ACCT801 Accounting for Managers Assignment 2 Brief | AIS

ACCT801 Assignment 2 Brief

POINTS To NOTE:

1. There are 100 marks for this assignment, which is 50% of the final course grade.
2. The word limit for this assignment is 2,500 words (+/-10%).
3. Use Arial or Times New Roman font size 12 and 1.5 line spacing.
4. Ensure you follow academic citation and referencing requirements, as failure to do so may invoke penalties. Use APA (7th). A reference list is required.
5. You are also required to reference the use of any tools / software / application used. This includes the use of artificial intelligence (AI) to paraphrase or proofread, which requires a statement where applicable.
6. Upon submission your assignment will be checked for copied materials as well as the use of AI (artificial intelligence), with penalties to be applied where appropriate and if not appropriately referenced.
7. You may submit your assignment once as a draft submission (Moodle/Turnitin) to check similarity prior to making your final submission.
8. Late submissions incur a 5% penalty (5 marks) for each 24-hour period up to 96 hours (after that time, your mark will be recorded as zero).
9. An extension may be granted if, within the prescribed timeframe, you submit an ‘Assignment Extension Application’ form with supporting documentation (e.g., a medical certificate) to the Programme Administration Unit.
10. As part of pass requirements for this course, you are required to pass each learning outcome at least once in this course.

This assignment requires you to:

LO1: Appraise the importance and relevance of accounting information to decision-making by managers and other stakeholders.
LO2: Demonstrate competence in a range of tools/techniques to be able to undertake and interpret various financial statements, including preparation of financial statements.
LO3: Justify and apply appropriate tools and techniques to moderately complex practical situations.
LO4 Analyse, assess and compose appropriate reports assisting stakeholders to make appropriate decisions.
Case scenario: GreenTech Solutions Co. (GTS)

Introduction

GreenTech Solutions Co. (GTS) is a renewable energy company that manufactures solar panels and portable energy storage systems. One of its key products, the EcoSoil Sensor, is priced at NZ $1,800 + GST. and targets both commercial clients and rural communities that are transitioning to renewable energy solutions.

You are a management accountant and a member of the Finance department. You have been asked to prepare a report for the CFO regarding the company’s financial performance, financial position, and cashflows. The report should include recommendations on whether the company can afford to invest in a new machine for production in the 2026 budget. The financial analysis would include this investment and determine whether external funding is needed. The CFO will submit this report to the Board of Directors (BoD) for final approval, and board papers are required at least one week before the meeting.

Background

GTS has effectively managed its variable costs, broken down as follows:

• Raw Materials Cost = 60% (Including PV cells, lithium batteries, frames, wiring, glass)
• Direct Labour Cost = 25% (Assembly-line and quality-testing staff wages)
• Packaging and Shipping Cost = 10% (Packaging materials, freight, and insurance)
• Commission and Sales Incentives = 5% (Distributor and sales agent commissions) These expenses include a GST component and are influenced by an annual inflation rate.

In 2024, GTS, a renewable energy company that manufactures solar panels and portable energy storage systems, scaled down its operations due to a significant downturn in the financial year ending March 31, 2024, compared to the prosperous 2023, when GTS achieved a Net Profit after Tax of 5% on Revenue.

In 2025, GTS experienced a 20% decrease in production and sales volumes of its key product, the EcoSoil Sensor, resulting in reduced output efficiency. Despite these challenges, the selling price remained constant at NZ $1,800 per unit, while operational costs per unit rose by 5%, consistent with inflation. With some production facilities closing and other cost reductions, depreciation expenses were reduced by 4%, and other overheads (such as salaries and factory rent) were reduced by 10% from the previous year. However, the savings were slightly less than 10% due to inflation. GTS had no outstanding debt in 2024.

The corporate tax rate is 28% on profits. If there are losses, these are treated the same way as credit. GST is set at 15% for the tax on goods and services, and payroll tax on salaries and wages is 20% (employee tax). Income Tax, GST and PAYE are paid altogether in the following year. The Tax liability is split evenly between the three taxes.

GTS plans to prepare a forecast for November and December 2025 as part of its ongoing financial planning. The company’s forecast for the year ending 31st March 2025 indicates a period of partial recovery, with sales volumes projected to increase by 20% compared to 2024 levels. GTS anticipates a 5% inflationary increase on all costs (excluding depreciation) but expects to achieve around 10% savings on fixed overhead costs from 2024, including depreciation of assets, due to the planned closure of one smaller production facility and other one-off efficiency measures. The company has not allocated funds for new capital assets in 2025 but intends to evaluate the feasibility of investing in a new production machine in 2026, contingent on its financial recovery.

