In this assessment, you’ll participate in a scenario where you’re in charge of budgeting decisions. This scenario puts you in charge of preparing a budget for the Redmond Management Association annual public relations luncheon. Save and upload each part of the assessment as a separate file and title the files so it’s clear to see what part of the assessment they serve. Include your name in your documents on the first page, upper left.
Scenario Information
Read the scenario located in “Problems – Series A,” section 8-19A of Ch. 8, “Performance Evaluation,“ of Fundamentals of Managerial Accounting Concepts. This scenario puts you in charge of preparing a budget for the Redmond Management Association annual public relations luncheon.
Use Microsoft® Excel®—showing all work and formulas—to complete the following:
Mr. Snow was extremely upset with the budget deficit. He immediately called you, the treasurer, to complain about the budget variance for the meal cost. He told you that the added dessert caused the meal cost to be $4,810 ($25,110 – $20,300) over budget. He added, “I could expect a couple hundred dollars one way or the other, but several thousand is totally unacceptable. At the next budget meeting of the budget committee, I want you to explain what happened.”
Create a 6- to 8-slide presentation for the budget committee meeting showing your findings and recommendations from your computations.
Complete the following in your presentation:
Access the textbooks via McGraw-Hill Connect.Edmonds, T., Edmonds, C., Edmonds, M., & Olds, P. (2020). Managerial accounting concepts(9th ed.). McGraw-Hill Education.Kubasek, N., Browne, M. N., Herron, D., Dhooge, L., & Barkacs L. (2020). Dynamic business law (5th ed.). McGraw-Hill Education.
ACCCB/543 Competency 2 Assessment and Rubric
Course Title: Managerial Accounting and Legal Aspects of Business
Competency Assessment Title: Flexible Budget
Assignment Directions
Review the scenario and complete the activity below. This scenario can also be found in the “Problems – Series A” section 8-19A of Ch. 8,
“Performance Evaluation “of Fundamentals of Managerial Accounting Concepts.
Use Excel®—showing all work and formulas—to complete the following:
• Prepare a flexible budget.
• Compute the sales volume variance and the variable cost volume variances based on a comparison between the master budget and the
flexible budget.
• Compute flexible budget variances by comparing the flexible budget with the actual results.
Mr. Snow was extremely upset with the budget deficit. He immediately called you, the treasurer, to complain about the budget variance for the
meal cost. He told you that the added dessert caused the meal cost to be $4,810 ($25,110 – $20,300) over budget. He added, “I could expect a
couple hundred dollars one way or the other, but several thousand is totally unacceptable. At the next budget meeting of the budget committee, I
want you to explain what happened.”
Create a 6- to 8-slide presentation for the budget committee meeting showing your findings and recommendations from your computations.
Complete the following in your presentation:
• Summarize the results of the sales volume and variable cost volume variances computations based on the comparison between the
master budget and the flexible budget.
• Summarize the results of the flexible budget variances computations based on the comparison between the flexible budget and the actual
results.
• Justify the favorable or unfavorable budget variances.
• Since this is a not-for-profit organization, address why anyone should be concerned with meeting the budget.
• Make recommendations for what can be done differently to stay on budget for future luncheons. Provide specific examples to support your
recommendations.
• Include detailed speaker notes.
Copyright 2021 by University of Phoenix. All rights reserved.
ACCCB/543 Competency 2 Rubric
Page 2 of 3
Competency Assessment Rubric
Assignment/Performance
Criteria
Mastery
100%
Meets Expectations
85%
Not Met
0%
1. Flexible Budget
(weight 15%)
Created a flexible budget in
Excel, showing all work and
formulas, and all calculations
are correct.
Created a flexible budget in
Excel, showing most work
and formulas, and most
calculations are correct.
Created a flexible budget in Excel, showing
minimal work and formulas, and some
calculations are correct or did not create a flexible
budget.
2. Sales Volume and
Cost Volume Variances
(weight 15%)
In Excel, all components of
the computations of the sales
volume and variable cost
volume variances based on a
comparison between the
master budget and the
flexible budget were correct.
