Category: Business Finance – Accounting

  

 

Read the case study. Write a paper between 700 and 1,000 words addressing the following:

Part 1, Sections 1-2: Provide calculations and a solution for total variable costs, break even in sales volume (number of members), break even in sales (in dollars), and margin of safety.

Part 1, Section 3: Respond to the questions included with the case study.

Part 1, Section 4: Assume you decide to invest in the franchise. Provide a description and estimates in dollars for monthly sales, variable and fixed expenses. Explain how you determined each number and provide a written list of assumptions.       

Format the paper consistent with APA guidelines. Deliverables: Paper (MS Word) and Excel File (optional). Review your Originality Report generated from SafeAssign. A new originality report is created with each attempt. Your last attempt is used for grading. 

Case Study: In addition to regular gyms, nontraditional workout concepts and centers such as Kosama are increasing in popularity. Kosama is a franchise opportunity that offers members the opportunity to improve their health and fitness level. To learn more about the company visit kosama.com. 

Part 1, Section 1: Assume the following revenue and cost break-down.

Revenue:  

-Monthly membership fee = $28.

Costs:

-General fixed operating expenses = $3,975 per month.

-Equipment Lease = $410 per month.

-Towel service = $.50 per member based on volume.

-Mixed costs are equal to $275 per/month (fixed) plus $1.10 per membership sale (variable). 

-Total variable costs are not known.  

-Estimated number of members required to break even is between 255 and 275 members per month.  

Using the information provided estimate the amount of variable costs. When performing your analysis, assume that the only fixed costs are the estimated monthly operating expenses, equipment lease and the fixed part of mixed costs. Show your work and all calculations.

Part 1, Section 2: Using the information from section 1. What would monthly sales in members and dollars have to be to achieve a target net income of $14,500 for the month? What is the margin of safety in dollars? Show your work and all calculations. 

Part 1, Section 3: Discuss how cost structure, relevant range, margin of safety, cost behaviors, and CVP apply to an investment in the franchise. How do you plan to use this in order to manage the business and plan for profitability? What type of internal accounting reports would you prepare? Why?

Part 1, Section 4: Assume you decide to invest in the franchise. Provide a description and estimates in dollars for sales, variable and fixed expenses. Explain how you determined each number and provide a written list of assumptions.

The following is additional explanations and resources.

Part 1, Section 1: Use the following formula in order to determine total variable costs.  

Sales – Variable Costs – Fixed Costs = Net Income. 

Add the problem data to the formula and solve for the missing piece of the equation (i.e. variable costs).

1. Membership sales is equal to sales volume times the price per member.  

2. Total variable costs is not known. Enter X in the above formula.

3. Total fixed costs are provided with the problem. Enter fixed costs in the above formula.

4. Net income at the break even is equal to zero. Enter 0 in the above formula for net income.

5. Solve the equation. X = total variable costs.

The above formula determines total variable costs at the break-even.  

Part 1, Section 2: Use the solution from part 1, section 1 (i.e. variable costs) in order to calculate the contribution margin (i.e. sales – variable costs) on a per unit (member) basis. In addition to fixed costs, add targeted net income equal to $14,500.  

Contribution Margin:

Sales: membership sales times the price per member

Minus Variable Costs: See solution in part 1, section 1.

Equals: Contribution Margin in dollars

Contribution Margin in dollars / number of memberships = contribution margin per member. 

The next step is to determine what would monthly sales in members and dollars have to be to achieve a target net income equal to $14,500 for the month? Utilize the CVP formula (fixed costs / contribution margin per member) to finalize the problem. Compute the margin of safety.   

Resource – Enhance learning & understanding: For additional guidance regarding cost volume profit analysis and related cost concepts please review the following.

Cost Volume Profit

Franchise Agreement: As you review and analyze the franchise opportunity it is important to develop a thorough understanding of the franchise agreement prior to investing. The following is an article that explains the basic fundamentals of an agreement. 

Franchise Agreement

Part 1 Section 4: You need to estimate/project sales, variable, and fixed expenses for your business. The first step is to determine a physical location for your franchise (i.e. city & state). Once this is identified, begin researching what the average monthly fee is for comparable fitness clubs in your area. The monthly fee per customer will help you determine sales revenue. The next step is to estimate your expenses. Do you plan to buy a building or sign a lease? Real estate is typically leased based on square footage. How many square feet does your business require and what is the cost per square foot based on the location of your business? In addition to the lease expense, do you expect to incur additional fixed expenses such as the purchase of fitness equipment? Finally, you need to determine all of your variable expenses. This could include hourly wages, sales commissions, utilities, etc.  

