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Introduction to Business Management and Accounting Analysis
The coordination and oversight of an organisation’s activities are managed through the concepts of business management. Accounting is one of the most systematic processes used by businesses to measure their relevant activities and process financial information. Through the help of accounting, financial information was presented in report format to make informed decisions. The techniques related to accounting such as cost construction, cash flow, and budgeting are going to be used to analyze the production process of ConceptErgo Ltd in three different stages: planning, development, and evaluation.
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Stage 1: Planning
Aim of the Case Study
The presented case study aims to evaluate the efficiency of producing the multilevel chair in the in-house process by using the existing and upgraded facilities. In this process, the development of financial statements and cost budgeting was conducted through the product cost and market demands.
Time Scale
| Activity |
Required Time |
| Research Phase |
1Week |
| Planning |
2 Week |
| Development (Financial Analysis) |
3 Week |
| Evaluation |
1 Week |
Table 1: Time Scale
(Source: Self Evaluated)
Identification of Key Factors
Some of the key factors included in the case study are presented below:
- Production capacity: The company has available capacity for products which is also suitable for meeting the current demand.
- Cost Structure: The cost structure includes direct, indirect, and overheated costs that influence profitability.
- Investment in CNC laser machine: The investment of a new machine includes acquisition custom, depreciation, and tax expenses.
- Alternative production Capacity: High priority and capacity to the production of chairs due to major demand.
Identification of Aspects
The identified aspects that are required for future research are presented below:
- Tax value and Capital Investment: The tax value and capital investment are necessary for getting information on applicable tax benefits (Jacob et al., 2024).
- Market Demand: The information regarding market demand can give more accuracy in the prediction of cash flow and sales.
- Popularity and Market Position: The market position and popularity of the organization can help determine executive production strategy which increases the competitive edge (Salim et al., 2021).
Identification of Methods
The research method includes the financial analysis of ConceptErgo through the help of sales value and the costings of the production materials. Apart from that, the limited information regarding the market competitive level of the organization helps in justifying the required demand for chairs and sales values.
Identification of Required Resources
| Required Resource |
Evidence of Availability |
| CNC cutting Machine |
Mentions in the capital investment of £125000. |
| Additional Workforce |
Additional production workers are required to manage excess chair production. |
| Materials for Production |
Secured supplies of the raw material are required for maintaining production |
Table 2: Resource Requirements
(Source: Self Evaluated)
Stage 2: Developing
The development process includes the construction of financial statement and valuation of effectiveness of the investment. The financial results were going to present the cognitive understanding of operational efficiency and growth opportunity.
Collection and Collation of Further Research
The analysis regarding production and investment was conducted through the construction of the whole cash budget and yearly cash flow analysis. In this process, the production units and their associated cost were taken to predict profitability. However, there are certain aspects that can improve the overall analysis results for future research such as understanding market trends, accurate taxation, capital allocation, and competitor analysis. The improvement in the production techniques can also be effective such as advanced production practices for aluminum. Future studies can apply the tax benefits related to investment in CNC machines to improve yearly cash flow.
Analysis of the Case Study
The case study was related to ConceptErgo’s production of the manufacturing capability of manufacturing office furniture and its potential to invest in new production lines. The organization has sufficient production capacity to implement multilevel chair production without any disruption in other production operations. In this process, the investment in CNC machines is necessary for meeting the product requirement of the wholesaler. The disruption in the global supply chain also creates opportunities for the company in the local market. However, the improvement and changes in the whole production line based on the requirement of a single major client presented high risks (Boddapati, 2025). The organization can face major problems if the demand falls, and the production exceeds the required demand.
Analysis of the Provided Numerical Data and Findings
Overhead cost per unit [Refer to Appendix 1]
The overhead cost per unit was evaluated through the method of activity-based costing. In this process, three main cost drivers are taken which include machinery activity, production run set-ups, and handling of orders. The allocated cost related to the total production of 20 units was £733. Thus, the resultant per unit production cost was £36.65. The highest cost drive of the production was cost regarding production setup. However, on single products, the biggest cost was connected to the activity of the machine.
Cost Statement [Refer to Appendix 2]
The cost statement of Conceptor parents all the cost factors related to its production which includes direct material cost, direct labor cost, direct expenses, and prime cost. In the raw material segment, the high costs were allocated to aluminum bars and fabrics with total costs of £5600 and £3275. In the 35 working hours of the labor, the labor cost was £295 per labor. The cost of fixed production overhead was £936.17 including the machining and assembly. This value results in a total cost of £10765 for the production of a single batch.
