a) Prepare a business report for Grosvenor Ltd. T

a) Prepare a business report for Grosvenor Ltd. This should include the following financial data for the year commencing 1 December 2016: • Break-even point in units and sales value

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Introduction

Grosvenor Ltd produces a single product for the engineering industry.   

For the year ended 30 November 2016, the business has provided its costs and sales information.  

To improve profit for the year commencing 1 December 2016, the following changes are planned:

(i)            Predicted units to be sold will be 22 500

(ii)          Selling price to be maintained at £40 per unit (iii)   Wages to be increased by 5% per unit.

(iv)         Material costs to be reduced by 10% per unit, this being achieved by changing from a local supplier to an overseas supplier.

(v)          Variable overheads to be reduced by £0.10 per unit.

(vi)         Fixed costs to increase by £20 000 per annum.

Task – 100 Marks

Grosvenor Ltd would like guidance on their financial decision making. 

a)    Prepare a business report for Grosvenor Ltd.  This should include the following financial data for the year commencing 1 December 2016:

• Break-even point in units and sales value
• Profit for the year, showing the contribution per unit in your calculations
• The margin of safety in units and sales value
• The sales in units required to maintain the profit level of the year ended                 30 November 2016

 [35 marks]

b)   Evaluate the effects of the decision to change from a local to an overseas supplier

[25 marks] 

c)    The management of Grosvenor Ltd are reviewing their accounting processes and procedures.  Assess the usefulness of break-even as a financial management tool.

[20 marks] 

d)   The management are considering purchasing new production machinery.   Assess the benefits and limitations of the main sources of funding that might be used by Grosvenor Ltd to purchase new production machinery.  

 [20 marks]