Evaluation Of Nonprofit Leadership And Control Systems

Income Statement

Discuss about the Nonprofit Leadership and Control Systems.

Ola plc Ireland’s is the largest production company in oil industry. The report has been prepared to evaluate the production capacity and planning of the company. In the report, various budgeting and costing techniques have been evaluated so that a better planning of production could be done. This report and the analysis would assist the company to not only manage the production capacity but it would also help the company to predict the future and manage the present value of the company. Currently, “cost leadership” strategy is followed by the company. And the records and the culture of the company briefs that the quality assurance is the main aim of the company.

In the report, firstly income statement has been prepared to evaluate the net profit or loss of the company. The income statement briefs about the present value and worth of the company. Further, Breakeven point in units and in monetary value has been calculated to identify the level where the cost and the profit of the company are equal. Various other costing techniques have also been evaluated to assure the management about the process and for few recommendations about the company. The production capacity and the cost of the company are as follows:

Income statement is a final statement which is prepared by the companies and others to evaluate and identify the position of the company and the net profit of the company. Income statement takes the concern of all the current details of an organization of a particular time period (Vardon, Birt & Ingram, 2017). It briefs the company about the gross profit and the net profit. The income statement of the company is as follows:

The statement briefs that the gross profit of the company is $ 2,70,00,000 whereas the net profit of the company is $ 40,03,125. It briefs that the net profit position of the company is quite better and also briefs that the better production planning has been done by the company.

Breakeven point is a point in a production house where the cost and the total revenue of the business are equal. At the breakeven point, there is not loss as well as no gain of the company. It is required for every business to evaluate the breakeven point in units to identify the minimum sales of the company which is required to be done to survive in the market (Frias?Aceituno, Rodríguez?Ariza & Garcia?Sánchez, 2014). The calculations of break even sales in units of the company are as follows:

Breakeven Point in Units

The above calculation briefs that the company is at least required to produce and sell 9,07,143 units. At this point, the total cost and the total revenue of the company would be similar and no loss would be faced by the company. In the current scenario of the company, company is producing and selling more units than BEP which briefs about better position of the company.

Breakeven point in value is the total amount in a production house where the cost and the total revenue of the business are equal. At the breakeven monetary value, there is not loss as well as no gain of the company. It is required for every business to evaluate the breakeven point in value to identify the minimum sales of the company which is required to be done to survive in the market (Ekren, Ekren & Ozerdem, 2009). The calculations of break even sales in monetary value of the company are as follows:

The above calculation briefs that the company is at least required to produce and sell the products of the company of worth $ 3,62,85,714. At this point, the total cost and the total revenue of the company would be similar and no loss would be faced by the company. In the current scenario of the company, company is selling products worth more than BEP which briefs about better position of the company (Christensen & Kent, 2016).

Desired sales units:

            Further, the calculations have been done on the profit and the sales volume of the company. earlier in the report, it has been calculated that the total net profit of the company is $ 40,03,125 and the total sales units of the company is 11,25,000 units. But, if the company wants to raise the position by $ 60,00,000 than the sales volume of the company is also required to be enhance, the calculations of the sales units on the basis of desired profits are as follows:

(Nobes & Parker, 2008)

The calculations brief that for generating the profit of $ 60,00,000, company is requires to sell 11,92,857 units. Due to increment in the profit, sales volume of the company has also been raised.

Simultaneously, the calculations have been done on the profit and the sales in monetary value of the company. Earlier in the report, it has been calculated that the total net profit of the company is $ 40,03,125 and the total sales worth of the company is 4,50,00,000 (Macintosh & Quattrone, 2010). But, if the company wants to rise the position by $ 60,00,000 than the worth of the sales of the company is also required to be enhance, the calculations of the sales in monetary value on the basis of desired profits are as follows:

Breakeven Point in Monetary Value

(Kieso, Weygandt & Warfield, 2010)

The calculations brief that for generating the profit of $ 60,00,000, company is requires to enhance the sales worth by $ 4,77,14,286. Due to increment in the profit, worth of sales of the company has also been raised.

Margin of safety is the point where the total sales are reduced by breakeven point. This point describes about the profit level of the company. This point describes about the profit or loss position of the organization. The formula of margin of safety is (Sales – breakeven point) (Zimmerman & Yahya-Zadeh, 2011). The margin of safety level of the company has been evaluated to recognize the profit position of the company as well as the total units on which the profit is generated by the company (Ward, 2012).

Margi of safety point of the company has been calculated further on the basis of 1125,000 sales units. The calculations of margin of safety of the company are as follows:

(Schaltegger & Burritt, 2017)

The above calculation briefs that the margin of safety units of the company in current scenario are 2,17,857.1 units and the margin of safety in terms of value are $ 87,14,826. It briefs that the production and the sales of the products of the company is quite better and explains about the huge profits which are generated by the company. margin of safety calculation brief that the fixed cost of the company is quite higher and thus the breakeven level is also higher but once the BEP level is achieved by the company, the profit generation capabilities of the company becomes better and higher (Higgins, 2012).

