Need it today

Topic-1

Jane, a friend of yours, has informed you that she is planning to set up a coffee shop.  You have advised her to be cautious, as the coffee market appears to be very competitive.  She agrees, but says that she has a strategy to help ensure that her business does not make a loss.  She stated: “I am going to work out the exact full cost of making one cup of each type of coffee and then set my prices to ensure that this cost is fully recovered, along with a profit margin”.

In further discussion with Jane, she provided the following additional information regarding her business plan:

·         The business will operate from rented premises, with a fixed rental cost per month, and be responsible for heating and electricity costs.

·         A coffee machine and related equipment will be purchased, along with furniture and sufficient coffee cups, saucers, spoons etc.

·         Jane will work in the business, but plans to hire additional staff to work on a casual basis during busy periods.

·         Suppliers have been identified to supply the business with coffee, milk and other supplies at prevailing market prices.

·         Some advertising will be undertaken, in local newspapers and on local radio, at least while the business is getting established.

·         A public liability insurance policy will be taken out to cover risks such as accidents involving customers and staff.

Required:

1.    Discuss the difficulties associated with Jane’s plan to “work out the exact full cost of making one cup of each type of coffee”.  (7 marks)

2.    Jane intends to set prices “to ensure that ... cost is fully recovered, along with a profit margin”.  What type of pricing model is Jane adopting and what difficulties may arise in trying to implement her pricing strategy?  (3 marks)

3.    In light of your responses to Questions 1 and 2, what practical advice would you give to Jane to help her business be successful?  Your answer should be based upon the material covered in BUACC5933 Cost and Management Accounting.  (5 marks)

Topic 2: Essay

According to the prescribed textbook, “corporate social responsibility considers a company’s efforts to employ sustainable business practices with regard to its employees and the environment” (p. 21).  Using examples to illustrate your discussion, explain how a knowledge of corporate social responsibility is important for today’s management accountants and how it may influence their work.