Descriptive Statistics & Financial Calculations for Kitchen Craze Assignment Sample

Calculation and Discussion on Cost-Volume-Profit, Net Present Value and Payback Period for Kitchen Craze PLC

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Introduction of Business Decision-Making at Kitchen Carzy

This assignment sample includes financial calculations, accounting methods and Discussion on Cost-Volume-Profit, Net Present Value and Payback Period.

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1: Descriptive Statistics and Impact on Management Information Systems

1.1: Descriptive Statistics

Calculation

Sales 4-Point Average Centred Average Seasonal Variation
Mean 108491.67 Mean 107936.96 Mean 108858 Mean -38953.261
Standard Error 2243.3896 Standard Error 1321.7443 Standard Error 629.28 Standard Error 14868.6436
Median 109650 Median 108300 Median 108800 Median -11833.333
Mode #N/A Mode 102400 Mode 108800 Mode #N/A
Standard Deviation 7771.3294 Standard Deviation 6338.8631 Standard Deviation 3017.92 Standard Deviation 71307.5099
Sample Variance 60393561 Sample Variance 40181186 Sample Variance 9107835 Sample Variance 5084760971
Kurtosis -0.975208 Kurtosis -0.393277 Kurtosis -0.3736 Kurtosis -0.3583587
Skewness -0.022783 Skewness 0.1650191 Skewness -0.5315 Skewness 0.55438445
Range 24600 Range 24600 Range 10283.3 Range 227350
Minimum 96600 Minimum 96600 Minimum 102567 Minimum -112850
Maximum 121200 Maximum 121200 Maximum 112850 Maximum 114500
Sum 1301900 Sum 2482550 Sum 2503742 Sum -895925
Count 12 Count 23 Count 23 Count 23

Table 1: Descriptive Statistics

(Source: Created by Learner)

Discussion

As per the above table of descriptive statistics, it can be ascertained that four variables have been considered for calculations. These four variables further include sales, 4-Point average, centred average and seasonal variation. Thus, as per calculations mean and median of sales has been calculated as 108491.67 and 109650 respectively. The mean and median for 4-Point average, centred average and seasonal variation has been further calculated as 107936.96, 108300, 108858, 108800 and -38953.261 and -11833.33 respectively. Thus, it can be considered that the values in seasonal variation consist of high variations in average values in comparison to actual sales values. De Couck et al. (2019), expressed that high variations and statistical fluctuations determine that a dataset is subject to high prospects of volatility.

1.2: Various Impacts on Management Information Systems

The management information system associated with an organisation is considered to be an important area of financial consideration, which is deemed to be directly linked with auditory and financial regulatory determinants (Zhang et al. 2021). The role of a management information system within the internal boundaries of an organisation is considered to be associated with making valuable decision-making aspects and to identify the relevance of financial transparency prevailing within the internal organisational boundary. Following is the brief discussion on impacts possessed by MIS which could propagate its necessary business performances over a specified period of time.

Transaction and Agency Costs

The primary impact of MIS within an organisational boundary is considered to be associated with determining the financial aspects attributed to transaction and agency costs. As per illustrations and explanations of Constantiou et al. (2019), high transaction and agency costs could incur financial disparity for an organisation. Hence, the auditory and regulatory purpose could lead to liquidation and insolvency of an organisation as investor attraction is bound to be affected adversely.

Career and Work Parameters

Career and work parameters are considered to be the second important impact associated with implementation of MIS within an organisational boundary. As per statements and opinions of Calabrese et al. (2018), career and work parameters are often influenced adversely owing to large-scale impetus being showered for adopting centralisation. Hence, the entire organisational structure could be hampered and disintegrated leading to operational and financial inefficiency in the near and distant future.

Stimulation of Business Function

Stimulation of business function is deemed to be the third important impact that is possessed by MIS and its implementation within an organisation. As per narrations and statements of Metcalf, et al. (2019), stimulation of business function increased top-level scrutiny and interjection could also be experienced in business function stimulation. Thus, the degree or freedom of performing unhindered operational function by lower management of an organisation could be jeopardised.

2: Differences between Financial and Management Accounting

Financial and management accounting of an organisation is considered to be an important determinant for establishing how business existence and continuity could be initiated through proper financial and operational planning. In general parlance, financial accounting is deemed to be crucial for examining the financial stronghold and prospects of an organisation, while management accounting is essential to regulate cost optimisation and to increase operational excellence for an organisation. Following is a detailed difference between financial and management accounting.

