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Talk to an Expert| Category | Assignment | Subject | Accounting |
|---|---|---|---|
| University | Lincoln University | Module Title | COMM602 – Principles of Accounting and Finance |
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The Recommendation Report represents the culmination of the case study decision making process developed through the course. The Recommendation Report is due for submission to the online drop-box on the course LEARN page by 5.00 pm on Thursday, 10 February, 2022. The Recommendation Report contributes to 35% of the final grade and must be completed individually. Prior to completing the Recommendation Report, students should complete the relevant Decision Making Quizzes (Quizzes 1-4) in Modules 2, 3, 4 & 5. These are designed to test your understanding of the course content needed to complete the Recommendation Report. The Recommendation Report requires students to make some informed decisions within the case study scenario and write up their recommendations for the management of Sheffield Limited. Further details are on page 5. |
You are the Business Development Manager of Sheffield Limited, a farm nutrient and environmental company located in central Canterbury. Sheffield Limited focuses in helping farmers and growers in the South Island of New Zealand to achieve production efficiency and reduce their environmental impacts. The company produces fertilisers, agrochemicals, and other agriculture products that help farmers to improve the fertility of soil, the quality of crops and livestock, and eventually the profitability of farms. The aspirational goals of the project are to learn the various types of finance-related decisions that managers of a company have to make and to understand how finance tools can help managers in making better decisions that will benefit the company.
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Your task: In preparation for an upcoming management meeting, you have been given a special task to analyse the financial position of the company and provide recommendations on what actions should be taken to improve the financial position of Sheffield Limited. You are to prepare a short report (maximum of eight single-sided A4 pages) that addresses the specific decisions currently facing different areas of the business. In your report, outline your recommendations, as well as the information you considered and the steps you took to arrive at that recommendation. |
Here are some background information that you will need to help you in the report process:
Operating
The Inventory Manager is considering introducing a new product to Sheffield Limited – the Sheffield soil test kit. The kit would sell for $400 per unit, have variable manufacturing costs of $120 per unit, and variable selling costs of $40 per unit. Market analysis suggests Sheffield Limited could sell 200 units per month. The company’s monthly fixed expenses are $36,000. The tax rate is 30% and Sheffield Limited have a targeted before-tax profit for the product of $16,000 per month.
Investing
At a recent trade fair that you attended, you were impressed with a new machine, Windwhistle model 230E, that can double the production capacity of your flagship product, Cropmaster 18 Fertiliser. The machine requires a capital outlay of $500,000 and will have a residual value of $25,000 at the end of its six-year useful life.
It is expected that the new machine will generate the following cash flows: 
You have obtained information on the payback Period policy of an investment set by management of Sheffield Limited and the other information for investment in the new machine, Windwhistle Model 230E as below:
| Investment decision technique | Decision criteria set by management | Outcome for investment in Windwhistle model 230E |
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Payback Period (PP) Net Present Value (NPV) Internal Rate of Return (IRR) |
Not more than 3 years Positive NPV Not less than 9.0% |
3.11 years $92,276.33 16.95% |
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