Managing Financial Principles and Techniques.

Level 7 Edexcel BTEC Higher National Diploma in Business (QCF)
Unit 13: Managing Financial Principles and Techniques
Assignment 13 – Managing Financial Principles and Techniques
Purpose
The purpose of this assignment is to provide a framework within which the learner can:
Apply cost concepts to the decision-making process
Apply forecasting techniques to obtain information for decision making
Participate in the budgetary process of an organisation
Recommend cost reduction and management processes for an organisation
Use financial appraisal techniques to make strategic investment decisions for an organisation
Interpret financial statements for planning and decision making

Dynamic Models PLC
Margaret Smith is the new Chief Executive of Dynamic Models PLC, a long established company which makes model toys and which had experienced rapid growth and healthy profit until two years ago. The business operates as a public limited company in UK.
Recently you were recruited as a trainee accountant by Margaret Smith to assist Margaret in the decision making process.
On Margaret’s arrival at Dynamic Models a year ago, she carried out a physical resource audit, the first for over three years. The company’s manufacturing department had embraced new engineering technology but this needed to be reviewed and updated. Research & Development (R & D), Sales & Marketing and the General Office used a combination of traditional methods with limited use of computer based applications for design and recording purchases and sales plus writing letters to customers and suppliers.
Poor performance over the last two years was attributed to the competition, poor cost management and lack of pricing strategy. The company needs to deliver a quality product more quickly and at a competitive price.
Currently the company charges the full cost of the product and adds a percentage mark-up for profit.
Dynamic Models PLC retained the edge in developing new designs, but this consumed a high level of resources and was a lengthy process from research to eventual production.
Margaret has given the Sales & Marketing Director the target of reducing the department’s costs by 30% while increasing sales by 50%.
Margaret’s goals for the company over the next six months are to:
● Promote open work environments and provide proper training and development opportunities where people deliver superior results
● Introduce proper costing and pricing strategy which could make Dynamic models more competitive into the market.
● Build a strong network of customers and suppliers and invest more in capital of the company with whom Dynamic Models can create mutual, enduring value
● Be a socially responsible company that maximises use of scarce resources while
minimising environmentally damaging aspects of manufacturing
● Maximise long term return on investment
● Be a highly effective, lean and fast-moving organisation that considers efficiency in
everything it does
● Develop a global market for selling Dynamic Models’ products by investing and expanding the business around the world
You will produce an individual written report for this assignment. The report should be approximately 3000 words and presented in a formal report style.
Task 1 – Costs concepts to the Decision Making Process

1.1 Explain the importance of costs in the pricing strategy to the Dynamic Models PLC
1.2 Design a costing system for use within Dynamic Models PLC
1.3 Propose improvements to the costing and pricing systems used by Dynamic Models PLC

This provides evidence for 1.1, 1.2, 1.3
Task 2 – Forecasting Techniques for Decision Making
2.1 Margaret wants you to assist her in identifying relationship between units produced in the factory and the associated costs. She also wants to know what others forecasting techniques can be used to make cost and revenue decisions. The following is the output of factory and costs:

