Managing Financial Resources and Decisions 2 Essay

Managing Financial Resources and Decisions 2 - Essay Example Not only this, cash budget also assists the financial manager about the cash balances at the beginning and closing of any period. In case if the business wish to make any non-routine expenditure, cash budget can help in meeting this cause. In case of any cash shortages, overdraft facility from the bank can be arranged in or order to meet the necessary expenditures of the business. b) In order to calculate the price per batch of the ice creams the individual cost per batch in terms of material, labour and overheads are estimated. Direct material and labour calculations are relatively simpler than factory overhead. For factory overheads, the cost of service department is absorbed into the cost of factory departments and apportioned on the basis of floor area in sq. m. Factory overhead rate is then computed in order to calculate the factory overhead per batch. The total cost of producing a batch of ice creams is found to be $371. Therefore, the selling price of the batch should be in between $500 and $600 range giving a profit of at least 25%. d) The following is the investment appraisal calculation in which the appraisal of the new project is made. NPV, IRR, Payback, and ARR are calculated in order to check out the viability of the project. From the above calculations, it can be observed that all the investment appraisal techniques reflect that the project is not viable at all. The initial investment of the project, which is $4,000, cannot be recovered in the project’s life. Negative Net Present Value also shows that the project will not enhance the overall cash flows of the company. Internal rate of Return is also quite negative, which suggests that the project is unable to provide healthy returns to the shareholders. Accounting rate of return is also negative which means that project will not increase the overall income of the