In Excel, most components of
the computations of the sales
volume and variable cost
volume variances based on a
comparison between the
master budget and the
flexible budget were correct.
In Excel, some components of the computations
of the sales volume and variable cost volume
variances based on a comparison between the
master budget and the flexible budget were
correct did not compute the sales volume and
variable cost volume variances based on a
comparison between the master budget and the
flexible budget.
3. Flexible Budget
Variance
(weight 15%)
In Excel, computation of
flexible budget variances
based on comparison
between the flexible budget
with the actual results was
completely correct.
In Excel, computation of
flexible budget variances
based on comparison
between the flexible budget
with the actual results was
mostly correct.
In Excel, computation of flexible budget variances
based on comparison between the flexible budget
with the actual results was somewhat correct or
did not compute flexible budget variances based
on comparison between the flexible budget with
the actual results.
4. Results: Sales Volume
and Variable Cost
Volume Variances
(weight 10%)
Thoroughly summarized the
results of the sales volume
and variable cost volume
variances computations
based on a comparison
between the master budget
and flexible budget from a
creative and innovative
perspective.
Partially summarized the
results of the sales volume
and variable cost volume
variances computations
based on a comparison
between the master budget
and flexible budget.
Narrowly summarized the results of the sales
volume and variable cost volume variances
computations based on a comparison between
the master budget and flexible budget or did not
summarize the results of the sales volume and
variable cost volume variances computations
based on a comparison between the master
budget and flexible budget.
Copyright 2021 by University of Phoenix. All rights reserved.
ACCCB/543 Competency 2 Rubric
Page 3 of 3
Assignment/Performance
Criteria
Mastery
100%
Meets Expectations
85%
Not Met
0%
5. Results: Flexible
Budget Variances
(weight 10%)
Thoroughly summarized the
results of the flexible budget
variances computations
based on a comparison
between the flexible budget
and actual results from a
creative and innovative
perspective.
Partially summarized the
results of the flexible budget
variances computations
based on a comparison
between the flexible budget
and actual results.
Narrowly summarized the results of the flexible
budget variances computations based on a
comparison between the flexible budget and
actual results or did not summarize the results of
the flexible budget variances computations based
on a comparison between the flexible budget and
actual result.
6. Justified Budget
Variances
(weight 10%)
Thoroughly justified the
favorable or unfavorable
budget variances from a
creative and innovative
perspective.
Partially justified the favorable
or unfavorable budget
variances.
Narrowly justified the favorable or unfavorable
budget variances or did not justify the favorable or
unfavorable budget variances.
7. Meeting the Budget
(weight 10%)
Thoroughly discussed why
someone should be
concerned with a not-for-profit
organization meeting the
budget from a creative and
innovative perspective.
Partially discussed why
someone should be
concerned with a not-for-profit
organization meeting the
budget.
Narrowly discussed why someone should be
concerned with a not-for-profit organization
meeting the budget or did not discuss why
someone should be concerned with a not-for-profit
organization meeting the budget.
8. Recommendations
(weight 15%)
Provided thorough, creative,
and innovative
recommendations for staying
on and supported all
recommendations with
examples.
Provided partial
recommendations for staying
on budget and supported
most recommendations with
examples.
Provided narrow recommendations for staying on
budget and supported some recommendations
with examples or did not provide
recommendations for staying on budget.
Copyright 2021 by University of Phoenix. All rights reserved.
ACC543
Hamza Eweedah
University Of Phoenix
04/28/2023
Introduction
• Investors rely on the internal rate of return and net present valuation to determine the economic benefits of
the target ventures (Arjunan, 2022).
• Donovan Enterprises intends to invest in one of the two projects:
• Project A
•
•
•
Automation machine investment
Useful life of 4 years
Annual cash flows of $126000
• Project B
•
•
•
Employees training
Annual cash flows of $52000
Desired return is 8% for the two projects.
• The NPV is an essential
Net present value
measure of the valuation of a
project (Arjunan, 2022).
• This analysis found that B has
a positive NPV.
