The report should cover the following key areas:
1.An executive summary outlining the key challenges that the company is facing and the main outcomes from the analysis work you have undertaken.
- A discussion of the reasons for the differences between the net cash flows and the operating profit in the statements above (Document 4), and in particular why net cash flow remains negative when the company returns to profit at the end of the six-month period
- A discussion of the break-even analysis of the proposed new sofa (Document 3) with particular emphasis on the following areas:
- A discussion of the original and proposed costing methods above (Document 5) with particular emphasis on the following areas:
- A critical appraisal of the reasons for the choice of apportionment bases used in both the original and proposed costing methods
- A critical appraisal of the Sales Director’s view that the proposed costing method is superior because it reduces the overheads chargeable to the Dining and Bedroom Furniture profit centres
- A critical appraisal of the results of the capital investment appraisal of the Faststitch and Bondright (Document 6) with particular emphasis on the following areas:
- A discussion of the reasons for the apparent conflicts between the investment advice provided by each method and the say these conflicts might be resolved
- A discussion of the risks and returns presented by each option and a recommendation as to which option should be chosen, given the shortage of investment capital available to the company (
- A critical discussion of the budgeting, including the Beyond Budgeting model focusing on the benefits it could bring to Parker Seating Ltd and the challenges they would face if they decided to introduce it (Document 6)
a.An explanation of the different types of cost behaviour and why all fixed costs are in reality stepped fixed costs (90-110 words).
b.A review of the risk and return offered by the two manufacturing options and a recommendation on which option Parker Seating Ltd should choose. You may find useful the concept of operating gearing