2.2 Margaret wants to expand the business and she is interested to know what funding options are available to public limited companies in UK. She asks you to assess and report on the sources of funds available to the Dynamic Models PLC
This provides evidence for 2.1, 2.2
Task 3 – Budgetary Process
After a period of training, you have been shown how to prepare and participate in the budgetary process of the organisation. Put these new skills into practice and prepare a training manual for your colleagues who will be carrying out the following tasks. Your training manual should cover the aspects below.
3.1 Explain with examples how to select appropriate budgetary targets for an organisation
3.2 Participate in the creation of a master budget for an organisation, illustrate in detail with example.
3.3 Compare actual expenditure and income to the master budget of an organisation
3.4 Give details how to evaluate budgetary monitoring processes in an organisation
This provides evidence for 3.1, 3.2, 3.3, 3.4
Task 4 – Cost Reduction and Management Process
The company asks you to submit a report to the management as how to reduce cost and improve management processes for the Dynamic Models PLC. You must incorporate the following in your report:
4.1 Recommend processes that could manage cost reduction in Dynamic Models PLC
4.2 Evaluate the potential for the use of activity-based costing
This provides evidence for 4.1, 4.2
Task 5 – Financial Appraisal Techniques
The company is considering investing in either Project Alpha or Project Beta and requires you to use financial appraisal techniques to make strategic investment decisions and to submit a report accordingly. Relevant financial information is as follows:
The target rate of return is 20%.
5.1 Apply financial appraisal methods to analyse these competing investment projects for the Dynamic Models PLC
5.2 Make a justified strategic investment decision for the company
5.3 Report on the appropriateness of a strategic investment decision using information from a post audit appraisal
This provides evidence for 5.1, 5.2, 5.3
Task 6 – Interpret Financial Statements
Analyse and interpret the last two years’ financial statements of Dynamic Models PLC and help in planning and decision making process. Following are the company’s financial statements and industry average ratios:



6.1 Analyse financial statements to assess the financial viability of the Dynamic Models PLC
6.2 Apply financial ratios to improve the quality of financial information within Dynamic Model’s financial statements
6.3 Make recommendations on the strategic portfolio of the company based on its financial information

Your work should be handed in by March 30, 2012
Your result will be issued on (TBC)
Assessment feedback will be provided on (TBC)


Literature
Investment fund options // http://www.wrighthassall.co.uk/resources/articles/article_investment_fund_options.aspx
Langfield-Smith K. Management control systems and strategy: a critical review // Accounting, organizations and society, 1997.
Model guide to securitisation techniques // http://crossborder.practicallaw.com/2-501-2997
Pricing Strategy // http://www.netmba.com/marketing/pricing/
Shawnee K. Vickery, Cornelia Droge, Robert E. Markland. Production Competence and Business Strategy: Do They Affect Business Performance? // Decision Sciences. Volume 24, Issue 2, pages 435–456, March 1993.
Smith T.M. The relationship of strategy, fit, productivity, and business performance in a services setting // Journal of Operations Management, 1999.
Ward P.T. Manufacturing strategy in context: environment, competitive strategy and manufacturing strategy // Journal of Operations Management, 2000.
Assessment Criteria
To obtain a Pass you will need to achieve the following criteria:
Learning Outcome 1 – Be able to apply cost concepts to the decision-making process
1.1 explain the importance of costs in the pricing strategy of an organisation
1.2 design a costing system for use within an organisation
1.3 propose improvements to the costing and pricing systems used by an organisation
Learning Outcome 2 – Be able to apply forecasting techniques to obtain information for decision making
2.1 apply forecasting techniques to make cost and revenue decisions in an organisation
2.2 assess the sources of funds available to an organisation for a specific project.
Learning Outcome 3 – Be able to participate in the budgetary process of an organisation
3.1 select appropriate budgetary targets for an organisation
3.2 participate in the creation of a master budget for an organisation
3.3 compare actual expenditure and income to the master budget of an organisation
3.4 evaluate budgetary monitoring processes in an organisation
Learning Outcome 4 – Be able to recommend cost reduction and management processes for an organisation
4.1 recommend processes that could manage cost reduction in an organisation
4.2 evaluate the potential for the use of activity-based costing
Learning Outcome 5 - Be able to use financial appraisal techniques to make strategic investment decisions for an organisation
5.1 apply financial appraisal methods to analyse competing investment projects in the public and private sector
5.2 make a justified strategic investment decision for an organisation using relevant financial information
5.3 report on the appropriateness of a strategic investment decision using information from a post audit appraisal
Learning Outcome 6 - Be able to interpret financial statements for planning and decision making
6.1 analyse financial statements to assess the financial viability of an organisation
6.2 apply financial ratios to improve the quality of financial information in an organisation’s financial statements
6.3 make recommendations on the strategic portfolio of an organisation based on its financial information

Unit 13 Managing Financial Principles and Techniques
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