• Projects with negative NPVs
are likely to result into losses.
• Project B has a higher NPV
than A.
Project A
Cash flow
PVIF
PV
$
(400,000.00)
1 $
$
126,000.00
0.926 $
$
126,000.00
0.857 $
$
126,000.00
0.794 $
$
126,000.00
0.735 $
NPV
$
Project B
Cash flow PVIF
PV
(400,000.00) -160000
1
-160000
116,676.00
52000 0.926
48152
107,982.00
52000 0.857
44564
100,044.00
52000 0.794
41288
92,610.00
52000 0.735
38220
(51,900.24)
$ 12,224.00
Selected project
• This analysis has revealed that B has a positive NPV.
• The NPV valuation for B imply that the investor will record a profit in four
years.
• The NPV for the two projects is:
• Project A $ (51,900.24)
• Project B $ 12,224.00
• Project A has a higher NPV and therefore, more appealing.
Internal rate of return analysis
• The internal rate of return is a metric for assessing the economic viability of a given
venture (Arjunan, 2022).
• This analysis considers the cash flows for the project in computing the IRR.
• Projects with a positive IRR are viable ventures because they are likely to record
profits.
• These outcomes are significant because:
• They determine the potential viability of a venture
• They outline the possibility of a project to earn profits
Selected project
• Project A has a positive IRR at a rate of 9.931039%.
• Project B has a positive IRR of 3.135267%.
• These observations show that:
• Project B has the capacity to generate profits.
• This project will lead to profits (Dai et al. 2022; Liu, 2022).
• Therefore, project A should be selected.
Preferred method of investment analysis
•
•
•
•
There are various methods that can be used in evaluating the ventures and their potential returns (Dai et al. 2022).
The IRR method
The NPV method
NPV is preferred when:
• Differing discount rates
• Irregular cash flows
• IRR is preferred when:
•
•
No discount rate
Comparing two or more ventures
• Therefore, the IRR is preferred in this project.
The most preferred investment
• In determining the best investment option, it is essential to consider the NPV and IRR
•
•
•
•
•
•
•
outcomes (Dai et al. 2022).
Project A
NPV: $(51,900.24)
IRR: 9.931039%
Project B
NPV: $12,224.00
IRR: 3.135267%
Project A has a higher IRR than B but a lower NPV.
Conclusion
• Investors must predict the viability of their selected ventures before
committing their finances.
• This assessment is achieved through two methods:
• The NPV
• The IRR
• These methods revealed that projects B will lead to profits.
• Donovan should invest in project A since it has a high IRR.
References
• Arjunan, K. (2022). A New Method to Estimate NPV and IRR from the Capital
Amortization Schedule and the Advantages of the New Method. Australasian
Accounting, Business and Finance Journal, 16(6), 23-44.
• Dai, H., Li, N., Wang, Y., & Zhao, X. (2022, March). The Analysis of Three Main
Investment Criteria: NPV IRR and Payback Period. In 2022 7th International
Conference on Financial Innovation and Economic Development (ICFIED 2022) (pp. 185189). Atlantis Press.
• Liu, X. (2022, December). NPV and IRR’s Comparative Analysis in Enterprises
Investment Decision Making. In 2022 2nd International Conference on Financial
Management and Economic Transition (FMET 2022) (pp. 157-165). Atlantis Press.