Functional Cash Budget [Refer to Appendix 3]
The cash budget includes the monthly cash flow of the company for the six continuous operative months. The monthly sales of the company were taken to be £29250 for the first month. The sales value was for the production of 150 units with a per-unit sales value of £195. In this process, no loan value has been considered for the required investment. The total cash outflow for the first months was £15837 which is going to be increased which in going to be increased at a range of nearly 9%. The evaluation stated a positive cash balance for each of the six months indicating financial stability.
Capital Apprisal [Refer to Appendix 4]
The capital appraisal techniques of NPV and IRR were used to evaluate the viability of the investment of ConceptErgo for the purchase of a CNC machine. In this process, the inflation of the selling price and the variable cost percentage were assumed to be 5% and 6%. The initial investment amount was £69500. The evaluated NPV and IRR values were 23218.82 and 6%. Both positive values of NPV and IRR indicate positive cash flow and effective returns on the investment (Wang, 2021).
Income Statement [Refer to Appendix 5]
The forecasted income statement of ConceptErgo was evaluated for a single financial year with the production of multiple chairs. In this process, the total collected revenue of the operation was £175000 which deducted from the cost of production gives a gross profit of £81350. The interest rate was taken to be 24%. Thus, yearly profit came to £33351 which varies high compared to the investment portion showing high profitability.
Statement of Financial Position [Refer appendix 6]
The statement of financial position or balance of ConceptErgo indicates that in the new production process, the liquidity of the company has been successfully maintained. The value of the total assets of the company was moreover comparable to total liabilities which are essential for managing any financial risk.
Budgetary Control System and Variance Analysis
The implementation of the budgetary analysis and variance comparison report is going to incl
Those aspects can present valuable information regarding the accuracy of their investment appraisal techniques and financial conditions (Dewi et al., 2024). This information can be further used by the company to make informative decisions.
In the financial analysis, the allocated overhead cost budget was high compared to the actual overhead cost of production which indicates the effective financial performance of ConceptErgo regarding the new production line.
Additional and Alternative Approaches
The investment appraisal and financial statements of ConceptErgo were evaluated for its new production line of chairs. In this process, some of the other approaches can be used which are presented below:
- Diversification of the Products: Apart from the common production lines of ConceptErgo, the company can implement a more diversified production line such as desks and tables to stabilize income channels.
- Streamline Processing and manufacturing: The streamline manufacturing process helps the company to be more efficient in production (Lele et al., 2023). Through this approach, the rates of production can be increased while minimizing the wastage of resources.
- Implementation of Marketing: Effective marketing of the products can ensure constant demands and sales value that can minimize the effects of risk factors such as inflation and demand fluctuation (Tufail et al., 2024).
Conclusion
Through the construction of cost structure and investment appraisal results, it has been concluded that ConceptErgo can implement spare production capacity that can boost the production of multilevel chairs. The investment in the new CNC laser cutting machine was totally justified and beneficial as its able to generate positive cashflow through increasing sales. In this process, the agreement of the wholesaler is going to provide financial stability in the initial times of the new manufacturing process.
Recommendation
Some of the actionable recommendations for ConceptErgo are presented below:
- Proceed with the production of new multilevel chare through the investment in CNC machine.
- Implement an effective budgeting control system for monitoring relevant production costs (Mardaani et al., 2024).
- To minimize financial risk, the organization can use an effective marketing strategy which was able to attract more wholesalers.
Stage 3: Evaluation
The evaluation of process is going to be presented through the financial findings of the financial reports and investment appraisal. The evaluation process was focused on the alight the financial results with the goals and objectives of ConceptErgo.
Identification of Criteria
The project focused on presenting the efficiency and effectiveness of ConceptErgo’s new production line which is in the multilevel chair. This evaluation was conducted by the construction financial statement and investment appraisal method. The criteria of this evaluation include the production capacity and investment capability of the company. Apart from those one of the critical criteria was meeting the demand of wholesalers.
Identification and Collection of Evidence
| Components / Evidence |
Description |
| Cost Analysis |
The calculations regarding the financial statement and investment appraisal include product cost statement and functional budget the data including the projected cashflow.
|
|
Market Research
|
The expected demand and sales, including the inflations rated, are determined or assumed through effective market research. In this process, the growth of the demand and supplier disruptions are taken into account.
|
| Competitor Analysis |
The competitor analyst includes comparing the sales and demand of a similar product for different companies with ConceptErgo’s product. This gives an overall understanding of the product profile and value (Chatterjee et al., 2021). |
Table 3: Used evidence in the project
(Source: Self Evaluated)
Evaluation of Effectiveness of the Project
The aspects that the project successfully fulfilled are presented below:
- Operational incrementation: The findings regarding the market demands of the new production of chairs and the capacity of ConceptErgo, can state the project fully concludes the new production decision of the company.