2.1: Financial Accounting

The key aspects of financial accounting mainly consist of allowing organisations the leeway to initiate thorough and daily recording of transactions happening. Yang et al. (2022), stated and idealised that the primary stage of preparing financial accounting for an organisation is considered to be related with preparation of journal entries. The recording of journal entries is often followed by preparation of ledger accounts and trial balances where all balances of accounts are established fundamentally. Certain adjustments are taken into consideration after preparation of trial balance which allows organisations to further facilitate the preparation of income statement, cash flow statement and statement of financial position or balance sheet. Involvement of internal and external stakeholders is highly energised in the preparation of accounts under financial accounting to evaluate and arrive at accurate financial facts and figures. Hence, a high degree of financial accuracy is considered to be a boon for an organisation as it could lead to high influxes and prospects of investments in the near and distant future.

2.2: Management Accounting

Management accounting is also considered to be another branch of accounting where main emphasis is being laid to regulate and monitor costs. As per illustrations and explanations of Stone et al. (2020), the management accounting motley follows a marginal costing approach where identification of sales revenues, variable costs and fixed costs are adhered to. The preparation of marginal costing approach under management accounting is mostly associated with establishing the internal stakeholder role for an organisation to determine how it could be improved in the near and distant future. Hence, the main distinction between financial and management accounting could be further considered with respect to availing external business expansion opportunity and internal operational control. Financial accounting is tasked to take care of business expansion opportunities, while management accounting is associated with ensuring thorough operational control.

3: Preparation and Presentation of a Cash Budget

3.1: Calculations for Cash Budget

Calculations for Cash Budget

Table 2: Cash Budget

(Source: Created by Learner)

3.2: Discussion on Figures Achieved

As per the above table of cash budget, it can be ascertained that the total cash flow generated is considered to be numerically expressed as £ 11,55,377.04. In order to calculate the total value of cash generated by Kitchen Craze in the six-month period, emphasis has been laid on expecting that factory sales would grow by 10% till September, while October would lead to a downfall in revenue collection by 10%. A total value of £600,000 is expected to be collected as trade receivable receipts in June and October respectively, while disposal value of investments is expected to be £450,000. The operational costs and overheads are expected to grow by a margin of 10% uniformly throughout the six-month cycle for Kitchen Craze Plc. Numerical expressions of total cash receipts and cash payments have been further calculated as £6,54,59,310.00 and £6,72,40,932.96 respectively.

4: Calculation and Analysis of Ratios

The calculation and analysis of ratios is deemed to be a significant factor of financial prosperity which is needed to be considered and adhered to by the managerial spearhead of the organisation concerned Kitchen Craze Plc. The stakeholders concerned Peter Griffin, Louis Griffin and Stewie Griffin can apply a wide range of ratio analysis to ascertain their overall financial position in the food industry and the hospitality market. These ratios can be further considered as profitability, liquidity, Gearing and efficiency ratios (Bahari et al. 2021). Following is the detailed calculation and analysis of all four categories of ratios.

4.1: Calculation of Ratios

Profitability

Profitability
GP percentage GP/ sales revenue 20.27% 35.95%
ROCE OP/ Share cap + Res + non-current liabilities 19.82% 97.17%
OP percentage OP/ sales revenue 7.83% 16.18%

Table 2: Profitability Ratios (Source: Created by Learner) Liquidity

2021 2020
RATIOS
Liquidity Current Assets-8960, Current Liabilities- 900 Current Assets-6170, Current Liabilities- 1175
Current Current asset / current liability 9.96 5.25
Acid test Current asset (excluding inventories)/ current liability 9.92 4.46
Current Assets-8960, Inventory- 30, Current Liabilities- 900 Current Assets-6170, Inventory- 930 Current Liabilities- 1175

Table 3: Liquidity Ratios (Source: Created by Learner) Solvency

Gearing
Debt:CE NC liabilities/ Share cap + Reserves + NC liabilities 0.14 0.01
Interest cover OP/ Int payable 17.41 1129.00 times

Table 4: Gearing Ratios

(Source: Created by Learner)