Project A
Period
Total
Net Present Value and Internal Rate of Return
R
8% Project B
cash flows ($)
Period
cash flows ($)
0
-400000
0
1
126000
1
2
126000
2
3
126000
3
4
126000
4
104000
Rate
-160000
52000
52000
52000
52000
48000
NPV
Project A
$16,044.43
Project B
$11,324.63
IRR
Project A
9.931039%
11.387928%
8% Project A
Cash flow
PVIF
PV
$
(400,000.00)
1 $
$
126,000.00
0.926 $
$
126,000.00
0.857 $
$
126,000.00
0.794 $
$
126,000.00
0.735 $
NPV
IRR
$
Project B
Cash flow PVIF
PV
(400,000.00) -160000
1
116,676.00
52000
0.926
107,982.00
52000
0.857
100,044.00
52000
0.794
92,610.00
52000
0.735
(51,900.24)
1.786344%
-160000
48152
44564
41288
38220
$ 12,224.00
3.135267%
1
Financial Analysis
University Of Phoenix
ACC543
Hamza Eweedah
04/26/2023
2
Financial Analysis
Capital investment decisions can be made more informed by understanding various
analytical techniques that managers can use. These include net present value, internal rate of
return, and the payback method; each has its own strengths and weaknesses, making it fit for the
investor’s specific objectives. In this way, maximum shareholder value is likely to be achieved. A
liquidity ratio can only help in short-term projects, while profitability ratios: helps the firm to
enhance its turnover and profit by meeting customer order fulfillment and operational level.
Managers use three analytical techniques to make capital investment decisions:
Net Present Value (NPV) is a technique used to calculate the present value of future cash
flows while considering the time value of money. NPV offers two key advantages: providing an
absolute dollar amount for the value of the investment and indicating whether the investment is
expected to yield a profit. Despite these benefits, determining future cash flows accurately can be
challenging, and NPV does not factor in the investment size. To illustrate, if a company is
evaluating a project with an initial investment of $40,000 that generates $10,000 in annual cash
flows for five years with a discount rate of 10%, then NPV will compute a figure of $4,023
which means that it is anticipated to be profitable. (McLaney & Atrill, 2017).
Internal Rate of Return (IRR) is a valuable tool when it comes to assessing investments
due to its provision of an exact percentage rate that can be compared to the required rate of
return. It is also beneficial in situations where cash flows are unevenly distributed over time.
However, IRR does come with certain drawbacks; for example, multiple rates may be generated,
making interpretation difficult and the assumption that reinvestment will happen at the same rate
as the IRR itself. To illustrate this concept, imagine a project with an initial investment of
3
$30,000 and year-by-year cash flows of $10,000, $12,000, $8,000, $9,000 and $11,000. Through
calculation via a financial calculator or Excel spreadsheet software, the IRR comes out at 11.8%.
There is a disadvantage to IRR in that it produces multiple rates of return. For example, if
the cash flow for the project in the above example were $10,000, $12,000, -$8,000, $9,000, and
$11,000, respectively, the IRR would produce two possible rates of return, 25% and -14%. This
makes the IRR less helpful in making investment decisions in this case.
Method of payment: (Kubasek, et al. 2020)
The payback method is a capital investment technique for calculating the amount of time
it takes for an investment to recover its initial costThis approach has some benefits, such as being
easy to understand and calculate. Additionally, it prioritizes liquidity, promoting investments
with faster turnaround times. However, on the downside, it needs to consider the time worth of
cash, which may lead to inaccurate outcomes.
The payback method has the advantage of being easy to calculate and understand. This
makes it an ideal tool for small businesses or investors who need more resources to make more
sophisticated capital investments. In addition to emphasizing the importance of liquidity, the
payback method emphasizes investment liquidity. Shorter payback periods make investments
more liquid, so they can be converted to cash if required. ( Drake, 2019).
Overall, financial statement analysis and capital investment techniques are valuable tools
for managers to use when making informed decisions about a company’s future. Financial ratios
are essential for analyzing a company’s financial performance, allowing users to compare
different aspects of the company’s operations. Managers can use these ratios to assess a
company’s liquidity, profitability, and solvency. (Graham & Harvey, 2021)
4
References
Drake, P. (2019). Financial Literacy and Investment Education: A Public Service Approach.
Springer.
Graham, J., & Harvey, C. (2021). The theory and practice of corporate finance: Evidence from
the field. Journal of Financial Economics, 60(2-3), 187-243.
Kubasek, N., Browne, M. N., Herron, D., Dhooge, L., & Barkacs L. (2020). Dynamic business
law (5th ed.). McGraw-Hill Education.
McLaney, E. J., & Atrill, P. (2017). Accounting and finance: An introduction. Pearson Education.
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