Assignment
Diploma in Management Level 5
4.9 Finance for Managers
Unit level 4, Credit value: 15
You are employed in a financial consultancy and one of your clients is a relatively new company that is
facing rapid growth. As they began as a small family business, they have not had the level of financial
control that would be expected in a business of their current size. The management team is looking to
employ an accountant. Before taking this step they need to understand the reasons for recording and
reporting financial information, the legal responsibilities they have in this respect and the usefulness of
financial information. They also require some specific help in relation to working capital and in respect
of a new project they are considering.
You should assume the business is incorporated, that is, in Malta as a limited company. Your answer
should be based on Maltese law and regulations.
You are required to produce a written document for the board of directors that answers their questions
about accounting and financial control and to produce some calculations in respect of figures they have
provided.
Task 1
Produce a written document for the board of directors that:
Explain the purpose and requirements for keeping financial records
Analyses the techniques for recording financial information
Analyses the legal and organisational requirements of financial reporting
Evaluate the usefulness of financial statements to stakeholders
Explain the difference between management and financial accounting
Explain the budgetary control process
Evaluate the use of different costing methods used for pricing purposes
This task covers Assessment Criteria 1.1, 1.2, 1.3, 1.4, 3.1, 3.2 and 3.4
Suggested evidence: Answers should give comprehensive explanations in all areas and give an accurate
reflection of the legal and regulatory requirements in relation to financial recording and reporting. You
should assess the usefulness of the financial statements to different groups of stakeholders considering
the purpose of the statements and explain why management accounting information is more effective
for management purposes.
Malta Business School | The Penthouse | Sean Building | Psaila Street | B’Kara BKR 9078| Malta
www.mbs.edu.mt |info@mbs.com.mt
Task 2
The business carried out some calculations on set up and the following information relating to their
main product was produced:
€ €
Sales Revenue 62
Direct labour 22
Direct materials (1kg) 20
Fixed overheads 6
Standard profit 14
The budgeted output for last month was 1,000 units of this product. Actual output was 1,100 units
which were sold for €69,900. The actual production costs were:
€
Direct labour (1075 hours) 24,420
Direct materials (1175kg) 23,260
Fixed overheads 6,400
There were no inventories at the start or the end of the month.
You are required to calculate the variances for the month from the available information, and use them
to reconcile the budgeted and actual profit figures. You should produce a document that indentifies and
explains the variances and reconciles the actual and budget profit figures. You should indentify further
information required that would help to further explain variances.
This task covers Assessment Criteria 3.3.
Suggested evidence: Answers should detail sales, direct labour, direct material and fixed overhead
variances and include a reconciliation of budgeted and actual profits. Adverse and favorable variances
should be identified. There should be a comprehensive explanation of variances and how they have
arisen including identifying further information needed to fully explain variances e.g. why material price
might have changed etc.
Malta Business School | The Penthouse | Sean Building | Psaila Street | B’Kara BKR 9078| Malta
www.mbs.edu.mt |info@mbs.com.mt
Task 3
The directors have the opportunity to invest in one of two new projects. Both projects involve the
acquisition of new machinery. The figures for the projects are as follows:
Project 1 Project 2
€ €
Cost (will be incurred immediately) 200,000 120,000
Expected annual profits/losses
Year 1 58,000 36,000
Year 2 2,000 4,000
Year 3 4,000 8,000
Estimated scrap value of machinery 14,000 12,000
The business has an estimated cost of capital of 10%. They use a straight line method of depreciation for
non-current assets to calculate operating profit. The business has sufficient funds to meet the capital
expenditure requirements.
For each project calculate:
A. Accounting rate of return
B. Payback
C. Net present value
D. Internal rate of return
You must demonstrate the main methods of project appraisal. Produce a document setting out your
findings and the assumptions on which calculations are based. Evaluate each method of project
appraisal and make a recommendation to the board as to which project they should invest in.
The board thinks that they might like to raise money to enable them to invest in both projects. Explain
to the board how they might obtain finance for a business project. In addition analyse the components
of working capital and explain how the company can better manage their working capital so that they
could finance both projects.
This task covers Assessment Criteria 4.1, 4.2, 4.3, 2.1, 2.2.
Suggested evidence: Answers should give calculated investment measures for each project with an
explanation of any assumptions made. There should be an evaluation of the methods pointing out the
strengths and the weaknesses of each method. Answers should include a clear recommendation and the
basis on which it is made.
Documents should set out and explain options for borrowing money and how the business may go about
this. An explanation of working capital and its components should be included together with a brief
explanation about how working capital might be manipulated to release funds.
Malta Business School | The Penthouse | Sean Building | Psaila Street | B’Kara BKR 9078| Malta
www.mbs.edu.mt |info@mbs.com.mt
Guidelines for assessment
Assignment Structure
The following are guidelines for the correct presentation of your assignment:
1. You must include a Title page which includes your name and surname, your student ID number,
the Unit name and number and the word count of your assignment.
2. Your assignment must include page numbers. It is suggested that you include your name and
surname in the footer in every page.
3. Your assignment must include a ‘Table of Contents’. This will be page 2 of your assignment. The
‘Table of Contents’ must include a list with headings (and sub-headings if appropriate) in
numerical order.
4. You must include an ‘Executive Summary’ or ‘Introduction’ on page 3. This is the start of the
assignment and should include relevant details as per this assignment brief.
5. Following the different sections asked of you from the assignment brief it is expected that you
include a list of references. References should be cited according to the Harvard Referencing
System. Please refer to your ‘MBS Notes for Academic referencing’ guide found on your online
learning space.
6. The last section of the assignment is the ‘Appendix’ which should include only relevant material.
7. Care must be taken to write grammatically correct English language.
