Sheffield Aerospace Materials Finance Report

Sheffield Aerospace Materials is a medium sized firm based in the advanced manufacturing parkway just outside the city centre. The firms managing director Richard Byrd has asked for your help in selecting the firms future strategy and direction.

After 5 years of research and development the firm has 5 products they are investigating and will launch to the market.

Below is a full set of accounts for Sheffield Aerospace Materials for the year to 31^stOctober listed as Appendix 1.

Mr Byrd the managing director would like you to prepare a report which answers the following questions.

1. Explain the role and function of the Finance Director/Finance Manager providing a clear explanation of the role of Financial Accounting and Management Accounting. (15 % weighting)

2. Critically explain the meaning of Risk and Return for Sheffield Aerospace Materials and the Time Value of Money (15 % weighting)

Questions 3 to 4 are based on appendix 2 the Key Product Information sheet.

Using the information in Appendix 2.

3. Calculate:
   1. The contribution per unit
   2. The break-even point and the margin of safety
   3. The required number of units to hit target profit.

Clearly explain each figure you have calculated and what this means for the firm.

1. If the firm makes the target profit based on estimated sales and the addition information in appendix two produce a revised Statement of Financial Position. (30 % weighting)

4. Calculate the Payback Period and Net Present Value for the product? (15 % weighting)

5. Critically evaluate if the product is viable for Sheffield Aerospace Materials and evaluate the advantages and disadvantages of the two investment appraisal methods. (15 % weighting)

10% of the mark to be awarded for presentation of your report, clarity of financial information provided and referencing to the APA standard.

Word Limit 2000

Required:

You must produce an individual report. Submission before 3pm on 4^thJan 2023. Disclosure there are 5 scenarios. Only produce the workings for the scenario you are assigned. Failure to submit work relating to your scenario will achieve zero.

APPENDIX 1 Financial Statements

Income Statement for Sheffield Aerospace Materials for the year ended 31^stOctober 2022.

Statement of Financial Position for Sheffield Aerospace Materials as at 31^stOctober 2022.

APPENDIX 2 Key Product Information Sheet

Information relating to Scenario 1 Product Epsilon

Estimated Sales 8,500 units

Selling price per unit 175

Direct Material Costs 65 per unit

Selling Costs 435,000

Admin Costs 225,000

Production Capacity 9,500 units

Accounting Additional Information

Additional information related to Sheffield Aerospace Materials required to update the Statement of Financial Position:

Increase in land and buildings 800,000

Increase in trade payables 250,000

Loan obtained on 1^stNovember for 275,0000

Additional Profit xxxx (to be calculated based on revenues and costs above)

Assumptions

There will be no change in the cash balance held by the company. There will also be no change to the level of trade receivables

Tax can be ignored.

Investment Appraisal Additional Information

Total Investment 1,050,000

Assume Total Revenues of 1,487,500 per year, Direct costs 552,500 , Selling Costs of 435,000 and Admin costs of 225,000

The finance director has estimated the cost of capital is 11% and the product would be on sale for 5 years.