Table of contentsSummaryIndustry backgroundMarketing strat.docx

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Table of contents Summary Industry background Marketing strategy Competitors Three year projections Why & how assumptions Three year funding schedule Break-Even analysis References 1 Summary Start-up company Outline Employees Job preferences Monthly fees The new start-up company will be a micro-brewery/pub style venue called Pints & Plates (P&P Brewery). The company will offer a quality product served at perfect temperatures both drinks and foods. The venue will also include different events on the weekend that will draw attention to the new micro-brewery selections an seasonal drafts on tap. To find the proper space and equipment necessary will be in the initial loan funds along with food supplies and local permits. The current scene for socialized consumption of craft beers has become more of an experience of tasting new unique styles of beer paired with the proper food to compliment the flavors brewed into the beers. It also draws in crowds of different backgrounds and lifestyles helping the business to expand and build business relations with other business owners. The company will start with the owner, manager, assistant manager, two brew masters, chef, and two kitchen assistants to get the company started. The manager and assistant manager will need a bachelors degree and above to apply, the brew-masters will go through an evaluation on mixture techniques and the knowledge they possess in regards to various styles of beer. The chef may be obtained through a local food truck to draw in their current customers with a new twist to their style food. As the company expands and builds a fleet of customer’s, options such as distributing the beer through local bars and selling kegs in liquor stores plus leasing a new warehouse to brew a larger amount of beer to build an inventory to supply the demand. We are asking for funding in the amount of $500,000 to start this company. The company will be developed out of an industrial location for easy access to supplies and have area workers provide free marketing. P&P Brewery will offer weekly specials, and generate opportunities for local bands and local food trucks to come provide their services while still enjoying our beers on tap. 2 Industry information History Brewing techniques Local support Access to ingredients History- Beer has been around since as early as 1900 BC Egyptian medical prescriptions included beer in their ingredients (BeerHistory.com, 1998). 1000 AD Hops is added to the brewing process 1200 AD Beer making is established in Germany, Austria, and England 1420 Germans develop the lager method of brewing 1553 Becks Brewery founded and still operating 1786 Samuel Adams starts operating commercial brewing 1870 Anheuser-Busch brands Budweiser as the first national beer 1935 160 breweries survive prohibition 1965 Fritz Maytag purchased Anchor Brewing and started to develop unique styles 1991-1995 volume growth on craft beers rose from 35% to 58% 2013 Over 2800 micro-b.

Table of contents
Summary
Industry background
Marketing strategy
Competitors
Three year projections
Why & how assumptions
Three year funding schedule
Break-Even analysis
References
1
Summary
Start-up company
Outline
Employees
Job preferences
Monthly fees
The new start-up company will be a micro-brewery/pub style
venue called Pints & Plates (P&P Brewery). The company will
offer a quality product served at perfect temperatures both
drinks and foods. The venue will also include different events
on the weekend that will draw attention to the new micro-
brewery selections an seasonal drafts on tap. To find the proper
space and equipment necessary will be in the initial loan funds
along with food supplies and local permits. The current scene
for socialized consumption of craft beers has become more of an
experience of tasting new unique styles of beer paired with the
proper food to compliment the flavors brewed into the beers. It
also draws in crowds of different backgrounds and lifestyles
helping the business to expand and build business relations with
other business owners.
The company will start with the owner, manager, assistant
manager, two brew masters, chef, and two kitchen assistants to
get the company started. The manager and assistant manager
will need a bachelors degree and above to apply, the brew-
masters will go through an evaluation on mixture techniques
and the knowledge they possess in regards to various styles of
beer. The chef may be obtained through a local food truck to
draw in their current customers with a new twist to their style
food. As the company expands and builds a fleet of customer’s,
options such as distributing the beer through local bars and
selling kegs in liquor stores plus leasing a new warehouse to
brew a larger amount of beer to build an inventory to supply the
demand. We are asking for funding in the amount of $500,000
to start this company. The company will be developed out of an
industrial location for easy access to supplies and have area
workers provide free marketing. P&P Brewery will offer weekly
specials, and generate opportunities for local bands and local
food trucks to come provide their services while still enjoying
our beers on tap.
