Learning Outcome – The learner will:

Assessment Criterion – The learner can:
Be able to apply the tools and techniques of cost accounting.1.1Critically analyse the concepts, features and importance of cost accounting in an organisation.
1.2Apply tools of costing design and costing systems to an organisation.
1.3Recommend improvements to the costing and pricing systems of an organisation.
Be able to critically analyse the financial performance of businesses.2.1Analyse financial statements to assess the financial position of an organisation.
2.2Recommend organisational decisions based on evaluation of financial statements using financial ratios.
2.3Propose managerial recommendations on the strategic portfolio of an organisation based on financial analysis.
Be able to evaluate the budgetary processes of organisations.3.1Evaluate budgetary targets for an organisation.
3.2Develop a master budget for an organisation.

Critically evaluate budget and budgetary processes

in an organisation.

Be able to recommend effective long term and short-term sources of funding.4.1

Assess the need for short term working capital and

long- term funds for an organisation.

4.2Appraise appropriate sources of short term and funds for an organisation.
4.3Justify choices of sources of funds using a range of criteria related to cost and risk.
Be able to critically appraise investment options.5.1Apply financial appraisal methods to analyse competing investment projects in different kinds of organisations.

Justify strategic investment decision for an

organisation using relevant financial information.

5.3Critically analyse strategic investment decisions using information.


You have recently joined Penco, a small pension fund that aims to strategically invest in low risk companies with a historically satisfactory return on investment.

Task 1 of 3 – (AC2.1, 2.2, 2.3, 5.1, 5.2 & 5.3)


As a junior analyst, your first task is to review the market and select two companies listed on the London stock market and to access their financial statements. You should analyse their financial position, using the information from their financial statements and apply appropriate financial ratios. You should make recommendations to Penco to invest. Calculations and financial ratios supporting the recommendation should be appended to the memo for the board’s attention.

Submission and delivery: 

  • 1x memo (circa 1000 words excluding supporting calculations and financial ratios used)


  • Each section must reflect any supporting Harvard style
  • A comprehensive Harvard style reference list must be included at the end of the

Task 2 of 3 Report – (AC4.1, 4.2 & 4.3)


The board of Penco approved your recommendations and decided to purchase stock in the two organisations you recommended. In fact, based on your recommendations, they decided to invest more than anticipated. The previous budget was £2,000,000 but the board wants to invest £1,000,000 in each of the two organisations you recommended which means that an extra £1,000,000 is required. Instructions:

Write a short report containing:

  • An introduction discussing the need for short term working capital and long-term funds
  • A main body comparing the sources of funding, including their pros and cons
  • A justified recommendation of your choices of funding for the £1,000,000 using a range of criteria related to cost and

Submission and delivery: 

  • 1x report (circa 1500 words)


  • Each section must reflect any supporting Harvard style
  • A comprehensive Harvard style reference list must be included at the end of the

Task 3 of 3 – Essay (AC1.1, 1.2, 1.3, 3.1, 3.2 & 3.3)


 Penco is excited by the results of your previous work and has asked you to review operations at Exciteco where it is an institutional investor.

Exciteco manufactures electronic components for export worldwide, from factories in Finland, for use in smartphones and hand-held gaming devices. These two markets are supplied with similar components by two divisions, Phones Division (P) and Gaming Division (G). Each division has its own selling, purchasing, IT and research and development functions, but separate IT systems. Some manufacturing facilities, however, are shared between the two divisions.

Exciteco's corporate objective is to maximise shareholder wealth through innovation and continuous technological improvement in its products. The manufacturers of smartphones and gaming devices, who use Exciteco's components, update their products frequently and constantly compete with each other to launch models which are technically superior.

Exciteco has a well-established incremental budgeting process. Divisional managers forecast sales volumes and costs months in advance of the budget year. These divisional budgets are then scrutinized by the main board and revised significantly by them in line with targets they have set for the business. The finalised budgets are often approved after the start of the accounting year. Under pressure to deliver consistent returns to institutional shareholders such as Penco, the board does not tolerate failure by either division to achieve the planned net profit for the year once the budget is approved. Last year's results were poor compared to the annual budget. Divisional managers, who  are appraised on the financial performance of their own division, have complained about the length of time that the budgeting process takes and that the performance of their divisions could have been better but was constrained by the budgets which were set for them.

In P Division, managers had failed to anticipate the high popularity of a new smartphone model incorporating a large screen designed for playing games and had not made the necessary technical modifications to the division's own components. This was due to the high costs of doing so, which had not been budgeted for. Based on the original sales forecast, P Division had already committed to manufacturing large quantities of the existing version of the component and so had to heavily discount these in order to achieve the planned sales volumes.

A critical material in the manufacture of Exciteco's products is silver, which is a commodity which changes materially in price according to worldwide supply and demand. During the year supplies of silver were reduced significantly for a short period of time and G Division paid high prices to ensure continued supply. Managers of G Division were unaware that P Division held large inventories of  silver which they had purchased when the price was much lower. Initially, G Division accurately forecasted demand for its components based on the previous years' sales volumes plus the historic annual growth rate of 5%. However, overall sales volumes were much lower than budgeted. This was due to a fire at the factory of their main customer, which was then closed for part of the year. Reacting to this news, managers at G Division took action to reduce costs, including closing one of the three R&D facilities in the division.

However, when the customer's factory reopened, G Division was unwilling to recruit extra staff to cope with increased demand; nor would P Division re-allocate shared manufacturing facilities to them, in case demand increased for its own products later in the year. As a result, Exciteco lost the prestigious preferred supplier status from their main customer who was unhappy with G Division's failure to effectively respond to the additional demand. The customer had been forced to purchase a more expensive, though technically superior, component from an alternative manufacturer.

Penco’s institutional shareholders' representative, recently appointed to the board, has asked you as  a performance management expert for your advice. 'We need to know whether Exciteco's budgeting process is appropriate for the business, and how this contributed to last year's poor performance.'

However, the shareholder representative did also acknowledge that external factors had contributed  to Exciteco's poor performance in the last year and suggested that it would be useful if Exciteco's performance reports distinguished between variances which had resulted from its own operational performance as opposed to external circumstances which could not have been anticipated when the budgets were produced. You noted that many organisations address this issue by analysing  variances into planning and operational elements.

Prepare a report that deals with the following:

  • Critically discuss key concepts, features and importance of cost accounting,
  • Evaluate the weaknesses in Exciteco's current budgeting system and whether it is suitable for the environment in which Exciteco
  • Evaluate the extent to which Exciteco's poor performance for the last year can be attributed to external
  • Discuss the potential benefits to Exciteco of analysing variances into planning and operational elements.

Submission and delivery:

 1x essay (2000 words excluding budget)


  • Each section must reflect any supporting Harvard style
  • A comprehensive Harvard style reference list must be included at the end of the

Evidence to be submitted: 

  • – 1000 words
  • Report – 1500 words
  • Essay – 2000 words