Management accounting - Essay Example

Download file to see previous pages... This is a growing market as evident from the fact that £ 85 billion is spent annually on UK tourism, especially London. About 50 % of this is by overseas visitors and the rest are by UK residents in day trips and staying away from home (UK-Culture, 2007). The book will be marketed to both the tourists and business visitors alike, as business tourism is also becoming increasingly common. In 2005, business tourism accounted to about 8 million visits to London (UK-Culture, 2007).
The shareholders of the company will invest £ 5,000 for the company. Another £ 30,000 will be taken as a long term loan from the family with instalment payments starting from the third year with a standard rate of 0 % and in a period of 9 years. A loan of £ 25,000 from NatWest bank will be availed at an interest rate of 6.4 % APR.
The estimated sales for the initial year of operations are about 6,173 units. This amounts to an average sale of 515 units per month in the first year. The tourist industry in London is always active and the company estimates to sell all of the 515 units produced in the month irrespective of the season. The sales volume is presented in Appendix 2.
The cash for the sales made in the month are collected within the end of the month (i.e., within a maximum period of 30 days). This way, the company will be able to maintain effective liquidity. The suppliers will be paid in two instalments, 50 % on purchase date and the remaining 50 % after 30 days.
The books will be made based on a just in time strategy, thus reducing the inventory to zero. This will enable the company to effectively safe on storage costs as well. A total of 6,173 units will be sold in the first year and there will not be any closing stock in the monthly budget, as all the 525 units manufactured in the month will be sold. The initial inventory will be zero at start ...Download file to see next pagesRead More