2
Industry information
History
Brewing techniques
Local support
Access to ingredients
History- Beer has been around since as early as 1900 BC
Egyptian medical prescriptions included beer in their
ingredients (BeerHistory.com, 1998).
1000 AD Hops is added to the brewing process
1200 AD Beer making is established in Germany, Austria, and
England
1420 Germans develop the lager method of brewing
1553 Becks Brewery founded and still operating
1786 Samuel Adams starts operating commercial brewing
1870 Anheuser-Busch brands Budweiser as the first national
beer
1935 160 breweries survive prohibition
1965 Fritz Maytag purchased Anchor Brewing and started to
develop unique styles
1991-1995 volume growth on craft beers rose from 35% to 58%
2013 Over 2800 micro-breweries are operating and 1500
breweries are in development.
Craft beer has become the new style of wine tasting and more
and more people are crossing over to drinking craft beer
because of innovative styles and consistency provide unique
flavors and quality blends (Raley, 2018).
Techniques- There are a multitude of techniques to brewing
beer, but P&P will have a general line-up ranging from lagers to
stouts and focusing on seasonal fruits provided by the Central
Valley to promote the agriculture rich areas surrounding Fresno,
CA. The brew-masters will collaborate with one another to
bring attention to different types of brew and how they can all
bring their unique style to each crafted beer.
Local support- The Central Valley has a strong presence in local
owned businesses by giving support by bringing their business
to a local brewery rather than going to a bar and getting the
basic store bought brand. Valley natives like to represent their
local brands by spreading the word on their social networks and
posting reliable information on platforms like Yelp and Google
maps to give suggestions and compliments on services and
quality. Also, local owned businesses will hear by word of
mouth by other locals wanting a particular draft or bottled beer
and sooner or later P&P will be served across town.
Access to ingredients- The central valley is the hub to most
agriculturally produced materials, and as for brewing equipment
California is a ocean based state so if importing is necessary
Fresno is fairly close to ports and shipping warehouses. Hops
will be the real question on either developing a local strain or
continuing to order from an outside provider to meet the taste of
specific beer types.
3
Marketing Strategy
Objectives
Target market areas
Funding
Goal
Objective- To gain as many customers as possible while
providing an amazing experience and product to both new and
returning customers.
Target market- Reaching out to the current craft beer scene and
food truck “foodies”. P&P will also generate local events the
could create new beer connoisseur. Reaching out to craft beer
groups on social media sites and advertising events and special
taste nights will help as well as the flyers developed to hand out
during other local events and taste nights around the valley
while placing them on the food trucks P&P will have at some of
the events.
Funding- The funding will only go toward the printing of the
brewery flyers that will advertise different events through out
the year and for food trucks to be at these events they will have
to either rent the spot on site or pay a percentage for each food
ticket purchased at the event. Allowing P&P to turn a profit no
matter the amount of people that show up to the events.
Goal- To provide a fun and friendly service that hopefully
builds a family type relationship where all customers feel safe
and respected and also become the best rated craft beer in the
Central Valley.
4
Competitor Analysis
Who is the competition?
Track the competitors sales comparison.
What are competitors responses?
Warning signs!
Analyzing the competitors is a powerful strategic weapon,
because studying your competitor is also the same thing they
will be doing to a new competitor on the market and especially
in their area.
Who- Knowing the competitors and what products they bring to
the table will provide a sense of what they are not offering the
customer and what P&P can capitalize on to bring their
customers and provide something new to the same atmosphere.
Track- Tracking a competitor on their prices and brewing styles
can only be done periodically because of seasonal drafts and
special releases, but it is not good to focus on another company
so much because there is the possibility to lose track of the
company at hand.
What- The way to see what responses other businesses are
getting is to get their original story on how and why they started
by looking to the content marketing technique of looking into
multiple platforms to research the company and the reviews
they are receiving from their current customers (Writtent,
2018).
