisions you have taken.

ii) The Company has carried out some research and found that many offices now want team working desks so have designed a new ‘Team’ desk module. Estimates of sales and costs show that sales over a year would be £25000; variable costs would be £15000 and additional fixed costs would be £3000. They would need to stop making ‘The Director’ model and switch any resources to production of the new module. Would it be worthwhile for the business to do this? In the handbook explain the decisions you have taken.

(Assessment criteria 1.1, 1.2)

Activity 2

The second section of the handbook must ensure managers understand how budgets and budgetary techniques are used to plan and control finance.

As some of the managers have not previously been responsible for budgets and have not been trained in how to use them you should:

  • explain how   budgets are used in businesses and the relationships between them, including how budgets are prepared and who is responsible for them
  • explain how budgets and budgetary techniques are used to plan and control finance and the limitations of these techniques.

(Assessment criteria 2.1, 2.2)

Activity 3

In the final section of the handbook you must ensure that managers understand the structure and purpose of company accounts.

Obtain a set of published accounts from a large UK company. You can do this by accessing the annual report and accounts on their website or calling/writing to the business to request a copy.

Using the annual report and accounts you have obtained as an example:

  • describe the main financial statements produced by the company and explain their structure and purpose
  • analyse the accounts using a range of ratios and supporting information in the annual report.  The analysis must include a review of the company’s financial and business performance during the year and compared with previous years. You should also identify any factors that may affect the business in the coming year.

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