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You?ve just been hired onto ABC Company

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Question;Final PaperFocus of the Final PaperYou?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.

 

Paper#49517 | Written in 18-Jul-2015

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