Warning signs- Being the new spot in the brewery industry a
lot of attention will be drawn to the business will not flourish
unless full attention is on the business and not on competitors.
5
Assumptions
Meeting & exceeding projected profits
Customer growth and approval
Executing all strategies
A way to always feel safe is constant commitment to achieving
growth. This allows the company to continue moving in the
right direction. To achieve this option do not let silos break
down the company from its best potential always keep morale at
its highest regardless of a situation (Gleeson, 2013). Having the
staff that are leading the company just as much as leadership is,
then the performance drivers in the company will show above
all others; these type or workers will treat the company as if it
was their own. To gain customer growth is to provide products
specific to the local area liking, producing liked products will
create revenue and continue to bring profit to the company. For
a start-up company the assumption is if the company can stay
within the spending limits and create guidelines for strategic
processes that work well then the customers will build on
themselves from customers voicing their opinions and customer
reviews. The company’s goal is to build upon the customer base
each week, but never lose sight in providing an experience that
no other brewery offers.
6
3 year funding tracking
Tracking System
Making higher payback options
Monitor higher sales
What sells at a higher rate
To track all sales and amounts P&P will use the Tap system that
tracks the amount of beer left in kegs and shows how often the
draft is being poured and the amount being poured each time to
ensure proper pours. As sales rise and the company attracts
more and more business the amounts will get higher and higher
to payback the start-up funding back to the original lender. With
the installed tap system monitoring all systems P&P will be able
to choose what style beer to focus more on to generate higher
inventory of that style. Once tracking has been deemed positive
on a continuous basis the creation of bomber bottles (22oz) and
quad packs will be made for purchase in the store.
7
Break even Analysis
Fixed cost
Variable cost
Cost bid pricing
Price bid pricing
Formula
Fixed cost will include payroll, expenses, rent, company
vehicle, and company cell phones these cost will all be
accounted for as a monthly average in the first year. Variable
cost are inventory items that are used to produce different
variations of different brews that will most likely be short
releases to determine the success or failure of the product. Cost
bid pricing is used to determine how much it will cost to
develop the type of beer and determine what the price of the
beer will be to sell in a couple different sizes. Price bid pricing
is comparing local competitors prices to what P&P should set
their own prices to be and what consumers will pay. The break
even analysis is as followed: breakeven point = fixed cost /
(unit selling price – variable cost).
8
Expanding Internationally
Which international locations
Deciding factors
Taxes
Venture capital
The two countries to expand to would be based off of the
highest selling beer style, but from statistics and known areas of
the world for drinking would be Germany and Italy. Taxes in
both of these locations are as followed: Germany 30,18% and
Italy is 19% (OECD, 2018), but is only paid one time to
shareholders and residents of the company so finding a business
partner to open a branch would save P&P some money. Venture
capital refers to financing high risk investments. There are three
different scenarios; raises funds for outside investors, there is
an active roll in overseeing, advising and monitoring the
situation as a whole, and does not intend to own the company
forever. P&P would not want to use the venture capital
processes to raise funds because one small risky error could
cost the owners the whole company.
9
Debt financing vs. sales of company stock
Debt Financing
Advantages
Retain control
Simple planning
Tax advantages
Disadvantages
Discipline
Collateral
Qualification requirements
Selling Stock
Advantages
Shared risk
Not bringing new debt
Disadvantages
Loss of full ownership
Loss of full control
There are several advantages and disadvantages of debt
compared to equity. The advantages are there is no new debt.
Selling partial ownership means you do not need to take on any
new debt, and there are no new obligations. A disadvantage is
when you sell your shares you give up some of your ownership
and investors will buy into your company, then in hopes to
profit if the company then succeeds further down the road and
generates income. You also lose control of ownership of your
business through equity financing. Some investors may insist
on having someone work for your company and be a part of
your board and it may change the direction of your business
completely.
