Unit 3 Assignment 1 Financial Information And Decision Making
Financial Information and Decision Making.
UMACST-20-2
JAN09115515
2013-04-21
Question 1:
To: Directors of Ace Suppliers Limited
From: Financial Information and Decision Making Student
Date: 30/05/2013
Subject: Sources of Finance.
Purpose:
Ace Supplies Limited is a fairly new company which was created by friends who have no previous experience in running their own company; therefore they have to be very scrupulous when choosing the most relevant source of finance for this project. Three main sources which will be discussed in this report are: bank loan, hire purchase and lease. These are all external sources of finance and will be explained in more details below.
Options:
Bank Loan – There are many advantages …show more content…
Leasing is more like renting. The business pays regular fees for a period of time, but still – the item belongs to the leasing company. The advantages of leasing are such: if technology or circumstances are changing, or equipment wears out fairly quickly, it can be replaced or updated on the regular basis. This can be beneficial for Ace Suppliers Limited because in this early stage it is very difficult to predict if this asset will be the most efficient in this kind of business. Lease is also cheaper than buying an asset for its full price. There are disadvantages too – leasing is usually more expensive in the long term. Monthly fees can be very costly which make the overall cost greater than the initial cost of the machinery. A consumer will never own the asset, as you can just purchase …show more content…
Equals Profit: £650
Expected budget profit: £650
b) Product A Product B
Product per unit / unit sold 6,000/1000 = £6 10,500/2,100 = £5
Less: Variable costs:
Direct materials/units sold 1000/1000 = £1 1,050/2100 = £0,5
Direct labour/units sold 2,500/1000 = £2,5 2100/2100 = £1
Variance overheads/unit sold 2000/1000 = £2 4,200/2,100 = £2
Total: £5,5 £3,5
Contribution per unit:
Selling price per unit – Unit variable costs
Product A Product B £6 - £5,5 = £0,5 £5 - £3,5 = £1,5
£3000 / 0,5 = £6000 £3000 – 1,5 =
UMACST-20-2
JAN09115515
2013-04-21
Question 1:
To: Directors of Ace Suppliers Limited
From: Financial Information and Decision Making Student
Date: 30/05/2013
Subject: Sources of Finance.
Purpose:
Ace Supplies Limited is a fairly new company which was created by friends who have no previous experience in running their own company; therefore they have to be very scrupulous when choosing the most relevant source of finance for this project. Three main sources which will be discussed in this report are: bank loan, hire purchase and lease. These are all external sources of finance and will be explained in more details below.
Options:
Bank Loan – There are many advantages …show more content…
Leasing is more like renting. The business pays regular fees for a period of time, but still – the item belongs to the leasing company. The advantages of leasing are such: if technology or circumstances are changing, or equipment wears out fairly quickly, it can be replaced or updated on the regular basis. This can be beneficial for Ace Suppliers Limited because in this early stage it is very difficult to predict if this asset will be the most efficient in this kind of business. Lease is also cheaper than buying an asset for its full price. There are disadvantages too – leasing is usually more expensive in the long term. Monthly fees can be very costly which make the overall cost greater than the initial cost of the machinery. A consumer will never own the asset, as you can just purchase …show more content…
Equals Profit: £650
Expected budget profit: £650
b) Product A Product B
Product per unit / unit sold 6,000/1000 = £6 10,500/2,100 = £5
Less: Variable costs:
Direct materials/units sold 1000/1000 = £1 1,050/2100 = £0,5
Direct labour/units sold 2,500/1000 = £2,5 2100/2100 = £1
Variance overheads/unit sold 2000/1000 = £2 4,200/2,100 = £2
Total: £5,5 £3,5
Contribution per unit:
Selling price per unit – Unit variable costs
Product A Product B £6 - £5,5 = £0,5 £5 - £3,5 = £1,5
£3000 / 0,5 = £6000 £3000 – 1,5 =