The directors of Kias Pastaria, a UK incorporated restaurant operating in Sheffi
ID: 2592472 • Letter: T
Question
The directors of Kias Pastaria, a UK incorporated restaurant operating in Sheffield are planning to expand into new markets and introduce new product varieties. You have been appointed as the financial manager of this company. The directors have approached you to understand the requirements and techniques for financial recording and reporting within the restaurant industry.
Prepare an information paper for senior managers within the company which explains the key financial statements comprising business accounts. It should identify the main components of each type of statement, and its role in the process of financial management. Reference should be made to the different techniques for recording financial information and any variations that may be made for different types of organisations. Your answers should include a brief introduction on the company and industry and should be based on law and regulations in the UK.
Describe the use of financial statements in the both financial accounting and management accounting, clearly distinguishing between these two functions. Indicate the significance of each function to the effective operation of a business. Discuss the information needs of various stakeholders of the company. Explain the budgetary control process and its importance in financial planning.
You are required to carry out a costing exercise for the new bakery product. Begin by defining the different classification of costs, with appropriate examples related to the production of the new product. Your report should include a detailed evaluation of the different costing methods for pricing purposes.
Using the following information, determine what would be the minimum number of units to be made each month:
Selling price per unit £30
Variable costs per unit £20
Fixed costs per month £70,000
Budgeted sales 7,500 units
Required ( the answer should be computerized )
Calculate the new breakeven selling price and the margin of safety. You are also required to calculate the level of sales required to generate a profit of profit of £20,000. As a consequence, propose a selling price to the company directors for their next meeting, providing detailed reasons to justify your proposal.
Explanation / Answer
The key financial statements in a company are:
The main components are:
Depending on the type of organisation there are some slight changes:
Example in Construction companies as the normal financial period of 12 months is exceeded there are various adjustments as in : nearing completion, or mature stages or initial stage, this is because profit cannot be realized as yet before the contact is completed.
Also in Chemical Industries there is Process costing which accounts for the different ways in which direct materials direct Labour and overheads are absorbed.
Key performance indicators in Restaurants:
Owners continually review their business and keep up to date with market developments and demands, whilst keeping costs under control.
Whilst Financial Accounting is obligatory as it’s a requirement of law to publish accounts Management Accounting is a must for managers to better understand how to run the business so as to generate sufficient sales, control costs and to make optimum profits to be able to survive and give the stockholders enough profit so that they do not sell their shares if dividends are not declared
Pricing Methods:
GBP 70000/10 = 7000 UNITS
= 7500 - 7000 x 100/ 7500 = 500/7500 = 6.57%
This is a very small Margin and is to show that even a small drop in sales will soon pass the break-even point and risks the drop further to make losses
WORKINGS
SP = £30
VC = £20
FIXED COSTS PER MONTH=£70,000
BUDGETED SALES = 7500 UNITS
CONTRIBUTION = 30 – 20 = 10