10
Venture Capital Process
Seed stage
Early stage
Start-up
First stage
Formative stage
Later Stage
Third stage
Mezzanin (Bridge)
Balanced-stage
There are nine basic stages in the venture capital process. The
first stage is the seed stage. This stage is the earliest of the
phases and offers modest amounts of financing to the
development of the business plan. The second stage is the early
stage is when the company is able to begin operations, but are
not quite there yet in the way of “commercial manufacturing”,
meaning, they cannot manufacture on a high level yet. The next
step is start-up, meaning it supports the product development
and initial marketing. The next stage is the first stage. Most
first-stage companies have been in business for less than three
years. The formative stage will encompass both the seed stage
and the early stage. The later stage is the capital that is
provided after commercial manufacturing and sales, but before
it is offered to the public. The third stage is capital that is
provided for the major expansions, such as a physical plant
expansion, product improvement, and marketing. The
expansion stage includes the second and third stages. The
mezzanine or bridge is the final step of going public with the
business and the IPO. The final stage, the balanced-stage
financing is all of the stages combined that are through the
mezzanine, going public with the business itself.
I feel, personally, that a larger corporation would benefit from
this approach because this is more of a larger investment one
would be seeking out. If I were opening a franchise of coffee
shops like the one listed in this PowerPoint presentation, I
might try this Venture Capital Process because it lists all of the
things I would need to do in order to open many different
locations, and then expand my business out farther, and then to
different countries once my business became popular and
successful. I think for smaller companies, however, say, one
store, it might not be such a good idea, but for a chain of stores,
it would be a great idea because of the expansion processes.
11
Production Costs
Running head: PRODUCTION COSTS
1
PRODUCTION COSTS
2
Production Costs
To: Davis Skaros
From: Senior Accountant
Date:
Subject: Production Costs
The purpose of this memo is to provide you with a clarification
to why the numbers that were provided in the production cost
reports are accurate and to show you how those numbers were
configured by the accountant assigned to count your inventory.
First, you will need to understand that the inventory that is not
shown is the equivalent units of production which will always
be less than the actual inventory in stock. Remember that
equivalent units “measure the work done during the period,
expressed in fully completed units” (Kimmel, Weygandt, &
Kieso, 2016).
In the following paragraphs we will look at the purpose of
inventory management and how production costs show in the
report. “It is not only the source for summary journal entries at
the end of the month but also a most convenient vehicle for
presenting and disposing of costs accumulated during the
month. A production cost report shows total unit costs
transferred to it from a preceding department, materials, labor,
and factory overhead added by the department, unit cost added
by the department, total and unit costs accumulated to the end
of operations in the department, the cost of the beginning and
ending work in process inventories, and cost transferred to a
succeeding department or to a finished goods storeroom”
(Rehman, 2018, para 1-2).
In the report you will see that the accountant took in whether
the units were reasonable and whether your production costs
were met. “A production cost report is the key document that
management uses to understand the activities in a department; it
shows the production quantity and cost data related to that
department” (Kimmel, Weygandt, & Kieso, 2016 page 798). The
overall units then are interpreted by the amount produced in the
period. The output consists of units shifted out during the
period and any units in development at the end of the period.
To get the full understanding of how the units were computed to
get and equivalent of 2,000 there were steps that were
performed to complete the report to show productions costs. The
first step was to compute the physical unit flow where the units
are to be kept tracked of by adding “the units started (or
transferred) into production during the period to the units in
process at the beginning of the period. This amount is referred
to as the total units to be accounted for” (Kimmel, Weygandt, &
Kieso, 2016, page 799). The second step is to compute the
equivalent units of production where the units are “completed
and transferred out plus equivalent unit if ending work in
process equal to equivalent units of production” (Kimmel,
Weygandt, & Kieso, 2016, page 800). The third step in this
process is how we compute unit production costs by computing
“the material, conversion and total manufacturing” (Kimmel,
Weygandt, & Kieso, 2016, page 800) where the material is
divided by equivalent units of the materials that are equal to the
unit material cost we then use the total conversion cost and
divide equivalent unit materials to unit conversion cost.
