Homework answers / question archive / Transcribed image text: Presentation of the company you will work with

Transcribed image text: Presentation of the company you will work with

Finance

Share With

Transcribed image text: Presentation of the company you will work with. Anderson & Smith Plc, A&S Plc, is a company in food processing industry. The company has gone from doing the traditional stuff like frozen pizza and burgers to offerings that resembles traditional home cooked food like stews, soups and various vegetarian dishes. Since about 10 years back the sourcing of ingredients comes from farms within a parameter of 40 miles from the processing plant. The production process is geared to limit waste and at the moment roughly 90% of all ingredients ends up as sellable items. What is not used is recycled and sold back to suppliers as animal food or soil enhancement. An issue is that a product sold under the name "Grandmas Beef and Carrot Stew" has a waste of 22% and is a major headache for management as it is not only costly but might pose a potential marketing challenge if known by investors and the public. The operation is smooth but has its challenges as the consumption of energy using current machinery is high and the energy prices on the market is sky rocketing due to the transition from nucellar and fossil based to wind and solar based production of electricity. A&S Plc is a family business even if roughly 25% of its shares are listed on the stock exchange in London. Since a few years back the chairman is Arnold Smith and the CEO is Lucy Andersson. Lucy has recently hired John Gromwell as her CFO, Chief Financial Officer. Even if A&S is a successful company with a good reputation there are challenges ahead that you will encounter as you are presented with a number of issues John and Lucy need to attend to. From time to time Arnold interferes in their day to day life and he is a rather demanding figure. Good luck! Task 1 5 points John Gromwell sat in his office and overlooked the medows that surronded the processing plant. It is indeed a lovely setting and after a month in office not much had occurred. However this was going to be a differen day. A SMS came in and it was Lucy who demanded his precense in her office. Lucy did not waste much time and went straigh into the topic, Grandmas Beef and Carrot Stew. Lucy started; "I met with Harold Brown yesterday and we discussed how to reduce the waste and he delivered a rather intriguing proposal but it is a challenge that requires your full attention". Harold is Operations manager and also in charge of he laboraty. The thought process is as follows; If we invest in a new process we can get the waste down from 22,2% to 12,5%. However it demands a new cutting machine and also an upgrade to our conveyor belt. In total the investment amounts to £195 000 and we can sell the current machinery for £20 000 to a competitor. As waste is reduced direct labour will be reduced but we need to hire a quality engineer to ensure proper calibration of the new set-up and that will increase the overhead. Can you please handle this Lucy said and use a rate of return of 15%. Let us assume the economic life of this investent is 5 years. John spent the rest of the day with Harold and his team and came up with the new cost structure that is presented below. Until this point John was comfortable but was in need of some help to finish off the analyse that Lucy was expecting. Please make the required analyse and deliver your view of whether the idea is viable or not. Old GBCS New GBCS Sales Price £ 4,00 £ 4,00 Ingredients £ 1,75 € 1,75 Waste - 0,50 € 0,25 Labour - 0,15 € 0,10 Overhead - 0,10 - 0,12 Depreciation - 0,30 € 0,35 Profit £ 1,20 € 1,43