Case Study Report on Sunny Horizons Ltd.

Task:

You are required to read the following case study then prepare the report requested.

Case Study

In 1975, Graham Sun started up in business in the UK selling quality, hand-made wooden garden benches. The products were in great demand and within a year Graham had expanded his product range to include a set comprising a table and chairs. In 1985 Graham incorporated his business and has been trading since then as Sunny Horizons Ltd. The company has continued to grow and now employs 50 people, manufacturing a large range of garden furniture.

Graham is still heavily involved in the business although he has been joined by his Son and Daughter who are also involved with decision making although to a lesser extent than Graham who has the final say on all matters. Graham tends to make business decisions based on whether he has a good feeling about the matter at hand. He deals with the same suppliers as he has done for many years in order to obtain quality raw materials. He claims not to be interested in cost as it’s the quality that’s important. He sets product prices based on what he would be happy to pay. Demand for the products is high; sales are limited by the number of products which can be produced. The premises are at full capacity.

The business has operated out of the same rented premises since 1990. Rent has increased every year since and despite it being above market rate, Graham hasn’t asked for a reduction as he plays golf with the Landlord every Friday afternoon and doesn’t want to upset him.

The organisation doesn’t have a formal budgeting process. Graham checks the bank balance every Monday morning and is happy as long as there is money in the bank. He has known many of the employees for a long time, trusts them implicitly and doesn’t think they need budgets to make them perform at their best.

The financial records are maintained on a simple computer package by the office administrator. These are sent to the company’s accountant once a year in order for the year-end Financial Statements to be produced. Graham always looks forward to seeing these so that he can see how much profit has been made.

As Graham is reaching retirement age, his children are keen to be more involved in the business and implement some new ways of making decisions. They are also keen to expand the business by growing sales in the current market and diversifying into new product lines.

Required

You have been approached by Graham’s daughter, Angela, who would like you to prepare a report for her and her brother, David, to discuss with Graham. She would like the report to address the following:

1.Budgeting
Angela would like to implement a formal budgeting process within the organisation. She is aware that her father will be reluctant to start using budgeting and would like a report which will present the advantages which it will bring to the organisation. In the interest of fairness, she would also like the report to address any negative aspects of budgeting which may affect the organisation.

Angela is a keen academic, having studied at University. She would like the report to contain references to academic sources so that she can find out more detail if required.

2.Use of Management Accounting Information

In addition to Budgeting, Angela would like her father to understand how the use of other management accounting information would help direct the business. She would like the report to give examples of areas in the organisation where decision making could be improved by using management accounting information and techniques.

Angela has made some suggestions for discussion including:

The use of Cost Information
Pricing Decisions
Appraising Capital Investment Projects

You do not have to consider all of these areas; you may have other points you think are relevant. Angela is simply keen that the report initiates some dialogue with her father about the impact financial information can have on decision making and control.

Detailed Requirements:

1.The work is to be carried out individually and independently – you should neither seek nor accept any advice or guidance from anyone other than the Module Coordinator.

2.Your report should be approximately 2,500 words; the word count should be clearly shown on the front cover of your submission. Table 1 provides details of what is, and is not, included in the word count.

3.Please present your work using the either the Calibri or Verdana font, size 11, double spaced.

Students are required to make themselves familiar with the University policies on Academic Misconduct and Plagiarism.  These are available in Academic Regulations and also via the Library website.