Manufacturing is to take unit material cost and divide it by unit
conversion cost, which will equal total manufacture cost per
unit. The final step is to prepare a cost reconciliation schedule
where the evidence in this schedule is corrected for equivalent
productions to establish the unit costs added by the section that
shows units transferred out and the ending work in process.
“In essence inventory control enables the business to have what
it needs, when it needs it to do business” (Johnson, 2018 para,
1). When figuring the equal units remember that one unit is
100% completed and half of a unit is only 50% completed, so
the information only accounted for the equivalent that amount
to 2,000 in finished units in your inventory where the work
prepared on the physical units are expressed in stipulations of
fully completed units. Hence, if your ending stock contains
4,000 units which are only 50% complete, that is equivalent to
having 2,000 finalized units at month end. Concluding in the
report inventory could be conveyed as holding 4,000 physical
units or 2,000 equivalent units. If you have any further
questions, feel free to reach out to me at any time.
References
Johnson, A. (2018). The Main Function of Inventory. Retrieved
from http://smallbusiness.chron.com/main-function-inventory-
16156.html
Kimmel, P.D., Weygandt, J.J. & Kieso, D.E. (2016). Accounting
Tools for Business Decision Making (6th ed.). Hoboken, NJ:
John Wiley & Sons.
Rehman, A. (2018). Cost of Production Report (CPR). Retrieved
from
http://www.accountingdetails.com/cost_of_production_report.ht
m

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Table of contentsSummaryIndustry backgroundMarketing strat.docx

  • 1. Table of contents Summary Industry background Marketing strategy Competitors Three year projections Why & how assumptions Three year funding schedule Break-Even analysis References 1 Summary Start-up company Outline Employees Job preferences Monthly fees The new start-up company will be a micro-brewery/pub style venue called Pints & Plates (P&P Brewery). The company will offer a quality product served at perfect temperatures both drinks and foods. The venue will also include different events on the weekend that will draw attention to the new micro- brewery selections an seasonal drafts on tap. To find the proper space and equipment necessary will be in the initial loan funds along with food supplies and local permits. The current scene for socialized consumption of craft beers has become more of an
  • 2. experience of tasting new unique styles of beer paired with the proper food to compliment the flavors brewed into the beers. It also draws in crowds of different backgrounds and lifestyles helping the business to expand and build business relations with other business owners. The company will start with the owner, manager, assistant manager, two brew masters, chef, and two kitchen assistants to get the company started. The manager and assistant manager will need a bachelors degree and above to apply, the brew- masters will go through an evaluation on mixture techniques and the knowledge they possess in regards to various styles of beer. The chef may be obtained through a local food truck to draw in their current customers with a new twist to their style food. As the company expands and builds a fleet of customer’s, options such as distributing the beer through local bars and selling kegs in liquor stores plus leasing a new warehouse to brew a larger amount of beer to build an inventory to supply the demand. We are asking for funding in the amount of $500,000 to start this company. The company will be developed out of an industrial location for easy access to supplies and have area workers provide free marketing. P&P Brewery will offer weekly specials, and generate opportunities for local bands and local food trucks to come provide their services while still enjoying our beers on tap. 2 Industry information History Brewing techniques Local support Access to ingredients
  • 3. History- Beer has been around since as early as 1900 BC Egyptian medical prescriptions included beer in their ingredients (BeerHistory.com, 1998). 1000 AD Hops is added to the brewing process 1200 AD Beer making is established in Germany, Austria, and England 1420 Germans develop the lager method of brewing 1553 Becks Brewery founded and still operating 1786 Samuel Adams starts operating commercial brewing 1870 Anheuser-Busch brands Budweiser as the first national beer 1935 160 breweries survive prohibition 1965 Fritz Maytag purchased Anchor Brewing and started to develop unique styles 1991-1995 volume growth on craft beers rose from 35% to 58% 2013 Over 2800 micro-breweries are operating and 1500 breweries are in development. Craft beer has become the new style of wine tasting and more and more people are crossing over to drinking craft beer because of innovative styles and consistency provide unique flavors and quality blends (Raley, 2018). Techniques- There are a multitude of techniques to brewing beer, but P&P will have a general line-up ranging from lagers to stouts and focusing on seasonal fruits provided by the Central Valley to promote the agriculture rich areas surrounding Fresno, CA. The brew-masters will collaborate with one another to bring attention to different types of brew and how they can all bring their unique style to each crafted beer. Local support- The Central Valley has a strong presence in local owned businesses by giving support by bringing their business to a local brewery rather than going to a bar and getting the basic store bought brand. Valley natives like to represent their
