Essay
BTEC Business Unit 7 Management Accounting Assignment 2
- Institution
- PEARSON (PEARSON)
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Task 1Introduction:
In this task I will be using the retail price indices of for 2015 and 2019, from valleys bakeries,
to compare the sales figures for both years for loaves and rolls. I will also describe how the
historical data can be used initially to monitor current business performance and assess its
relative success based on the current data.
The Retail Price Index (RPI) is one of the main measures of consumer inflation. It measures
the change in the cost of a representative sample of retail goods and services. RPI is an
older measurement of inflation that is still published because it is used to calculate cost of
living and wage escalation; however, it is not considered an official inflation rate by the
government. The consumer price index is determined as the better measure of inflation.
Content:
Valley Bakeries have asked for a report concerning the budgeting that is needed for the
company. It is highly important for Valley Bakeries to have documents from all previous
sales in the business, because the RPI is continually increasing. By having a copy of data of
previous sales gives the business the ability to compare their profits from one year to the
next, which gives them a more of a precise view on how well the business is working. After
viewing the tables that are below, it shows that the company’s sales in 2019 are better than
what they were in 2015, but when the RPI is increased in 2015 to 2019 figures, a larger is
profit is made in 2015 due to the price of bread being cheaper.
The sales of loaves for 2015 had an RPI rate
of 144.3 and had made a profit of £50,000 in 2015, however in January 2019, the RPI was
157.2 and the company had made a profit of £53,000. When first looking at the tables, it
shows that Valley, Bakeries has only made a profit increase of £3,000 across 4 years, but if
the calculations are done with having the RPI rate 157.2 in 2015 the business would have
actually made £1470 less in January 2019 compared to 2015. The graph below shows that
when 2015 figures are used with the same RPI as 2019 figures, they are bringing in more
sales in compared to 2019.
, 2019 Sales of Loaves vs RPI
100,000
90,000
80,000
70,000
60,000
2019 (£)
Sales
50,000
RPI on 2015
40,000
30,000
20,000
10,000
0
1 2 3 4 5 6 7 8 9 10 11 12
Months
In January 2015, Valley Bakeries made a profit of £40,000 with an RPI of 144.3 from the
sales of their roles and in January 2019 they made a profit of £42,000 with an RPI of 157.2.
However, if the calculations are done with having the 2019 RPI rate, the sales for January
show a profit of £43,575.88 which is £1,576 more than when using the RPI of 144.3. The
graph below shows that the 2019 sales look better than 2015 sales but using the RPI for
both of the years, the 2015 sales actually made a better profit.
2019 Sales of Rolls vs RPI
90,000
80,000
70,000
60,000
50,000 2019 (£)
Sales
40,000 RPI on 2015
30,000
20,000
10,000
0
1 2 3 4 5 6 7 8 9 10 11 12
months
Task 2
The tables below demonstrate the moving average of each month for the sales of both
loaves and rolls at Valley Bakeries in the year of 2019. To calculate the moving average the
figures from the month before, the current month and the month after have been added
together. The result of that sum was then divided by 3 which gives the moving average for
that month.
For example, for February’s moving average, the figures from January, February and March
have been added together and gave a total of £174,000. This figure was then divided by 3 to
give a moving average of £58,000.
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