Efficiency

Efficiency
INV Turnover Inventory held/ CoS x 365 0.39 9.49 days
Rec'ble collection Trade rec/credit sales revenue x 365 60.48 27.72 days
Payables pmt Trade payables/ Credit purchases x 365 7.72 7.40 days

Table 5: Efficiency Ratios

(Source: Created by Learner)

4.2: Analysis of Ratios

Profitability

As per the above table of profitability ratio calculations, it can be considered that the gross profit ratio for Kitchen Craze in 2021 and 2020 has been calculated as 20.27% and 35.95% respectively. Thus, a -15.68% growth has been witnessed in terms of gross profit ratios, which suggests that the company has been thoroughly inefficient in managing its operational reserves with respect to sales value generated and costs incurred for manufacturing. As per calculations of Return on Capital employed, it can be further ascertained that the numerical values of 2021 and 2020 have been further calculated as 19.82% and 97.17%.

Hence, the company also lags significantly in terms of generating a valuable return generation based on available leverage figures. The operating profit ratio for the company has also faltered significantly, which can be expressed in numerical terms as 7.83% and 16.18% respectively. Thus, a growth of -8.25% has been observed in 2021 as compared to 2020. As per statements and explanations of Fioriti et al. (2020), decrease or downfall in the profitability ratios is considered to be an area of significant concern for an organisation. Hence, long-term business continuity could be jeopardised and necessary implementation of cost optimisation techniques is needed to be encouraged.

Liquidity

As per the above table of calculations for liquidity ratios, it can be considered that the current ratios for 2021 and 2020 have been calculated as 9.96:1 and 5.25:1. Hence, it can be measured that the performance of liquidity for Kitchen Craze Plc. has increased substantially to necessitate essential liquidity prospects for encouraging growth and development of short-term assets and working capital. Additionally, the liquidity ratio calculations also consist of quick or acid-test ratios where the formula applied consists of deducting inventories from current assets and subsequently dividing it with current liabilities.

The quick ratios for 2021 and 2020 have been further calculated as 9.92: 1 and 4.46:1 respectively. This further suggests that the quick ratios have also increased substantially in 2021 as compared to 2020. As per narrations and views of Halkiopoulos et al. (2020), high liquidity ratio prospects are generally deemed to be healthy financial attributes which encourage organisations to establish a high command on appropriately managing its short-term assets and working capital. Thus, it can be analysed that the prosperous liquidity ratios for Kitchen Craze are deemed to be healthy financial parameters which encourage better cash availability to continue business operations for a long period of time.

Gearing

In addition to the calculation for liquidity ratios, calculation of gearing ratios has also been conducted in the above table of calculations. The main ratios calculated under the gearing parameter are considered to be associated with debt-to-equity ratios and interest coverage ratios. The figures of debt-to-equity ratios for 2021 and 2020 have been further calculated as 0.14 and 0.01 times, thereby suggesting a significant growth in ratios as compared to figures achieved in 2020. Interest coverage ratio has also been calculated under gearing ratios where the numerical figures of 2021 and 2020 suggest readings as 17.41 and 1129 times respectively.

Hence, the growth could be observed as lower one, however the high ratio in 2020 is also deemed to be an unfavourable situation as proportion of finance costs is minimal as compared to operating profit achieved. As per narrations and explanations of Martins et al. (2020), better gearing prospects welcome better opportunities for external investments. Thus, in future Kitchen Craze Plc. can further welcome a high number of investments to ensure that business could be expanded and strengthened successfully.

Efficiency

Efficiency ratios have simultaneously been calculated for Kitchen Craze Plc, where emphasis has been laid on inventory, receivable and payment days. Thus, as per calculations of inventory days in 2021 and 2020, it can be ascertained that numerical expressions of inventory days in 2021 and 2020 have been calculated as 0.39 days and 9.49 days respectively. Thus, it can be ascertained that inventory days have increased substantially which could lead to shortage of inventory levels in Kitchen Craze's organisational structure. The receivable days have been further calculated as 60.48 and 27.72 days in 2021 and 2020 respectively.