  • 4. local brands by spreading the word on their social networks and posting reliable information on platforms like Yelp and Google maps to give suggestions and compliments on services and quality. Also, local owned businesses will hear by word of mouth by other locals wanting a particular draft or bottled beer and sooner or later P&P will be served across town. Access to ingredients- The central valley is the hub to most agriculturally produced materials, and as for brewing equipment California is a ocean based state so if importing is necessary Fresno is fairly close to ports and shipping warehouses. Hops will be the real question on either developing a local strain or continuing to order from an outside provider to meet the taste of specific beer types. 3 Marketing Strategy Objectives Target market areas Funding Goal Objective- To gain as many customers as possible while providing an amazing experience and product to both new and returning customers. Target market- Reaching out to the current craft beer scene and food truck “foodies”. P&P will also generate local events the could create new beer connoisseur. Reaching out to craft beer groups on social media sites and advertising events and special taste nights will help as well as the flyers developed to hand out during other local events and taste nights around the valley
  • 5. while placing them on the food trucks P&P will have at some of the events. Funding- The funding will only go toward the printing of the brewery flyers that will advertise different events through out the year and for food trucks to be at these events they will have to either rent the spot on site or pay a percentage for each food ticket purchased at the event. Allowing P&P to turn a profit no matter the amount of people that show up to the events. Goal- To provide a fun and friendly service that hopefully builds a family type relationship where all customers feel safe and respected and also become the best rated craft beer in the Central Valley. 4 Competitor Analysis Who is the competition? Track the competitors sales comparison. What are competitors responses? Warning signs! Analyzing the competitors is a powerful strategic weapon, because studying your competitor is also the same thing they will be doing to a new competitor on the market and especially in their area. Who- Knowing the competitors and what products they bring to the table will provide a sense of what they are not offering the customer and what P&P can capitalize on to bring their customers and provide something new to the same atmosphere. Track- Tracking a competitor on their prices and brewing styles
  • 6. can only be done periodically because of seasonal drafts and special releases, but it is not good to focus on another company so much because there is the possibility to lose track of the company at hand. What- The way to see what responses other businesses are getting is to get their original story on how and why they started by looking to the content marketing technique of looking into multiple platforms to research the company and the reviews they are receiving from their current customers (Writtent, 2018). Warning signs- Being the new spot in the brewery industry a lot of attention will be drawn to the business will not flourish unless full attention is on the business and not on competitors. 5 Assumptions Meeting & exceeding projected profits Customer growth and approval Executing all strategies A way to always feel safe is constant commitment to achieving growth. This allows the company to continue moving in the right direction. To achieve this option do not let silos break down the company from its best potential always keep morale at its highest regardless of a situation (Gleeson, 2013). Having the staff that are leading the company just as much as leadership is, then the performance drivers in the company will show above all others; these type or workers will treat the company as if it was their own. To gain customer growth is to provide products specific to the local area liking, producing liked products will create revenue and continue to bring profit to the company. For a start-up company the assumption is if the company can stay
