Write a Business Plan

Accounting and Finance for Managers Assessment Portfolio 1: Individual CVP Analysis Report (2000 words) Investors and creditors frequently use CVP Analysis to screen business plans by evaluating a firm’s cost structure and sales volume needed to generate profit. Suppose you are planning to open a “Bed and Breakfast” accommodation, you are expected to determine all relevant financial data and prepare a CVP analysis. Prepare your analysis as an authentic business report using the format guidelines below; please refer to CALS for further information. Executive Summary Provide a maximum one-page summary, include a snapshot of the results you calculated in your analysis and your recommendations based on these results.   Introduction Provide a brief introduction to your report including a short summary of the business and activities, as key background/context. Key business assumptions All room prices below include “Bed and Breakfast”, list all key assumptions for your business and prepare the following table: Key assumption Value Location Room price: Deluxe Room price: Standard Occupancy %: Deluxe Occupancy %: Standard Number of Deluxe rooms Number of Standard rooms Business start up costs Start up depreciation (20%) All these key assumptions are to be carefully researched and correctly referenced including defining which months of the year are high, shoulder and low season. Carefully consider the differences in price and costs of a Deluxe and Standard room. Identify and classify all relevant costs Identify and classify all relevant costs that your business is likely to incur, as the business is a new start up, prepare the following table: Product costs Period Costs Direct material Direct labour Overhead Selling Administration Identify each cost and classify as variable, fixed or mixed cost, list the total cost in dollars. Develop one or two paragraphs about each set of costs, explaining the behaviour and purpose of each cost. For each of your expected costs, estimate variable cost per unit and total fixed cost. For mixed costs, be sure to identify variable and fixed cost components.   CVP analysis Complete your CVP analysis, clearly explaining what each means, assume tax rate is 30%: 1. What is the Weighted Average Selling Price (WASP) per unit? 2. What is the Weighted Average Contribution Margin (WACM) per unit? 3. What is the Contribution Margin Ratio (CMR)? 4. What is the total fixed cost? 5. What is sales volume, in units, at breakeven point? 6. What is sales volume, in dollars, at break-even point? 7. Show breakeven points graphically. 8. Perform “what if” analysis of breakeven by considering the following: (i) Decreasing fixed cost by 5% (ii) Decreasing variable costs by 5% (iii) Increasing selling price by 5% 9. What are the Operating Leverage and Safety Margin for your business? Carefully explain what this means in terms of the risk to your business. 10. Calculate sales needed to earn an after tax profit of $70,000. Carefully explain if $70,000 is realistic, if not, what would be a more realistic after tax target profit? Conclusions, observations and recommendations Conclude all the findings of your analysis; address the fixed costs, variable costs and income statement, CVP analysis, contribution margin etc. Discuss critically key results that would impact on your business future decision-making, including explaining how you could improve your business by making any changes.