Memo Assignment | Get Paper Help

Use the spreadsheet to inform your responses in the business memorandum. Include examples from it to put into the memo. Uploaded is the instructions and the spreadsheet.

Style: APA

Number of pages: 3 pages/double spaced (825 words)

Number of source/references: 5

 FIN30146 – Allocating Resources  Note: Feel free to change numbers in YELLOW cells.
 West Bay Restaurant Supply, Inc.
 OPERATING AND CAPITAL BUDGET SUMMARY – 2019
 Unaudited; amounts in thousands except per Share. Variances are Better or (Worse)
 CURRENT YEAR ACTUAL OR FORECAST  NEXT YEAR’S BUDGET  YEAR-OVER-YEAR BETTER OR (WORSE)
 Qtr 1  Qtr 2  Qtr 3  Qtr 4  Full Yr  Qtr 1  Qtr 2  Qtr 3  Qtr 4  Full Yr  Qtr 1  Qtr 2  Qtr 3  Qtr 4  Full Yr  NOTES
 OPERATING BUDGET SUMMARY
 REVENUE
 Product 1  $       900.0  $       650.0  $       900.0  $       750.0  $   3,200.0  $       840.0  $       950.0  $       950.0  $       950.0  $   3,690.0               (7)%              46 %                 6 %              27 %               15 %
 Product 2            600.0            500.0            400.0            350.0         1,850.0            300.0            250.0            200.0             150.0            900.0            (50)%            (50)%            (50)%            (57)%             (51)%
 Installation & Service            300.0            500.0            275.0            400.0         1,475.0            390.9            390.9            390.9            390.9         1,563.5              30 %            (22)%              42 %               (2)%                 6 %
 TOTAL REVENUE         1,800.0         1,650.0         1,575.0         1,500.0        6,525.0         1,530.9         1,590.9         1,540.9         1,490.9         6,153.5             (15)%               (4)%               (2)%                (1)%               (6)%
 MFG & SERVICE COSTS
 Variable            900.0            825.0            787.5            750.0        3,262.5            765.4            795.4            770.4            745.4        3,076.8               15 %                 4 %                 2 %                  1 %                 6 %
 Fixed (e.g., Rent)             100.0             100.0             100.0             100.0            400.0             104.5             104.5             104.5             104.5             418.0               (5)%               (5)%               (5)%               (5)%               (5)%
 Gross Expenses         1,000.0            925.0            887.5            850.0        3,662.5            956.8            956.8            956.8            956.8        3,827.3                 4 %               (3)%               (8)%             (13)%               (4)%
 GROSS INCOME            800.0            725.0            687.5            650.0        2,862.5            574.0            634.0            584.0            534.0        2,326.2            (28)%             (13)%             (15)%             (18)%             (19)%
 Sales & Marketing              40.0              40.0              40.0              40.0             160.0               41.6               41.6               41.6               41.6             166.4               (4)%               (4)%               (4)%               (4)%               (4)%
 Mgmt & Admin            250.0            250.0            250.0            250.0         1,000.0            265.0            265.0            265.0            265.0         1,060.0               (6)%               (6)%               (6)%               (6)%               (6)%
 TOTAL OP EXPENSES        2,090.0         1,940.0         1,865.0         1,790.0        7,685.0         1,837.5         1,897.5         1,847.5         1,797.5        7,379.9               12 %                 2 %                  1 %               (0)%                 4 %
 OP INCOME             510.0            435.0            397.5            360.0         1,702.5            267.4            327.4            277.4            227.4         1,099.8            (48)%            (25)%            (30)%            (37)%            (35)%
 Interest Inc or (Exp)            (60.0)            (60.0)            (60.0)            (60.0)          (240.0)             (61.8)             (61.8)             (61.8)             (61.8)          (247.2)               (3)%               (3)%               (3)%               (3)%               (3)%
 Other Income or (Expense)                   –                   –                   –                   –                   –                   –                   –                   –                   –                   –                 –  %                 –  %                 –  %                 –  %                 –  %
 PRETAX INCOME            450.0            375.0            337.5            300.0         1,462.5            205.6            265.6             215.6             165.6            852.6            (54)%            (29)%            (36)%            (45)%            (42)%
 Income Tax Rate %            21.0 %            21.0 %            21.0 %            21.0 %            21.0 %            21.0 %            21.0 %            21.0 %                 –  %                 –  %                 –  %                 –  %                 –  %
 Income Tax (Expense)            (94.5)            (78.8)            (70.9)            (63.0)           (307.1)            (43.2)            (55.8)            (45.3)            (34.8)           (179.0)              54 %              29 %              36 %              45 %              42 %
 NET INCOME            355.5            296.3            266.6            237.0          1,155.4             162.5            209.9             170.4             130.9            673.5            (54)%            (29)%            (36)%            (45)%            (42)%
 Shares Outstanding             100.0             100.0             100.0             100.0             100.0             100.0             100.0             100.0                 –  %                 –  %                 –  %                 –  %                 –  %