- Financial Justification: The financial justification of the new production operation of ConceptErgo was financially justified by the positive net present value and IRR which helps the manager of the company to make informative decisions.
- Market Demand: The evaluated growth in the demand and sales of the company including its capability of meeting constant supply of the, highlights ConceptErgo’s competitive strength.
Modification of the Project Approach
The requirement for modification is generally presented in the capital investment and budgeting approach. As for the initial process, the company includes outsourcing the frame parts which then shifted to the investment in CNC machines which is able to increase both quality and flexibility in production. The needs of working capital in the budget adjustment can be implemented in more depth in the effectiveness of the investment and profitability of the company (Banerjee and Deb, 2023). However, adjustments in the production process including the labor hours are mandatory for meeting the demand.
Conclusion
Through the evaluation of the findings, it can be concluded that the analyzed operational and financial measurements effectively justified ConceptErgo’s starting of a new production line including the investment in CNC machines. However, this analysis can be further strengthened through effective market research and real-time data regarding the growth and inflations.
Recommendation
Some of the recommendations regarding the evaluation of findings are presented below:
- The company was recommended the implement diversity in the client based on its vanity production lines which was able to eliminate dependency on single wholesalers.
- Implementation of innovation in the products can significantly increase its market demand which can boost sales.
Conclusion
The whole analysis of business operations and production of ConceptErgo was conducted through three different steps which include planning, development, and evaluation. The planning process effectively justified the methods that are going to be applied in the financial evaluation. The positive value regarding the profitability, NPV, and IRR concludes that the investment proposal and changes in the manufacturing process the able to boost the sales and revenue of the company.
References
- Banerjee, P. and Deb, S.G., 2023. Capital investment, working capital management, and firm performance: Role of managerial ability in US logistics industry. Transportation Research Part E: Logistics and Transportation Review, 176, p.103224.
- Boddapati, V.N., 2025. Optimizing production efficiency in manufacturing using big data and AI/ML.
- Chatterjee, S., Rana, N.P., Tamilmani, K. and Sharma, A., 2021. The effect of AI-based CRM on organization performance and competitive advantage: An empirical analysis in the B2B context. Industrial Marketing Management, 97, pp.205-219.
- Dewi, J.L.S.I., Ketut, S.I., Asmara, P.I.N.W. and Nyoman, B.I.D., 2024. The Effect of Budget Participation and Budget Emphasis on Budgetary Slack with Environmental Uncertainty and Tri Hita Karana Culture as Moderating Variables. RJOAS: Russian Journal of Agricultural and Socio-Economic Sciences, 7(151), pp.113-121.
- Jacob, M., Wentland, K. and Wentland, S.A., 2022. Real effects of tax uncertainty: Evidence from firm capital investments. Management Science, 68(6), pp.4065-4089.
- Lele, V.P., Kumari, S. and White, G., 2023. Streamlining Production: Using Big-Data’s CRM & Supply chain to improve efficiency in high-speed environments. IJCSPUB-International Journal of Current Scienc (IJCSPUB), 13(2), pp.136-146.
- Mardiani, E., Riswandi, D.I., Suprayitno, D. and Mudia, H., 2024. Implementation of internet of things in the production process of msmes: quality improvement and process control. Jurnal Informasi dan Teknologi, pp.310-316.
- Salim, M., Saputra, F., Hayu, R. and Febliansa, M., 2021. Marketing performance of bread and cake small and medium business with competitive advantage as moderating variable. Management Science Letters, 11(4), pp.1421-1428.
- Tufail, R., Adamjee, A., KASHIF, S.H. and SAAD, S., 2024. ADAPT MODEL FOR APPAREL INDUSTRIES FOR THEIR BETTER PERFORMANCE IN MARKETING & SALES. New Horizons, 18(1).
- Wang, Y., 2021, December. The development and usage of NPV and IRR and their comparison. In 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021) (pp. 2044-2048). Atlantis Press.
Appendix
- Appendix 1: Overhead Cost Per Unit
- Appendix 2: Cost Statement
- Appendix 3: Functional cash budget
- Appendix 4: Capital Appraisal
- Appendix 5: Income Statement
- Appendix 6: Statement of Financial Position
