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ACC206 final paper




Question;Focus of the Final Paper;You?ve just been hired onto ABC Company as the corporate;controller. ABC Company is a manufacturing firm that specializes in making;cedar roofing and siding shingles. The company currently has annual sales of;around $1.2 million, a 25% increase from the previous year. The company has an;aggressive growth target of reaching $3 million annual sales within the;next 3 years. The CEO has been trying to find additional products that can;leverage the current ABC employee skillset as well as the manufacturing;facilities.;As the controller of ABC Company, the CEO has come to you with a;new opportunity that he?s been working on. The CEO would like to use the some;of the shingle scrap materials to build cedar dollhouses. While this new;product line would add additional raw materials and be more time-intensive to;manufacture than the cedar shingles, this new product line will be able to;leverage ABC?s existing manufacturing facilities as well as the current staff.;Although this product line will require added expenses, it will provide;additional revenue and gross profit to help reach the growth targets. The CEO;is relying on you to help decide how this project can be afforded Provide;details about the estimated product costs, what is needed to break even on the;project, and what level of return this product is expected to provide.;In order to help out the CEO, you need to prepare a six- to;eight-page report that will contain the following information (including;exhibits, but excluding your references and title page). Refer to the;accompanying Excel spreadsheet (available through your online course) for some;specific cost and profit information to complete the calculations.;Final Paper;Spreadsheet;I. An overall risk profile of the company based on current;economic and industry issues that it may be facing.;II. Current company cash flow;a. You need to complete a cash flow statement for the company;using the direct method.;b. Once you?ve completed the cash flow statement, answer the;following questions;i. What does this statement of cash flow tell you about the;sources and uses of the company funds?;ii. Is there anything ABC Company can do to improve the cash flow?;iii. Can this project be financed with current cash flow from the;company? Why or why not?;iv. If the company needs additional financing beyond what ABC;Company can provide internally (either now or sometime throughout the life of;the project), how would you suggest the company obtain the additional;financing, equity or corporate debt, and why?;III. Product cost: ABC Company believes that it has an additional;5,000 machine hours available in the current facility before it would need to;expand. ABC Company uses machine hours to allocate the fixed factory overhead;and units sold to allocate the fixed sales expenses. Bases on current research;ABC Company expects that it will take twice as long to produce the expansion;product as it currently takes to produce its existing product.;a. What is the product cost for the expansion product under;absorption and variable costing?;b. By adding this new expansion product, it helps to absorb the;fixed factory and sales expenses. How much cheaper does this expansion make the;existing product?;c. Assuming ABC Company wants a 40% gross margin for the new;product, what selling price should it set for the expansion product?;d. Assuming the same sales mix of these two products, what are the;contribution margins and break-even points by product?;IV. Potential investments to accelerate profit: ABC company has;the option to purchase additional equipment that will cost about $42,000, and;this new equipment will produce the following savings in factory overhead costs;over the next five years;Year 1, $15,000;Year 2, $13,000;Year 3, $10,000;Year 4, $10,000;Year 5, $6,000;ABC Company uses the net-present-value method to analyze;investments and desires a minimum rate of return of 12% on the equipment.;a. What is the net present value of the proposed investment;(ignore income taxes and depreciation)?;b. Assuming a 5-year straight-line depreciation, how will this;impact the factory?s fixed costs for each of the 5 years (and the implied;product costs)? What about cash flow?;c. Considering the cash flow impact of the equipment as well as;the time-value of money, would you recommend that ABC Company purchases the;equipment? Why or why not?;V. Conclusion;a. What are the major risk factors that you see in this project?;b. As the controller and a management accountant, what is your;responsibility to this project?;c. What do you recommend the CEO do?;Writing the Final Paper;1. Must be six to eight double-spaced pages in;length, and formatted according to APA style as outlined in the Ashford Writing;Center.;2. Must include a title page with the following;a. Title of paper;b. Student?s name;c. Course name and number;d. Instructor?s name;e. Date submitted;3. Must begin with an introductory paragraph;that has a succinct thesis statement.;4. Must address the topic of the paper with;critical thought.;5. Must end with a conclusion that reaffirms;your thesis.;6. Must document at least three, but no more;than five sources in APA style, as outlined in the Ashford Writing Center.;7. Must include a separate reference page;formatted according to APA style as outlined in the Ashford Writing Center.;Carefully review the Grading Rubric for the criteria that will;be used to evaluate your assignment.


Paper#44708 | Written in 18-Jul-2015

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