As GTS continues to navigate the post-pandemic recovery phase, management intends to revise the budget for 2026 based on the financial forecast from 2025. To account for ongoing economic fluctuations and market conditions, GTS plans to increase the selling price of its EcoSoil Sensor by 15%. Despite this price adjustment, the company projects that sales volumes may decline by approximately 4% compared to the levels forecasted for 2025, reflecting the price sensitivity observed among both commercial and rural customers.

In response to the financial strain caused by the pandemic, the government introduced the Renewable Energy Industry Support Scheme (REISS), an interest-free financial aid program designed to assist manufacturing companies in the renewable energy sector struggling with the economic impacts of COVID-19. No repayments are required until the end of the loan term. GTS’s Board of Directors has strategically utilised this program to maintain a stable and positive cash balance, highlighting the importance of preserving liquidity during the recovery period. However, the Board remains concerned about future cash flows and has requested detailed financial modelling to ensure the company can meet all its cash commitments. None of the shareholders is willing to inject additional funds into the company.

GTS has been cautious with its cash flow management, particularly since the beginning of the fiscal year on April 1, 2023, when it reported a modest positive bank balance. The company’s accounts receivable and payable positions have remained stable, indicating that these factors do not require significant emphasis in upcoming financial projections or decision-making processes.

CAPEX Acquisition: Investment In A New Production Machine

GreenTech Solutions Co. faces increasing operational risks due to its aging production equipment, which has led to inefficiencies and delays in meeting customer demand. The company now needs to decide on a comprehensive upgrade of its manufacturing infrastructure, focusing on acquiring a new automated production machine that integrates both hardware and software enhancements. This capital investment proposal requires the Board of Directors’ approval.

Project Background:

• The existing production machinery at GTS is outdated and energy-inefficient, making daily manufacturing operations slow and costly. A modern automated machine would significantly enhance productivity, product consistency, and energy efficiency, aligning with the company’s renewable energy objectives.
• GTS is considering purchasing a new integrated production system designed and manufactured in Australia. The key expected benefit from this upgrade is an annual cost saving on operational and maintenance expenses, projected at NZ$660,000 per year over a five-year period. These savings will offset the initial restructuring costs, including NZ$700,000 for staff redundancy and retraining in the first year.
• The purchase price for the new machinery and automation components is quoted in AUD, with no GST applicable on imports.
• The machine will be purchased outright and is anticipated to retain 15% of its total cost as residual value after five years.
• GTS plans to enter a software licensing agreement with the Australian supplier for the system’s operating software, which includes updates and technical maintenance. Any increase in licensing fees will not exceed 4% per annum.
• GTS’s target return on capital investment is 12% per annum.

Other quantitative data relevant to the investment in the equipment is: 

• Current exchange rate AUD $1 to NZD 1.10
• Customs duty 4%
• Installation Costs are NZ$ 85,000.
• Savings in net working capital during Year 1 $100,000 due to efficiencies gained from the new system.

Additional notes:

• With the exception of the purchase cost of the machine, all other cash flows are quoted in New Zealand dollars.
• Ignore GST for this analysis and evaluation.
• Depreciation for the new production machine will be calculated using the straight-line method at 20% per annum.
• The project has a five-year investment horizon.

Assignment Requirements:

(in your report, include any detailed workings as an appendix and table of contents)

1) In The Excel Template Provided (25 Marks, LO2):
a) Prepare the financial statements (Income Statement, Cashflow Statement, and Balance Sheet) from 2024 to 2026 (15 marks).
b) Complete variance analysis both in dollars and between the forecast and the 2026 budget (5 marks).
c) Calculate the breakeven points (BEPs) in units and revenue. Analyse the institution’s situation using tools/techniques such as the margin of safety percentage (MoS %) for all years. (5 marks).

2) In A Word Processing File, Write Up A Management Report Including (25 Marks, LO1):
a) Your interpretation of the company’s financial performance, financial position, and cash flows from 2024 to 2026 (15 marks).

b) Identify key variances and factors that are relevant in the decision-making of senior management, investors, employees, and customers (5 marks).

c) Justify why the BEPs and MoS can be useful in analysing an institution’s situation (5 marks).

3) Analysis Of CAPEX Acquisition (25 Marks, LO3)
In the Excel template provided, complete the cashflow calculations and analysis of the proposed proposed CAPEX Acquisition. This includes the relevant (incremental) cash flows, the NPV, IRR, Payback, and Average Accounting Rate of Return.

4) Preparation And Recommendation Of CAPEX Acquisition (25 Marks, LO4)
As part of your management report, evaluate and recommend whether the company should purchase the new machine. The report should provide a full analysis of the project, financial and non-financial risks, and a summary of your recommendation and justification for your commitment to this new machine.

Additional Information and Data: 

ACCT801 Assignment 2 – Marking Rubric