UGB 163 – Introduction to Accounting and Finance

 

 

Canvas Submission Deadline: Tuesday, 22^nd November 2022 by 2pm

 

Module Leader: Syed Hussain Learning outcomes Knowledge:

1. An understanding of fundamental models, concepts, and techniques used within financial
2. An understanding of fundamental models, concepts, and techniques used within management
3. An understanding of the role of finance at a local and international

Skills:

 

4. Application of theoretical concepts to a range of practical scenarios enabling production of solutions to business

 

Assessment weight:       100% of module

 

Please read carefully the following instructions:

 

This assessment is in three (3) parts; answer all elements. Word Count – 3,000 words (plus or minus 10%)

Please note that this is an individual assignment and the policy of the University on “Policy on Cheating, Collusion and Plagiarism” applies.

 

 

Part A – Racca Limited

Racca Limited is a new business that started trading on 1 January 2021. You have recently been appointed as an account manager within the accounting department and have been presented with the following summary of transactions that have occurred during the first year of trading:

 

 

• The owners introduced £180,000 of equity, which was paid into a bank account opened in the name of the
• Premises were rented from 1 January 2021 at an annual rate of £90,000. During the year, rent of £112,500 was paid to the owner of the
• Rates (a tax on business premises) were paid during the year as follows: For the period 1 January 2021 to 31 March 2021 £2,400

For the period 1 April 2021 to 31 March 2022                 £4,500

• A delivery van was bought on 1 January 2021 for £60,000. This is expected to be used in the business for five years and then to be sold for £12,000.
• Wages totalling £117,000 were paid during the At the end of the year, the business owed £2,175 of wages for the last week of the year.
• Electricity bills for the first three quarters of the year were paid totalling £5,700. After 31 December 2021, but before the financial statements had been finalised for the year, the bill for the last quarter arrived showing a charge of £2,025.
• Inventories totalling £486,000 were bought on
• Inventories totalling £39,000 were bought for
• Sales revenue on credit totalled £504,000 (cost of sales £243,000).
• Cash sales revenue totalled £129,000 (cost of sales £54,000).
• Receipts from trade receivables totalled £438,000.
• Payments to trade payables totalled £393,000.
• Van running expenses paid totalled £33,600.

 

 

At the end of the year it was clear that a credit customer (trade receivables) who owed £1,500 would not be able to pay any part of the debt. All of the other trade receivables were expected to settle in full.

The business uses straight-line depreciation for non-current assets.

Required:

Prepare for Racca Limited, a Statement of Income for the year ended 31^st December 2021 and a Statement of Financial Position as at 31 December 2021. (20 marks)

 

Part B – Stockstone Limited

 

Stockstone Limited makes electric kettles that they currently sell at £13 each. The management believes that the company’s equipment could currently produce up to 70,000 units of electric kettles per year. However, the budget for the coming year is 53,000 units of electric kettles and costs are estimated as follows:

 

 

Variable Costs (per unit)

 

 

 

	Materials	£5.25
	Labour Variable overheads	£2.95 £ 1.85
	Fixed costs:
	Production	£59,000
	Selling etc.	£47,600
Required:

 

1. What is the contribution that each electric kettle makes towards covering fixed costs if it is sold for £13? (2 marks)
2. What is the break-even point and margin of safety in terms of both units and revenue if each electric kettle is sold for £13 (4 marks)
3. Calculate the profit Stockstone makes if it produces and sells 48,000 electric kettles at £13 per kettle. (4 marks)
4. Stockstone Ltd. is considering whether to spend £45,000 on marketing and advertising but consequently raising the selling price by 9%. At this new sales price and with the advertising, sales (in units of electric kettles) will increase by 17%. Analyse whether this is a good strategy for Stockstone Ltd?

(7 marks)

1. Identify and explain the underpinning assumptions attached to the break-even model including analysing whether the model can successfully be utilised by a range of differing

businesses.                                                                                                       (13 marks)

 

Part C – Rockham Plc.

You have recently joined the finance team at Rockham Plc a manufacturer of components for the motor industry. On the first day, you heard a few colleagues talking about a potential investment of a new machine and the importance of budgeting as a successful tool within the overarching strategic planning process. As these areas are of particular interest you request to be part of the project team that assesses the viability of the investment. You are provided with the following details:

 

 

The purchase cost of the new machine is £40,000,000. The machine will produce an expected annual cash inflow of £17,000,000, with an annual cash outflow of £6,400,000. It is expected the machine will have a useful life of 5 years after which it can be sold for £5,000,000. The machine will be depreciated using the straight-line method. Rockham Plc currently has a cost of capital of 7%.

 

 

Required:

 

 

1. Calculate the Payback Period, the Accounting Rate of Return, and the Net Present Value of the machine, and provide recommendations as to whether Rockham Plc should buy the machine.

(10 marks)

1. Produce a report that explains and analyses the key merits and limitations of the differing investment appraisal (20 marks)
2. Produce a report that identifies and explains the key benefits and limitations of using budgets as a tool for strategic (20 marks)

 

Assessment Criteria

 

 

Your seminar tutor on the basis of the following general criteria will assess the paper:

 

• The university generic assessment criteria
• Discretion – additional credit may be awarded to a student who tackles a difficult subject
• The “Presentation” element of the Generic Assessment Criteria will be used to assess the report

 

Table 1 Applied Penalties for exceeding the word count.

Word limit	Penalty	Actual Word Count
Exceeds limit by up to 10%	No penalty – tolerance band (see below)	3300
Exceeds limit by 10.1-20%	-5%	3301 – 3600
Exceeds limit by 20.1-30%	-10 %	3601 – 3900
Exceeds limit by 30.1-40%	-15 %	3901 – 4200
Exceeds limit by 40.1-50%	-20 %	4201 – 4500
Exceeds limit by more than 50%	Mark of zero	4501+

 

Assessment Regulations

 

For further information regarding Assessment Regulations, extenuating circumstances or extensions and academic integrity, please refer to your Programme Handbook on the University of Sunderland in London information page on Canvas.

 

Reading List

 

Please access your reading list from the library website. To access it, please go to https://moduleresources.sunderland.ac.uk/ and search for your module.

 

Submission guidelines

 

Your submission link will become available approximately 3 weeks prior to your submission deadline. Your submission will be on your module space on Canvas. Please refer to the ‘General Assessment Guidance’ under the Assignment tab, for detailed instructions on how to submit and how to check for your marks and feedback.

 

Grading

 

You will be marked in accordance to the University of Sunderland assessment criteria. The assessment criteria covers; Relevance, Knowledge, Analysis, Argument and Structure, Critical Evaluation, Presentation, Reference to Literature.

Your mark and feedback will be made available to you electronically once the internal moderation has taken place, which is after 4 weeks from your submission deadline.

 

Infringement

 

The University is committed to the universal academic standard, which requires that students must not submit materials which contain someone else’s work without appropriate acknowledgement.

By submitting, you confirm that the work you submit is your own and that you have read and understood the guide to academic integrity and academic misconduct.