Anthony Unit 2 5 Final Project Essay

3678 Words Nov 28th, 2014 15 Pages
Consultancy Report for Anthony’s Orchard

Section 1 : Financial Analysis

An accurate view over the current financial state of Anthony’s Orchard is given by the value of the financial ratios.
The financial ratios are calculated based on the 2011’s income statement and based on 2011’s Cash Flow. a. Financial ratios based on the Income Statement:

Gross Margin – Overall, the gross margin registered in 2011 reaches 17% which indicates that the company is using efficiently its resources and it has a strict control of its costs.
Analizing the gross margin splited by each one of the three most important activities of Anthony’s
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Cost-Volume-Profit analyse

Quarter 1
Quarter 2
Quarter 3
Quarter 4
Full Year
Direct Labor costs
$302,670.00
$302,670.00
$302,670.00
$0.00
$908,010.00
Direct materials costs
$0.00
$0.00
$0.00
$0.00
$8.017.892
Other ingredients
$27,867.00
$27,867.00
$27,867.00
$0.00
$83,601.00
Variable overheads
$513,000.00
$513,000.00
$513,000.00
$0.00
$1,539,000.00
Fixed factory overhead
$162,500.00
$162,500.00
$162,500.00
$162,500.00
$650,000.00

The cost-volume-profit analysis is a form of cost accounting and an important part of this analyses is the break-even point.
Anthony’s Orchard is using CVP analysis to measure how changes in costs and volume affect its net incomes and operating incomes .
The break-even point is the point where the company will not register incomes or loss (net incomes equals 0 ).

Fixed costs= Fixed Factory overhead = 650,000

Variable costs= Direct labor costs + Direct materials costs + Other ingredients + Variable overheads = 10,548,503

Contribution per unit= Sales revenue per unit – variable costs per unit
Sales revenues per unit= Sales revenue/ Production = 11,005,208/190,000 =57,92
Variable costs per unit= Variable costs/Production= 10,548,503/190,000= 55,52

BEP (break-even point) = Fixed costs per period/Contribution per unit= 650,000 / (57,92 – 55,52) = 650,000/ 2,40 = 270,833.30

Section 2 : Analysis of the Investment

a. Evaluating how a major customer of Anthony’s Orchard cancelling its order can affect the budgeted

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