Description

You were recently hired as management director of the new I Can Business Incorporated (ICBI). You have been asked to establish policies and systems for the business. The first one you choose to work on is a financial reporting system. For this assignment, you must develop a 4-5 page memo that you will deliver to the board of directors of ICBI. You will describe what a financial reporting system is and explain how management of ICBI should use an activity based budget instead of an operating budget. Be sure to explain the similarities and the differences of the two. Finally, give examples of budget guidelines for ICBI. You must answer the following questions: Describe the meaning and the components of a financial reporting system.

 Explain the budget cycle and process. Write a description of how management should use an activity based budget instead of an operating budget Explain the similarities and differences of the two budgets Give an example of budget guidelines that ICBI should follow in order to successfully plan. Identify and describe at least 5 basic budget guidelines. Remember to use the library or other credible resources to support your argument. Be sure to cite your sources using the correct standard of APA. Question 2: A quaint but well-established coffee shop, the Hot New Cafe, wants to build a new cafe for increased capacity. Expected sales are $800,000 for the first 5 years. Direct costs including labor and materials will be 50% of sales. Indirect costs are estimated at $100,000 a year. The cost of the building for the new cafe will be a total of $750,000, which will be depreciated straight line over the next 5 years. The firm's marginal tax rate is 37%, and its cost of capital is 12%. For this assignment, you need to develop a capital budget. It is important to know what the cafe managers should consider within their capital budget. You must also define the key terms necessary to understand capital budgeting. In this assignment, please show all work, including formulae and calculations used to arrive at financial values. You must answer the following: Using the information in the assignment description: Prepare a capital budget for the Hot New Cafe with the net cash flows for this project over a 5-year period. 

Calculate the payback period (P/B) and the net present value (NPV) for the project. Answer the following questions based on your P/B and NPV calculations: Do you think the project should be accepted? Why? Define and describe Net Present Value (NPV) as it pertains to the new cafe. Define payback period. Assume the company has a P/B (payback) policy of not accepting projects with life of over 3 years. Do you think the project should be accepted? Why? A double-spaced, two page Word document that contains answers to the word questions. You must include a Microsoft Excel spreadsheet for your calculations. Either the Word document or the Excel spreadsheet must have all of your calculation values, your complete calculations, any formulae that you used, the sources you wish to cite, and your answers to the questions listed in the assignment guidelines. Your submitted assignment must include the following: Both the questions should only have a similarity index of 25% or less.