Caribbean Internet Café case:
A tutorial in managerial accounting concepts and financial modeling using Excel Assignment 1: Introduction
We will begin our work this semester with a case called Caribbean Internet Café [hereafter, CIC]. In the CIC case, David Grant wants to open an Internet Café in Kingston, Jamaica. This simple business setting is familiar; how many coffee shops, drive-up or otherwise, can you think of that are within walking distance of campus? Even if you are not a coffee-holic, the operation of one of these places should be fairly self-evident. This assignment will help to fulfill a number of major objectives of the course: 1. The CIC case makes use of a relatively familiar context in which to introduce many of the managerial accounting concepts we will deal with this semester. The familiarity of the context should enable you to associate managerial accounting terminology with real world phenomena. 2. The structure of this series of exercises also provides an opportunity to develop your skills in using Excel to do financial modeling. Irrespective of your preferences for a career choice, financial modeling will be a critical skill in your professional life. Marketers and HR specialists take note: there is no avoiding the numbers. 3. The majority of you are still relatively early in your path through the School of Business program. Case analyses will be an important element in several of your subsequent courses. One key to successful case analysis is meticulous organization of relevant facts and information. The approach I am suggesting is one way to ensure that you have all the information you need in one place. We’ll work through the case over several days, developing an increasingly sophisticated understanding of the concepts and terminology of managerial accounting. At times, the CIC case will be very much in the foreground as we use David’s situation to illustrate basic concepts. At other times, the case will be in the background, as we deal with material from the text and/or other cases. Oh, by the way. I do realize that the case is “old;” CIC’s Internet hookup is to be a 56 kbps leased line. However, that’s really irrelevant for our purposes. Just assume they’ll have wireless and don’t worry about it. And, oh, yeah, assume he's using Windows Vista, [or at least XP], not Win 95. It is especially important that you follow the directions on this page as we work trough the CIC case. Some parts of this series of assignments may seem like a lot of extra work. However, I can assure you that a very methodical and structured approach to analysis of a business problem pays big dividends in the long run. As you gain experience, you will probably find you can take some shortcuts which will speed up your work. But, be careful. The best math teacher I have ever known cautions his students “not to skip steps,” and I have learned through bitter experience that this is good advice in problem solving of any kind, mathematical or otherwise.
Here is an overall roadmap of where we are going with this assignment. Our ultimate goal is to develop a complete Excel model of David Grant's business. The model will include several Excel worksheets, all in the same Excel workbook [or Excel file]: |Worksheet Name* |What we'll use it for | |Data |All the data used elsewhere in the analysis. Everything in the other worksheets will be cell referenced| | |from the data worksheet. | |Brkeven |Calculate the contribution margin and breakeven point for the cafe | |Mtge |Develop mortgage amortization table for | | |David Grant's loan from JTL....
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