1. Table of Contents
MAJOR FINDING........................................................................................................................ 5
TASK 1. (UNIT 2, 2.3) .............................................................................................................. 5
1.
Manufacturing manager ............................................................................................ 5
2.
Sales manager ............................................................................................................. 6
3.
Inventory manager ..................................................................................................... 6
TASK 2. (UNIT 2, 3.1) .............................................................................................................. 7
1.
Budget and decisions .................................................................................................. 7
2.
Limitation and solution .............................................................................................. 9
TASK 3. (UNIT 2, 4.3) ............................................................................................................ 11
1.
Profitability and return on capital .......................................................................... 12
3.
Borrowings ................................................................................................................ 12
4.
Liquidity and working capital ................................................................................. 13
5.
Shareholders’ investment......................................................................................... 13
APPENDIX .................................................................................................................................. 15
REFERENCES ............................................................................................................................ 20
4

2. MAJOR FINDING
TASK 1. (UNIT 2, 2.3)
1. Manufacturing manager
At first time, manufacturing manager will look into functional costs including production or
manufacturing, administration and distribution cost to control how much and how to use money
reasonably. Furthermore, it also helps Archie’s company avoid the situation of losses and wastes
that is unworthy of production and manage their money effectively. Whereas production costs
will come from the price of raw materials, administration costs cover the expense for general
office departments with personnel department salaries, photo-copying and office stationery. In
addition, spending for transportation or research for innovation should be noticed.
Secondly, direct and indirect cost or overhead also should be evaluated by the manager. In direct
costs, to manage their resources such as materials and labour, manager should find out how
worthy it is for spending. These costs will measure how many necessary employees for
manufacturing and how much to pay for their salaries, as well as expense for process of
production. Moreover, manufacturing manager also see the costs of making a product, providing
service and running a department as the cost related directly with manufacture. Another
important cost is production and distribution indirect cost or overhead which cannot be traced
directly. These overhead may occur as supervisors’ wages and cleaning raw materials. As a
result, manager should consider it in order to avoid the case of losses.
Thirdly, in order to fix problem,the information about cost centres and cost units are concerned
to help manufacturing manager to find out the factors that cost most. Additionally, cost per unit
mention the needed cost for producing an item used to choose suitable types of materials to
reduce the total cost.
Finally, if Archie’s company decides to expend their business, they will have to pay for changes
in added renting and machinery. However, there are some kinds of cost such as direct materials
and transportation will vary depending on the volume of production.
5

3. 2. Sales manager
Sales manager is suggested to consider marketing cost in classification in function in order to
manage the demands for products and put price at a certain level. The direct costs as well as
indirect costs like selling overhead are seen to calculate the amount of money that company
spends for and the ability to gain profit in future.
Cost centres and cost per unit are also necessary information in making decision. Basing on this
analysis, sales manager can set up a range for price and determine which level will be most
reasonable to make profit. Also, in order to reach break-even point and maximize profit, Archie’s
company can propose a specific volume of sales.
3. Inventory manager
First of all, the costs of warehousing and transportation are concerned to show how necessary to
manage inventory effectively by JIT (Just in time) or EOQ (Economic order quantity) model as
features of functional costs. Inventory manager will analyze the need of materials and labour to
avoid the situation of surplus in these categories when company has too much
inventory.Furthermore, other costs are considered to identify exactly the volume of materials,
employees and time they should spend for production.
With the purpose of maintaining the business and making profit, spending for fix and variable
cost should be in control and not be affected too much by market factors such as inflation and
changes in demand through time.
At last, relevant cost is mentioned as the cost that should be used in decision making (BPP
Learning Media, 2010) including future cost and cash flow. By forecasting the market changes,
inventory manager will have a decision making inventory be not only a risk but also an
opportunity to remain or expand the size of business.
6