Assumptions: Explain how you developed estimates for sales revenue and business expenses and list any assumptions. 

Example: 

1. Explain how you developed your monthly fee and volume estimates.  

2. Discuss why you decided to rent or buy a building and the related costs such as rent per square foot based on, in part, the location of your business.

The key is to present the data in a professional manner so the end user (business owner, etc.) can review the numbers, understand it, and modify it in the future with little effort. If you use Excel add formulas so you can modify the data to account for changes in activity. This will help you manage your investment in the franchise. Example: What if sales volume is more or less than your original estimate? In this case you could change sale volume (number of members) and sales revenue and variable expenses automatically change based on formulas in the spreadsheet.

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 Read Lecture 3. React to the material in this lecture. What is unclear about setting up and using Excel for these statistical techniques? Looking at the data, develop a test for mean differences between the genders on a variable other than compa-ratio or salary you feel might be important in answering our equal pay for equal work question. Interpret your results. 

You have been hired in the finance department at a large, metropolitan, for-profit hospital. Your duties are very important to the entire hospital in terms of financing operating costs. Additionally, you are also in charge of 3 employees who work under you to help with the day-to-day accounting activities. Your role includes budgeting, managing the general ledger accounts, utilizing financial formulas to perform accounting activities, and training and development of your 3 employees. This professional career is exciting and challenging for you but is also enjoyable and rewarding as you work your way up the career ladder toward reaching your goal of becoming the Chief Executive Officer (CEO) of the hospital. 

Due to scarce resources, your organization is faced with the decision of choosing between mutually exclusive projects (i.e., build a rehab center or build a neonatal wing). You have been asked to develop a financial analysis of the two projects based on Net Present Value (NPV), Return on Investment (ROI), and Profitability Index (PI). Briefly explain the following concepts and their use/value in assessing the validity of the two mutually exclusive projects:

• NPV 
• ROI 
• PI 
• Payer (or case) mix 

Submitting your assignment in APA format means, at a minimum, you will need the following:

• Title page: Remember the running head and title in all capital letters. 
• Abstract: This is a summary of your paper, not an introduction. Begin writing in third-person voice. 
• Body: The body of your paper begins on the page following the title page and abstract page, and it must be double-spaced between paragraphs. The typeface should be 12-pt. Times Roman or 12-pt. Courier in regular black type. Do not use color, bold type, or italics except as required for APA level headings and references. The deliverable length of the body of your paper for this assignment is 35 pages. In-text academic citations to support your decisions and analysis are required. A variety of academic sources is encouraged. 
• Reference page: References that align with your in-text academic sources are listed on the final page of your paper. The references must be in APA format using appropriate spacing, hang indention, italics, and upper- and lower-case usage as appropriate for the type of resource used. Remember, the reference page is not a bibliography, but it is a further listing of the abbreviated in-text citations used in the paper. Every referenced item must have a corresponding in-text citation

Assume that you are a CEO of a medium-sized company that needs a significant influx of cash for several expansion projects. As the CEO, you must determine whether your company should remain private or go public. Some companies postpone going public due to the unpredictability of economic and market conditions. Consider the ramifications of both alternatives. Construct an argument for and against going public. Before providing your response, review the guidelines and regulations associated with going public by visiting Small Business and the SEC located at http://www.sec.gov/info/smallbus/qasbsec.htm.

Use the Internet to research SOX law, located at http://www.sarbanes-oxley-101.com/sarbanes-oxley-compliance.htm.

Write a four to five (4-5) page paper in which you:

1. Outline three (3) ways in which your medium-sized private company may benefit from going public, providing a rationale for each.
2. Create an argument that the same goals may be achieved if the company remains a privately held entity. Provide support for your argument.
3. When a company decides to go public, it can typically obtain capital by issuing stocks or bonds. Suggest four (4) leading financial ratios that will be evaluated and how each will impact the companys decision to obtain expansion funds. Determine whether the results of the ratios would alter the decision to go public. 
4. By researching the results of SOX compliance surveys, assess the financial impact that SOX might have on your company if it decides to go public. Considering the impact of SOX compliance, take a position as to whether your company can overcome the challenges posed by SOX compliance if the decision is to go public. Based on your research, support your decision by identifying the potential advantages and disadvantages that SOX may have on your company. Provide specific examples.
5. Make a recommendation as the CEO regarding the alternative (i.e., going public or staying private) that will best support the companys expansion goals. Support your position.
6. Use at least four (4) quality academic resources in this assignment. Note: Wikipedia and other Websites do not qualify as academic resources.