  • 7. within the spending limits and create guidelines for strategic processes that work well then the customers will build on themselves from customers voicing their opinions and customer reviews. The company’s goal is to build upon the customer base each week, but never lose sight in providing an experience that no other brewery offers. 6 3 year funding tracking Tracking System Making higher payback options Monitor higher sales What sells at a higher rate To track all sales and amounts P&P will use the Tap system that tracks the amount of beer left in kegs and shows how often the draft is being poured and the amount being poured each time to ensure proper pours. As sales rise and the company attracts more and more business the amounts will get higher and higher to payback the start-up funding back to the original lender. With the installed tap system monitoring all systems P&P will be able to choose what style beer to focus more on to generate higher inventory of that style. Once tracking has been deemed positive on a continuous basis the creation of bomber bottles (22oz) and quad packs will be made for purchase in the store. 7 Break even Analysis Fixed cost Variable cost Cost bid pricing Price bid pricing Formula
  • 8. Fixed cost will include payroll, expenses, rent, company vehicle, and company cell phones these cost will all be accounted for as a monthly average in the first year. Variable cost are inventory items that are used to produce different variations of different brews that will most likely be short releases to determine the success or failure of the product. Cost bid pricing is used to determine how much it will cost to develop the type of beer and determine what the price of the beer will be to sell in a couple different sizes. Price bid pricing is comparing local competitors prices to what P&P should set their own prices to be and what consumers will pay. The break even analysis is as followed: breakeven point = fixed cost / (unit selling price – variable cost). 8 Expanding Internationally Which international locations Deciding factors Taxes Venture capital The two countries to expand to would be based off of the highest selling beer style, but from statistics and known areas of the world for drinking would be Germany and Italy. Taxes in both of these locations are as followed: Germany 30,18% and Italy is 19% (OECD, 2018), but is only paid one time to shareholders and residents of the company so finding a business partner to open a branch would save P&P some money. Venture capital refers to financing high risk investments. There are three different scenarios; raises funds for outside investors, there is an active roll in overseeing, advising and monitoring the situation as a whole, and does not intend to own the company forever. P&P would not want to use the venture capital
  • 9. processes to raise funds because one small risky error could cost the owners the whole company. 9 Debt financing vs. sales of company stock Debt Financing Advantages Retain control Simple planning Tax advantages Disadvantages Discipline Collateral Qualification requirements Selling Stock Advantages Shared risk Not bringing new debt Disadvantages Loss of full ownership Loss of full control There are several advantages and disadvantages of debt compared to equity. The advantages are there is no new debt. Selling partial ownership means you do not need to take on any new debt, and there are no new obligations. A disadvantage is when you sell your shares you give up some of your ownership and investors will buy into your company, then in hopes to profit if the company then succeeds further down the road and generates income. You also lose control of ownership of your business through equity financing. Some investors may insist on having someone work for your company and be a part of your board and it may change the direction of your business completely.
  • 10. 10 Venture Capital Process Seed stage Early stage Start-up First stage Formative stage Later Stage Third stage Mezzanin (Bridge) Balanced-stage There are nine basic stages in the venture capital process. The first stage is the seed stage. This stage is the earliest of the phases and offers modest amounts of financing to the development of the business plan. The second stage is the early stage is when the company is able to begin operations, but are not quite there yet in the way of “commercial manufacturing”, meaning, they cannot manufacture on a high level yet. The next step is start-up, meaning it supports the product development and initial marketing. The next stage is the first stage. Most first-stage companies have been in business for less than three years. The formative stage will encompass both the seed stage and the early stage. The later stage is the capital that is provided after commercial manufacturing and sales, but before it is offered to the public. The third stage is capital that is provided for the major expansions, such as a physical plant expansion, product improvement, and marketing. The expansion stage includes the second and third stages. The mezzanine or bridge is the final step of going public with the business and the IPO. The final stage, the balanced-stage financing is all of the stages combined that are through the