4. TASK 2. (UNIT 2, 3.1)
1. Budget and decisions
Raw Material Purchase Badget
Material X
Material Y
Kg
Kg
Using Requirement
To product 18,300 units of A
91.500
109.800
To product 76,350 units of B
534.450
687.150
Usage Budget
625.950
796.950
1.878
2.391
627.828
799.341
Provision of losses (0.3%)
Opening Stock
400
0
Closing Stock (55%)
220
0
Decrease in Stock
180
180
0
0
627.648
799.341
$ 4,60
$ 6,50
$ 2.887.180,11
Raw Material Purchase
$ 5.195.715,53
Budget (kg)
Cost per kg
Raw Material Purchase
Budget($)
Total Purchase Cost
$ 8.082.895,64
Figure 1. Raw material purchase budget of Archie’s company in 2014
7

5. Production Budget
Product A
Product B
Units
Units
20.000
80.000
100
Sales goods
400
Provision for losser (0.5%)
Opening Stock
4.000
9.000
Closing Stock(55%)
2.200
4.950
Decrese in Stock
1.800
Production Budget
1.800
4.050
18.300
4.050
76.350
Figure 2. Production budget of Archie’s company in 2014
Materials
800
Opening stock (400kgx$2+
0x$6.8)
1012
Closing stock
(220kgx$4.6+0x$6.5)
8,082,895.64
Purchase cost
Skilled labor
1,328,250
Variable overhead
1,593,900
900,000
Fixed overhead
Production cost budget
*Working
11,904,833.64
Product A
Product B
Unit produced
18,300
76,350
Hour per unit
1
1.5
18,300
114,525
Total hours
8

6. Skilled labor
$1,328,250
Variable overhead
$1,593,900
Figure 3. Production cost budget of Archie’s company in 2014
A budget in business is financial plan in exactly the same way, budget can encourage forward
thinking and help Archie company can manage their monetary, income, expenditure, capital
investment for future plans.
Budgetary planning and control systems has some benefits.
The Budgets set up targets for company.
The budget show manager how much money they need to focus on their activities.
Budgets improve communication.
Budgets as the control tool the task, the results of company, monitor income and
expenditure and identify any problems.
Budgets motivate employees to improve their performance.
Budgets provide a framework for responsibility
2. Limitation and solution
Budgets is the job that take time and money. The development of budget for Archie
company provides information for managers, they can be predicted for the future. However,
Archie's budget planning also has a few minor drawbacks. Because budgets will good if the data
being used to create them are good. Moreover, budget just provides only approximate
numbers,thus,final results cannot be correctly one hundred percent. One of the most important
limitations of Archie’s budget is not flexible because the data are not real and final, it was be
predicted and prices change very often.If this is a financial plan for 2014, Archie Company will
be able to take advantage in 2014, but that plan did not apply to the next and next year. Besides,
budgets creates some problem about behavior and it takes costly, management of time. From the
financial management, Archie company plans should split its budget into quarters rather than an
entire year. It can help companies to easily predict more accurately the numbers. Perhaps,
innovation cost, discount cost, changing cost, labor cost, work hour and other cost should be
added more in plan.
9

7. 10

8. TASK 3. (UNIT 2, 4.3)
Ratios
Industry Average
2013
2012
(2013)
PROFITABILITY AND RETURN ON CAPITAL
20%
296.76%
50.90%
Profit margin
15.80%
71.92%
14.25%
Asset turn over
3.6 times
4.13 times
3.57 times
26%
79.13%
26.36%
8.30%
71.9%
14,24%
Liabilities ratio
50%
43.43%
50.34%
Gearing ratio
18%
10.78%
14.85%
Debt/Equity ratio
25%
14.02%
18.83%
190.77 times
36.26 times
ROCE
Gross profit margin
Net profit margin
BORROWINGS
Interest cover
25.7 times
Current ratio
120%
151.52%
171.78%
Quick ratio (Acid
90%
145.51%
162.34%
55 days
64.27 days
85.02 days
13.8 days
14.71 days
9.36 days
90 days
174.13 days
56.2 days
ratio)
Debtor days ratio
Stock turnover
period
Credit turnover
SHAREHOLDERS' INVESTMENT RATIOS
Earnings per share
$0.45 per share
(EPS)
11
$5.79 per share $0,71 per share