Your assignment must follow these formatting requirements:

• Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
• Include a cover page containing the title of the assignment, the students name, the professors name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

The specific course learning outcomes associated with this assignment are:

• Analyze financial reports, prepare analysis, and draw conclusions based on the financial analysis.
• Calculate and interpret various financial and operating ratios used in business.
• Use technology and information resources to research issues in accounting management.
• Write clearly and concisely about accounting management using proper writing mechanics.

 

One step in assessing the quality of earnings is to look for red flags. An example of a red flag is a significant increase in accounts receivable without commensurate growth in sales (that is, accounts receivable turnover decreases). List and discuss at least five other red flags the astute analyst might look for, explain why each is a red flag, and identify where the analyst might find this information.

Using your example, discuss how monitoring the financial results of a companys competitors over time might help raise or explain red flags.

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Assignment Content

1.    Now that youve identified the organizations SWOT, you need to determine the project and its objectives and metrics. This project should be based on an unmet opportunity for the organization, or to minimize a potential threat. What does the organization need to do to advance its goals and/or expand its competitive advantage? How will you measure their progress? 

   Complete the following: 

   • Explain why this opportunity/threat was selected, and how it is anticipated to benefit the organization. 
   • Create at least 3 measurable project objectives based on your analyses. Determine timelines and responsibilities for each objective (e.g. with a RACI chart) 
   • Explain why these objectives are appropriate for the project. 
   • Develop at least 2 metrics to evaluate achievement of each of the project objectives. Provide a 1-page explanation for why these are appropriate metrics for each of the objectives. 
   • Cite all sources following APA guidelines. 

     Submit your assignment. 

Foreverfiances expanded to offer more than just invitations and stationery. We now offer business cards, rustic wedding invitations and merchandising stationery for businesses who want to go green and show that they are eco-friendly all the way down to their business cards. Just like our invitations, our green business cards, business thank you cards and stationery are 100% biodegradable. 

 Read Chapters 19 and 20 of our text. Identify an ACCOUNTING topic included with the assigned chapters and explain it to the class. How would your current or former employer benefit from the information and how does it apply to their business operations? Add examples and details to support your analysis and explanations.  

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Three (3) personal trainers at an upscale health spa / resort in Sedona, Arizona, want to start a health club that specializes in health plans for people in the 50+ age range. The trainers Donna Rinaldi, Rich Evans, and Tammy Booth are convinced that they can operate their own club profitably. They believe that the growing population in this age range, combined with strong consumer interest in the health benefits of physical activity, would support the new venture. In addition to many other decisions, they need to determine the type of business organization that they want to form. Should they incorporate as a corporation or form a partnership? Rich believes there are more advantages to the corporate form than a partnership, but he has not convinced Donna and Tammy of this. The three (3) trainers have come to you, a small business consulting specialist, seeking information and advice regarding the appropriate choice of formation for their business. They are considering both the partnership and corporation formation options.

Assume the trainers determine that forming a corporation is the best option. Next, Donna, Rich, and Tammy need to decide on strategies geared toward obtaining financing for renovation and equipment. They have a grasp of the difference between equity securities and debt securities, but do not understand the tax, net income, and earnings per share consequences of equity versus debt financing on the future of their business. They have asked you, the CPA, for your opinion.

Write a two to three (3-4) page paper in which you:

Provide a summary to the partners, outlining the advantages and disadvantages of forming the business as a partnership and the advantages and disadvantages of forming as a corporation. Recommend which option they should pursue. Justify your response.

Explain the major differences between equity and debt financing and discuss the primary ways in which each would affect the future of the partners business.

Use at least two (2) quality academic resources in this assignment. Note: Wikipedia and similar websites do not qualify as academic resources.  You have access to Strayer Universitys Online Library at https://research.strayer.edu and the iCampus University Library Research page at https://icampus.strayer.edu/library/research.