 EARNINGS/SHARE  $         3.56  $         2.96  $         2.67  $         2.37  $              –  $          1.62  $          2.10  $          1.70  $           1.31  $              –            (54)%            (29)%            (36)%            (45)%                 –  %
 Gross Margin %           44.4 %           43.9 %           43.7 %           43.3 %           43.9 %           37.5 %           39.9 %           37.9 %           35.8 %           37.8 %             (16)%               (9)%             (13)%             (17)%             (14)%  Gross Margin = Gross Income / Revenue
 Operating Margin %           28.3 %           26.4 %           25.2 %           24.0 %            26.1 %            17.5 %           20.6 %            18.0 %            15.3 %            17.9 %            (38)%            (22)%            (29)%            (36)%            (32)%  Operating Margin = Operating Income / Revenue
 Net Income Margin %            19.8 %            18.0 %            16.9 %            15.8 %            17.7 %            10.6 %            13.2 %              11.1 %             8.8 %            10.9 %            (46)%            (27)%            (35)%            (44)%            (38)%  Net Income Margin = Net Income / Revenue
 CAPITAL BUDGET SUMMARY (PARTIAL)
 CAPITAL EXPENDITURES (Replacements + New)  Capital expenditures are cash outlays (not accounting expenses). They might
 Buildings  $              –  $              –  $              –  $              –  $              –  $              –  $              –  $              –  $              –  $              –                 –  %                 –  %                 –  %                 –  %                 –  %     be funded from internal funds, or bank loans, bonds, or other sources.
 Machinery & Equipment                   –             100.0                   –                   –             100.0                   –             100.0                   –                   –             100.0                 –  %                 –  %                 –  %                 –  %                 –  %
 Furniture & Fixtures                   –              40.0              25.0              25.0              90.0               10.0                   –                   –              35.0              45.0                 –  %             100 %             100 %            (40)%              50 %
 Capitalized Software                   –               15.0               15.0               15.0              45.0               15.0               15.0               15.0               15.0              60.0                 –  %                 –  %                 –  %                 –  %            (33)%
 Other Intangibles                   –                   –                   –                   –                   –                   –                   –                   –                   –                   –                 –  %                 –  %                 –  %                 –  %                 –  %
 TOTAL CAPEX                   –             155.0              40.0              40.0            235.0              25.0              115.0               15.0              50.0            205.0                 –  %              26 %              63 %            (25)%               13 %
 DEPRECIATION AND AMORTIZATION EXPENSE (NON-CASH)  Depreciation (of assets) and amortization (of liabilities) are non-cash expenses.
 Buildings  $              –  $              –  $              –  $              –  $              –  $              –  $              –  $              –  $              –  $              –                 –  %                 –  %                 –  %                 –  %                 –  %
 Machinery & Equipment                   –               14.3               14.3               14.3              42.9               14.3              28.6              28.6              28.6             100.0                 –  %           (100)%           (100)%           (100)%           (133)%
 Furniture & Fixtures                   –                 5.7                 9.3               12.9              27.9               14.3               14.3               14.3               19.3               62.1                 –  %           (150)%            (54)%            (50)%           (123)%
 Computer Software                   –                 5.0               10.0               15.0              30.0              20.0              25.0              30.0              35.0              110.0                 –  %          (400)%          (200)%           (133)%          (267)%
 Other Intangibles                   –                   –                   –                   –                   –                   –                   –                   –                   –                   –                 –  %                 –  %                 –  %                 –  %                 –  %
 TOTAL D&A                   –              25.0              33.6               42.1             100.7              48.6              67.9              72.9              82.9             272.1                 –  %            (171)%            (117)%            (97)%           (170)%

In this project, you will demonstrate your mastery of the following competency:

  • Allocate resources effectively through the evaluation of financing decisions

Scenario

West Bay Restaurant Supply

Company Overview

West Bay Restaurant Supply distributes and ships commercial restaurant supplies such as ovens, fryers, industrial refrigerators, warmers and dishwashers, as well as restaurant furniture and fixtures within the U.S. They operate as a Business to Business (B2B) entity, and they currently serve 500 small businesses, including restaurants and cafeterias. In addition, they install and service the equipment and provide training to ensure proper use of the equipment.