9. $0.1 per share
$1.736 per
$0.211 per
share
Dividend per share
share
Dividend cover
4 times
3.335 times
3,365 times
P/E ratio
3 times
0.276 times
2.676 times
108.53%
11.05%
Dividend yield
14%
Figure 4. Financial ratios of Archie’s company in 2012 and 2013
1. Profitability and return on capital
There is a great change for return on capital employed from 50.90% in 2012 to 296.76% in 2013.
This percentage change rose nearly 6 times in comparison with 2012 and is much higher than
only 20% of industry average at the same time. Along with an improvement of return on capital
employed, profit margin in 2012 was a bit lower than the industry average but increased rapidly
to 71.92% in 2013. This change reflects Archie’s good business and distribute to a higher asset
turnover between these two years. It means that Archie’s company has had the first successful
step in the market of electric components industry and has ability to make profit. The higher
gross profit margin also leads to an increase for net profit margin in 2013. It can be explained by
a decrease of cost of sales which is less than a half of it was in 2012, even the way Archie’s
company manage their total expenses.
3. Borrowings
In this criteria, the liability ratio was decrease a bit to under 50% compared with 2012 which
means that Archie’s company are borrowing less than the previous year. The ratio has fallen
from 50.34% to 43.43% helping company to improve its position and prove its ability to reduce
the total debt in total asset. This change also attributes a great increase of profit margin and
return on capital employed in 2013.
The gearing ratio seems quite low and decrease through time can be seen as good news for
Archie’s company. It proves that Archie’s has to pay less for preference shares and debentures.
Technically, they have only 10% of debenture stock and do not exist any preference shares.
Furthermore, debt/equity ratio is mentioned as the same sort of information as the gearing ratio
12

10. which also decreases in times of change. Lower percentage will show how better Archie’s
company was in comparison with other competitors in 2013.
As can be seen clearly, the interest cover of Archie’s company in 2013 is much higher than 2012.
This ratio shows that Archie’s company has enough ability to pay for interest and tax easily.
Although they have to face with effects from ordinary shareholders, they still create a high level
of profit.
4. Liquidity and working capital
With a high level of current and quick ratios, the assets of Archie’s company are considered
better than its competitors. It distributes to make Archie’s company have a high volume of
liquidity by their opportunity to transfer money from stock to cash based on higher ratio than the
industry average.
Debtor days ratio also decreased showing that Archie’s company has transferred credit sales to
cash quickly. However, this ratio is still higher than the industry average with 55 days. Because
Archie’s company has to sell a large number of components for each order, debtors of company
will last longer than usual.
Stock turnover days in 2013 are longer than it was in 2012 due to the consequence of reducing
sales. Moreover, this ratio reflects that Archie’s company has invested more in managing
inventory but it seems ineffective as in 2012. Because it take longer time, the performance is also
slower.
Creditors’ turnover is worse between 2012 and 2013 from 56.2 days to 174.14 days. Whereas the
rate of industry average is 90 days, it means that company is in trouble with credit from suppliers
and loan from bank.
5. Shareholders’ investment
Earnings per share of Archie’s company have rose fastly in 2013, equal nearly 10 times of 2012
and even 12 times of the industry average. This high number show the return on each ordinary
share which can be used to evaluated how good the business was.
13

11. High earnings per share lead to an increase in dividend per share from 2012 to 2013 which
express the level of satisfaction of shareholders. Compared with $0.1 of the industry average,
shareholders can have the general perception to evaluate how effective the business was between
Archie’s company and its competitors.
Dividend cover is nearly the same in these two years, however, both of these years having the
lower rate than the industry average. Archie’s company can identify how many percent of profit
should be used for future growth and dividends.
A great decrease in price to earnings ratio between these two years proves that Archie’s company
has run the business more effectively. Nevertheless, it does not mean weak shareholder’s
confidence; the earning was too big whereas company is able to reduce the share price.
Dividend yield also increased sharply which show how expectation of shareholders was. Its
percentage is still higher than industry average nearly 10 times in 2013. Because they see a great
increase in earning, they will expect to receive much more return in comparison with their
competitors’ dividends.
14