Simultaneously, the calculations have been done on the profit and the sales in monetary value of the company. Earlier in the report, it has been calculated that the total net profit of the company is $ 40,03,125 and the total sales worth of the company is 4,50,00,000. But, if the company wants to rise the position by $ 50,00,000 (after tax) than the worth of the sales of the company is also required to be enhance, the calculations of the sales in monetary value on the basis of desired profits are as follows:

(Renz & Herman, 2016)

The calculations brief that for generating the profit of $ 57,14,286, company is required to enhance the sales worth by $ 4,71,70,068. Due to increment in the profit, worth of sales of the company has also been raised.

Desired Sales Units

Further, the study has been done on the breakeven point of the company of 2019. It has been evaluated that the following changes would taken place into the production house of the company:

On the basis of the new information, the break even sales and the break even value of the company has been evaluated. The calculations of breakeven point are as follows:

(Hilton & Platt, 2013)

It briefs that in 2019, the break even sales of the company as well as the break even in monetary value would be enhanced. It briefs that the financial position of the company would be better in 2019.

The quality of the company has also been evaluated and recognized that the quality of the profits of the company is quite better. Though, it has been found that the company is not utilizing the full capacity and due to which the production of the company and the sales of the company is quite lesser. It has been found that the “bottleneck” rule is followed by the company where the resources are not utilized by the company at its fullest. Thus, it is recommended to the company to utilize the resources at their fullest and manage the performance of the company accordingly.

Bottleneck is a phenomenon which is used to describe the performance or the capacity of a business or an entire system. It is simply limited to a single component, It provides information about the less uses of resources (Brigham & Houston, 2012). The phenomenon describes that the resources are at their fullest but the company is not able to use it due to narrow bottle neck. In case of our company, it has been found that the organization is required to take the use of resources at their fullest so that the better management of the resources could be done as well as the position of the company could be better.

For managing and assuring the quality of the products, it has been recommended to the company to follow the quality assurance process in which the mistakes and the defects of the product would be evaluates and resolved by the quality manager of the company (Brigham & Ehrhardt, 2013). Every country has some standards about the quality of the product. So it is recommended to the comapny to check and assure of the quality if the product on the basis of that standards so that the better position and performance of the product could be found.

Desired Sales in Monetary Value

Conclusion:

To conclude, Ola plc Ireland is performing and managing its production house at a better level. The income statement of the company briefs about the higher net profits of the company as well as better position of the company. Further, it has been found that if the company would utilize the resources at the fullest than the breakeven level of the company would be lesser than the total sales of the company. It further briefs that the margin of safety level of the company is also higher which directly briefs about the total profit from the production process of the company.  Breakeven point in units and in monetary value has been calculated to identify the level where the cost and the profit of the company are equal. Various other costing techniques have also been evaluated to assure the management about the process and it has been found that the position and the level of the company s quite better.

The future prediction of the company has also been done to found the future performance of the company and it has been analyzed that the company would perform better in near future. The sales price of the company would be enhanced. Though, the variable cost and fixed cost of the company also briefs about some additional cost. To conclude, the performance of the position of the company is quite better if the company uses the entire capacity to produce and sell the product.

References:

Brigham, E. F., & Ehrhardt, M. C. (2013). Financial management: Theory & practice. Cengage Learning.

Brigham, E. F., & Houston, J. F. (2012). Fundamentals of financial management. Cengage Learning.

Christensen, J., & Kent, P. (2016). The decision to outsource risk management services. Accounting & Finance, 56(4), 985-1015

Ekren, O., Ekren, B. Y., & Ozerdem, B. (2009). Break-even analysis and size optimization of a PV/wind hybrid energy conversion system with battery storage–a case study. Applied Energy, 86(7), 1043-1054.

Frias?Aceituno, J. V., Rodríguez?Ariza, L., & Garcia?Sánchez, I. M. (2014). Explanatory factors of integrated sustainability and financial reporting. Business strategy and the environment, 23(1), 56-72.

Higgins, R. C. (2012). Analysis for financial management. McGraw-Hill/Irwin.

Hilton, R. W., & Platt, D. E. (2013). Managerial accounting: creating value in a dynamic business environment. McGraw-Hill Education.

Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2010). Intermediate accounting: IFRS edition (Vol. 2). John Wiley & Sons.

Macintosh, N. B., & Quattrone, P. (2010). Management accounting and control systems: An organizational and sociological approach. John Wiley & Sons.

Nobes, C., & Parker, R. H. (2008). Comparative international accounting. Pearson Education.

Renz, D. O., & Herman, R. D. (2016). The Jossey-Bass handbook of nonprofit leadership and management. John Wiley & Sons.

Schaltegger, S., & Burritt, R. (2017). Contemporary environmental accounting: issues, concepts and practice. Routledge.

Vardon, M., Birt, J., & Ingram, J. C. (2017). . Business and National Accounting for Natural Capital–Toward Improved Understanding and Alignment. Better Policy through Natural Capital Accounting: Stocktaking and Ways Forward, 215.

Ward, K. (2012). Strategic management accounting. Routledge.

Zimmerman, J. L., & Yahya-Zadeh, M. (2011). Accounting for decision making and control. Issues in Accounting Education, 26(1), 258-259.

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