  • 11. mezzanine, going public with the business itself. I feel, personally, that a larger corporation would benefit from this approach because this is more of a larger investment one would be seeking out. If I were opening a franchise of coffee shops like the one listed in this PowerPoint presentation, I might try this Venture Capital Process because it lists all of the things I would need to do in order to open many different locations, and then expand my business out farther, and then to different countries once my business became popular and successful. I think for smaller companies, however, say, one store, it might not be such a good idea, but for a chain of stores, it would be a great idea because of the expansion processes. 11 Production Costs Running head: PRODUCTION COSTS 1 PRODUCTION COSTS 2 Production Costs To: Davis Skaros From: Senior Accountant Date:
  • 12. Subject: Production Costs The purpose of this memo is to provide you with a clarification to why the numbers that were provided in the production cost reports are accurate and to show you how those numbers were configured by the accountant assigned to count your inventory. First, you will need to understand that the inventory that is not shown is the equivalent units of production which will always be less than the actual inventory in stock. Remember that equivalent units “measure the work done during the period, expressed in fully completed units” (Kimmel, Weygandt, & Kieso, 2016). In the following paragraphs we will look at the purpose of inventory management and how production costs show in the report. “It is not only the source for summary journal entries at the end of the month but also a most convenient vehicle for presenting and disposing of costs accumulated during the month. A production cost report shows total unit costs transferred to it from a preceding department, materials, labor, and factory overhead added by the department, unit cost added by the department, total and unit costs accumulated to the end of operations in the department, the cost of the beginning and ending work in process inventories, and cost transferred to a succeeding department or to a finished goods storeroom” (Rehman, 2018, para 1-2). In the report you will see that the accountant took in whether the units were reasonable and whether your production costs were met. “A production cost report is the key document that management uses to understand the activities in a department; it shows the production quantity and cost data related to that department” (Kimmel, Weygandt, & Kieso, 2016 page 798). The overall units then are interpreted by the amount produced in the period. The output consists of units shifted out during the period and any units in development at the end of the period. To get the full understanding of how the units were computed to get and equivalent of 2,000 there were steps that were performed to complete the report to show productions costs. The
  • 13. first step was to compute the physical unit flow where the units are to be kept tracked of by adding “the units started (or transferred) into production during the period to the units in process at the beginning of the period. This amount is referred to as the total units to be accounted for” (Kimmel, Weygandt, & Kieso, 2016, page 799). The second step is to compute the equivalent units of production where the units are “completed and transferred out plus equivalent unit if ending work in process equal to equivalent units of production” (Kimmel, Weygandt, & Kieso, 2016, page 800). The third step in this process is how we compute unit production costs by computing “the material, conversion and total manufacturing” (Kimmel, Weygandt, & Kieso, 2016, page 800) where the material is divided by equivalent units of the materials that are equal to the unit material cost we then use the total conversion cost and divide equivalent unit materials to unit conversion cost. Manufacturing is to take unit material cost and divide it by unit conversion cost, which will equal total manufacture cost per unit. The final step is to prepare a cost reconciliation schedule where the evidence in this schedule is corrected for equivalent productions to establish the unit costs added by the section that shows units transferred out and the ending work in process. “In essence inventory control enables the business to have what it needs, when it needs it to do business” (Johnson, 2018 para, 1). When figuring the equal units remember that one unit is 100% completed and half of a unit is only 50% completed, so the information only accounted for the equivalent that amount to 2,000 in finished units in your inventory where the work prepared on the physical units are expressed in stipulations of fully completed units. Hence, if your ending stock contains 4,000 units which are only 50% complete, that is equivalent to having 2,000 finalized units at month end. Concluding in the report inventory could be conveyed as holding 4,000 physical units or 2,000 equivalent units. If you have any further questions, feel free to reach out to me at any time.
  • 14. References Johnson, A. (2018). The Main Function of Inventory. Retrieved from http://smallbusiness.chron.com/main-function-inventory- 16156.html Kimmel, P.D., Weygandt, J.J. & Kieso, D.E. (2016). Accounting Tools for Business Decision Making (6th ed.). Hoboken, NJ: John Wiley & Sons. Rehman, A. (2018). Cost of Production Report (CPR). Retrieved from http://www.accountingdetails.com/cost_of_production_report.ht m