In your role as the finance manager, you support upper management with budgeting, financial planning, and analysis. You examine targets, performance compared with those targets, and relevant external information such as market forces. You provide a financial perspective to the senior management team, which they combine with insights from other functions such as sales, operations, marketing, and human resources. The end result should be the best short-term and long-term resource allocation decisions for the company.

The company’s president, Brooke Myers, asked you to prepare an analysis and recommendation to help the senior management team make two important decisions, both involving substantial upfront costs and commitments. She would like to see a business memorandum including appropriate financial reports. Your memorandum should explain your observations based on the available information, but it should also identify additional information that would be useful for making the final decisions.

Investment Decision 1: Sales force hiring and training

Should the company recruit, hire, and train 50 more salespeople (in addition to the 100 it currently has) in anticipation of a large expected increase in demand? On average, salespeople are paid $12 per hour with 30% commission. If the demand materializes, West Bay Restaurant Supply can take advantage of it to grow its revenue and profit. If the demand falls short, the company will lose money on the decision.

Investment Decision 2: Energy management system

The company wants to minimize its energy usage to minimize costs as well as to support its corporate social responsibility (CSR) goals. While the management team recognizes that there are substantial upfront costs involved in an energy management system, this investment should reduce energy costs in the long run. There would be an upfront cost of $50,000 for installation and training for the new energy management system. It is estimated that the energy management system would save the company $10,000 per year in energy costs.

Financial Information

Review the Financial Information document to see the company’s financial information.

Directions

President Myers has requested that you describe the operating budget process in a business recommendations memorandum that explains the implications of the financial information and provides recommendations.

Spreadsheet: An accountant in your department provided the financial information. You will use this information to support your business recommendations memorandum.

Review the following:
Quarterly operating budget
Quarterly capital budget for the upcoming calendar year

Business recommendations memorandum: In addition to reporting key takeaways about the company’s basic financial health, president Myers has requested that you choose one of the options they are considering for the upcoming year and discuss why it would be the best decision based on financial information and resource allocation approaches.

  • Highlight 3-5 key takeaways from the operating budget for their impact on resource allocation. Use financial information to support your response. Include the following:
    • How should management use this information in informing financing and resource allocation decisions?
  • Explain basic concepts of capital budgeting for informing resource allocation strategies Include the following in your explanation:
    • Explain cash inflows and outflows as they relate to operating budgets.
    • Briefly explain how a capital budget is related to an operating budget.
    • Discuss the company’s financial status in terms of its ability to meet short- and long-term obligations.
  • Recommend appropriate investment decisions based on discounted cash flow calculations. Include the following in your response:
    • How does the company’s time value of money (TVM) information inform resource allocation decisions? Consider factors such as net present value (NPV), present and future values, and discount rates.
    • Are there any changes the company should make related to resource allocation strategies based on discounted cash flow information?
  • Determine the best opportunity for ROI based on the company’s current considerations and financial information. Include the following:
    • How does ROI inform strategies related to resource allocation?

What to Submit

The owners have asked you to write a business recommendations memorandum that encapsulates key takeaways from the financial information and makes a recommendation about the best course of action to move the company forward based on financial information.

Every project has a deliverable or deliverables—these are the files that you must submit before your project can be assessed. For this project, you’ll need to submit the following:

Business Recommendations Memorandum
Your memorandum should be approximately 3-5 pages in length. Please attach the provided spreadsheet with financial information as well.

Memo must include:

  • Highlights key takeaways from the operating budget for its impact on resource allocation using financial information to support responses. Includes how management should use this information in informing financing and resource allocation decisions
  • Explains basic concepts of capital budgeting for informing resource allocation strategies. Explains the cash inflows and outflows and capital budgeting as it relates to operating budgets and discusses the company’s financial status
  • Recommends appropriate investment decisions based on discounted cash flow calculations. Explains strategies for resource allocation based on (TVM), (NPV), present and future values and discount rates, and identifies changes the company should make
  • Determines the best opportunity for ROI based on the company’s current considerations and financial information. Includes how ROI informs strategies related to resource allocation
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