12. APPENDIX
TASK 3
2013
2012
$
$
Profit on ordinary activities before tax
5,479,318
666,773
Interest payable
28,874
18,909
Profit on ordinary activities before interest and
5,508,192
685,682
taxation
1,856,103 1,346,969
Capital employed
Return on capital employed (ROCE)
296.76%
50.90%
2013
$
Profit before interest and tax
2012
$
5,508,192
685,682
7,658,796 4,809,567
Sales
Profit margin
71.91%
14.25%
2013
2012
$
$
Sales
7,658,796 4,809,567
Capital employed
1,856,103 1,346,969
Asset turnover
4.13
15
3.57

13. times
times
2013
2012
$
$
Turnover
7,658,796
4,809,567
Cost of sales
1,598,709
3,541,780
Gross profit
6,060,078
1,267,787
Operating profit
4,988,816
305,331
Gross profit margin
79.13%
26.36%
Net profit margin
65.14%
6.35%
2013
2012
$
$
Creditors: amount falling within one year
1,071,262
962,456
10% first mortgage debenture stock 2016/2011
200,000
200,000
Total debts
1,271,262
1,162,456
Tangible fixed assets
1,304,180
656,071
Current assets
1,623,185
1,653,354
Total assets
2,927,365
2,309,425
Liability ratio
43.42%
50.33%
16

14. 2013
2012
$
$
Prior charge capital
200,000
200,000
Total capital
1,856,103
1,346,969
Gearing ratio
10.77%
14.84%
2013
2012
$
$
Prior charge capital
200,000
200,000
Ordinary share capital and reserves
1,426,103
1,061,969
Debt/equity ratio
14.02%
18.83%
2013
2012
$
$
Profit before interest and taxation
5,508,192
685,682
Interest payable
28,874
18,909
Interest cover
190 times
36 times
2013
$
17
$
1,623,185
Current assets
2012
1,653,354

15. Current liabilities
1,071,262
962,456
Current ratio
151.52%
171.78%
2013
2012
$
$
Current assets
1,623,185
1,653,354
Current liabilities
1,071,262
962,456
Stock
64,422
90,850
Current assets less stock
1,558,763
1,562,504
Quick ratio
145.50%
162.34%
2013
2012
$
$
Trade debtors
1,348,592
1,120,252
Sales
7,658,796
4,809,567
Stock
64,422
90,850
Cost of sales
1,598,709
3,541,780
Trade creditors
762,701
545,340
Purchases
1,598,709
3,541,780
days
days
18

16. Debtors day period
64.27
85.02
Stock turnover
14.71
9.36
Creditor turnover
174.13
56.20
2013
2012
$
$
Profit before interest and tax
5,508,192
685,682
Interest
(27,000)
(18,127)
Profit before tax
5,481,192
667,555
Taxation
(1,369,830)
(166,693)
Profit after tax
4,111,362
500,862
Number of ordinary shares
710,000
710,000
Earnings per share
5.79
0.71
19

17. 2013
2012
Dividend
$1,232,847
$150,024
Number of ordinary share
710000
710000
Dividend per share
$1.74
$0.21
Earnings per share
$5.79
$0.71
Net dividend per ordinary share
$1.74
$0.21
Dividend cover
3.33 times
3.38 times
Current share price
1.6
1.9
P/E ratio
0.27 times
2.67 times
Current market price of the share
1.6
1.9
Dividend yield
108.75%
11.05%
REFERENCES
Unknown.(2010) Managing Financial Resources and Decisions. BPP Learning Media, p.132145
Unknown.(2010) Managing Financial Resources and Decisions. BPP Learning Media, p.157171
20