Thus, it could be assessed that the collection of debts by Kitchen Craze Plc. has slowed down considerably in 2021 as compared to 2020. The payment days in 2021 and 2020 have been further calculated as 7.72 and 7.40 days respectively, which states that payment date for suppliers and creditors has increased. Hence, the overall efficiency parameters are considered to be in a precarious situation for Kitchen Craze due to potential stock out situation, more days required for collection as well as delay in settling short-term debts. As per illustrations and explanations of Hernández-Julio et al. (2020), lower efficiency ratios for an organisation could further lead to operational burnout thereby hampering the overall prospects of attracting high financial values.

5: Calculation and Discussion on Cost-Volume-Profit, Net Present Value and Payback Period

5.1: Calculations

Net Present Value

Initial investment:

£ 1,00,00,000.00

Useful life (years):

4

Residual/ Scrap value:

500000

Fixed cost

100000

Cost of Capital (%)

12

YEAR

1

2

3

4

Production/Sales(units)

6,00,000

6,00,000

6,00,000

6,00,000

Sales (£)

10,80,00,000

11,88,00,000

13,06,80,000

14,37,48,000

Variable cost (£)

5,40,00,000

5,94,00,000

6,53,40,000

7,18,74,000

Fixed cost

100000

100000

100000

100000

YEAR/CF

0

1

2

3

4

Investment

-1,00,00,000

Sales Revenue

10,80,00,000

11,88,00,000

13,06,80,000

14,37,48,000

Variable cost

-5,40,00,000

-5,94,00,000

-6,53,40,000

-7,18,74,000

Fixed cost

0

0

0

0

Scrap value

5,00,000

Net CF

-1,00,00,000

5,40,00,000

5,94,00,000

6,53,40,000

7,23,74,000

DF@12%

1

0.893

0.797

0.712

0.636

Present Value

-1,00,00,000

4,82,14,286

4,73,53,316

4,65,07,721

4,59,94,985

NPV

17,80,70,309

Table 6: Calculation of Net Present Value

(Source: Created by Learner)

Payback Period

Payback

YEAR

Net CF

Accumulated CF

0

-1,00,00,000

-1,00,00,000

1

5,40,00,000

4,40,00,000

2

5,94,00,000

10,34,00,000

3

6,53,40,000

16,87,40,000

4

7,23,74,000

24,11,14,000

Payback Period (Years)

1.81

Table 7: Calculation of Payback Period

(Source: Created by Learner)

Cost-Volume Profit Analysis

Particulars

Per Unit Cost/ Price

Units

Total

Sales

£ 180.00

600000

£ 10,80,00,000.00

Costs

£ 90.00

600000

£ 5,40,00,000.00

Profits

£ 90.00

£ 5,40,00,000.00

Table 8: Calculation of Cost Volume Profit

(Source: Created by Learner)

5.2: Discussion of Results

Net Present Value

As per the above table of net present value calculations, it can be ascertained that the numerical expression of NPV has been calculated as GBP 17,80,70,309. Hence, it can be ascertained that the new project under consideration for Kitchen Craze Plc contains high developmental aesthetics in order to establish feasible long-term propositions to continue investments and other important prospects associated with project expansion and project implementation. The encouragement for factoring the NPV as a vital investment appraisal method is mostly substantiated based on its ability to determine time value of money (Klopotan et al. 2020). Hence, the new concerned project for Kitchen Craze has met all relevant criteria to justify selection by the concerned managerial spearhead.

Payback

Payback period has also been calculated for the new concerned project of Kitchen Craze Plc, which has been substantiated based on numerical expressions derived from the above table. As per calculations of payback period, it can be assessed that the project requires a time of 1.81 years or 1 year and 10 months to recover its initial cost of investments which has been stated as GBP100,000,00.0. Thus, a low payback for a project is considered to be an important criterion for a project to be selected and hence it can be assessed that the new project for Kitchen Craze Plc could be selected by its managerial spearhead. Brenk et al. (2019), stated that the payback period is deemed to be an important area of consideration for assessing how much time is required for a project to achieve its designated milestones.

Cost Volume Profit

The cost volume profit is further deemed to be an important area of consideration for the concerned management of Kitchen Craze Plc to ensure the proportion of sales revenues in comparison to costs expected to be incurred. As per the above table of calculations, it can be assessed that the cost volume profit analysis for Kitchen Craze has been calculated as GBP 54,00,000.00. Thus, this can be considered as a highly beneficial figure which assures the company of high operational profitability in the near and distant future.

References

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