ITSA EXCEL ASSIGNMENT

IMAGE SELECT MEDIA LTD

Image Select Media Ltd is a media company creating film and media products. It
purchases labour and supplies from a range of specialist suppliers and sells mainly to
customers buying over the internet but does have a small DVD outlet open to the
public at its rented premises in West London. The outlet also carries out a small
amount of photography and printing work.

The following information is provided to you on 1st April 2011 and you are to
complete this exercise as if at that date.

Sales over the internet for January, February and March 2011 were £40,000 each
month. Outlet sales in March were £4000. Forecast monthly sales are as follows:
April May Jun Jul Aug
Sept
Internet: £50,000 £90,000 £110,000 £120,000 £85,000
£95,000
Shop: £4,500 £6,000 £10,500 £8,000 £9,000
£10,000

Image Select Media offers an instalment arrangement to its internet customers

whereby purchasers can pay in 5 monthly instalments. To take advantage of this
arrangement customers have to pay a supplement of 3% on top of the basic sales
value, the total amount (sales value plus supplement) is then paid in 5 equal monthly
instalments with the first instalment being paid in the month the sale occurs. In recent
months 85% of internet customers have opted for this arrangement. The remaining
customers pay the sales value in full at the time of purchase. All shop sales are paid in
full at the time of purchase.
Note 1 the sales of January, February and March were made under these terms and
will not change even if it is decided to change terms for future sales.
Note 2 the forecast figures and the figures for January, February and March are the
basic sales value before any supplement. The total figure (sales value plus
supplement) is treated as “sales” in the financial statements and any sales receipts
outstanding including supplement are regarded as “debtors”.
Note 3 Image Media Select may want to see the effect of varying the proportion of
instalment sales and the supplement charge but the 5 month instalment period is fixed
i.e. there is no requirement for the number of months to vary – this will always be
over 5 months.

In addition to media sales, income from photography work is fairly constant at £1,000
a month. Customers pay cash for photographs. The overhead for providing
photographic work averages 25% of the income.

Closing stock at the end of each month is equal to 120% of the cost of media forecast
to be sold the following month. Film and media products are purchased for 60% of the
value they are sold for before any supplement (ie cost of goods sold = 60% of basic
sales value). Purchases of film and media are 40% for cash with the 60% credit
purchases being paid for 1 month later. Purchases of film and media products in
March was £38,370.

The balance sheet of Image Select Media at the end of March 2011 was as
follows:

31 March
£
Fixed assets 125,000
Depreciation 31,200
Net book value 93,800

Stock - film & media 47,300 (opening stock on 1st March 2011 was £31,680)

Debtors 46,800
Pre paid insurance 1,962
Cash 20,000
Interest receivable 83
Total current assets 116,145

Creditors (including
Accrued commission) 28,560
Overdraft 0
Interest payable 0
Total current liabilities 28,560

Net Assets 181,385

£
Share capital 100,000
Retained profit 81,385
181,385

Image Select Media expenses are as follows:

Wages of £7,500 are paid monthly in the month earned

The firm that designed, hosts and maintains Image Select Media’s website does not
charge directly for these services but instead charge a commission of 5% on all sales
made via the internet (including on any supplement charged for instalment
arrangements). The commission is regarded as an expense of the month the sale takes
place but the commission is paid in the month(s) Image Select Media receives the
receipts from those sales. i.e. commission is paid in the month of sale for sales paid in
full and is paid on receipt of each instalment for instalment sales.

Rent of £6,000 is paid each month for that month.

Insurance of £2,616 is paid annually in January and charged to profit and loss evenly
at £218 per month
Depreciation of 2% (of opening net book value) is charged each month on a reducing
balance basis

Interest is earned monthly on positive cash balances at the rate of 4% per annum.
Interest is charged monthly on overdrafts at the rate of 12% per annum
In both cases interest is calculated on the closing cash balance before interest and is
regarded as income or expense of that month but is not received or paid until the
following month. (interest receivable/payable is in the Balance sheet as a current
asset/liability)

Miscellaneous expenses of 5% on all sales (excluding any supplement for instalment

arrangements) are paid in the same month as the sales.

Required:

1. Using a spreadsheet, produce a monthly cash budget for the 5 month period from
April to August 2011. The cash budget should allow the user to change planning
values and immediately see the effect of these changes.

2. Produce monthly projected Income Statements (Profit and Loss Accounts) for the
months April to August. The Income Statements should also respond to changes in
planning values.

3. Produce monthly projected Balance Sheets for the period April to August 2011.
The Balance Sheets should respond to changes in planning values.

4. a) Create a chart to show how:

i) total net profit from April to August varies with changes in cost of
goods sold

ii) closing cash in August

b) Write a brief report to the finance director of Image Select Media explaining
your findings.

You will upload the completed assignment onto blackboard, your full name and
student number must be clearly stated on all pages.

Hand in a word processed report plus a disk, CD or cheap memory stick containing
the spreadsheet file.
.
There must be no other files on the disk/CD/stick other than your assignment files.

Note 1. A file copied from another student’s disk is detectable even if extensive
modifications are made or the file is transferred to another disk. It is not acceptable to
copy even a skeleton layout from another student and complete the workings yourself.
This will be detected. You must build up your work from scratch yourself. Do not
allow other students access to your disks. Your attention is drawn to the University's
policy on plagiarism.
Note 2. File management is part of good IT skills. You must save work at frequent
intervals and back up regularly. "I lost my disk", or "I can't print out because of a disk
error" etc will not be acceptable excuses. You must always have a recently saved
backup copy
Note 3. On attaching disks etc.
If using sticky tape do not tape down more than 2 sides of the disk.
If sealing a plastic envelope using staples do not staple through the assignment as
well. You should be able to remove it and put it back easily.
Mark allocation and Assessment Criteria:
Marks will be allocated to each part as follows:
Part 1 35%
Part 2 20%
Part 3 20%
Part 4 20%
Clarity and presentation of spreadsheet printouts 5%
100%
Note: in parts 2 and 3 amounts which have already been calculated in part 1 and
awarded marks will not be allocated further marks ( nor will errors made in part 1
which are repeated in parts 2 and 3 be regarded as new errors). However amounts
already calculated in part 1 that also appear in parts 2 and 3 but with different timing
will have marks allocated for correct timing.

Pass (40-49): in order to pass the assignment you should have made a reasonable
attempt at the cash budget, income statement and balance sheet, showing an
awareness of the use of spreadsheet formulae and use of planning values. Your report
should also have shown some appreciation of the meaning of the results.
Lower Second (50-59): in addition to meeting the criteria for a pass, there should be
very few mistakes in parts 1, 2 and 3 and a reasonable attempt made at producing the
correct data tables in part 4. Your report should demonstrate a good appreciation of
the results. Layout and formatting should be clear.
Upper Second (60-69): in addition to meeting the criteria above, parts 1, 2 and 3 of
the spreadsheet should be virtually error free. The spreadsheet should be flexible and
robust, giving correct answers when any of the planning values are changed. Layouts
and formatting will also be appropriate very clear. The data tables should be correct
and the report should demonstrate a firm grasp of the results with a correct
interpretation thereof.
First (70+): in addition to meeting the criteria above you will have demonstrated a
high level of understanding of spreadsheet modelling. There will be evidence of
original thinking in your spreadsheet design and formatting. Parts 1, 2 and 3 will be
error free and the model will respond accurately to all possible changes in planning
values. Your data tables will be correct and clearly presented. Your report should be
clear and demonstrate an excellent understanding of the results and the significance to
those results of changes in planning values.