You are an accountant working for the restructuring and insolvency firm Turnaround and Insolvency Business Experts (“TIBE”).

Your supervisor has provided you with a file on Deluxe and Delicious Wines Pty Ltd (“DDW”), a company that specialises in the warehousing and distribution of select wines that is experiencing financial difficulty. Samantha Smithers is Managing Director of DDW. She has approached TIBE as she is concerned the DDW is trading whilst insolvent. She seeks your advice as to what options the company has, whether the company is likely to be placed in external administration and what actions (if any) should she take as the Managing Director of DDW.

On receiving the DDW file you carried out some initial investigations of the company, including its operating environment and overall financial position.

You have completed your investigation on 5 April 2017. Your investigations revealed the following information:

DDW History and Business Model

DDW is a small, family owned business, established by Samantha’s grandfather. For many years, the company has successfully operated a warehouse and distribution service for Australian producers of fine wine. There are three directors on the board of DDW: Samantha, her brother David Smithers and George Trinket who is a family friend and has worked for the company for the last 20 years.

The company’s business model has been that the company purchases the wines directly from the wine makers, particularly the smaller, more elite, wine producers that were not able to warehouse and distribute their own products. Once purchased, DDW would store and then sell the wines to retailers at a margin of approximately 40% per order. In most cases this covered the costs of the order and a sizeable profit. Historically 80% of the orders were in the Brisbane and surrounds area with the remainder in various locations around Queensland and northern NSW.

This business model has been successful in the past, but the company has been experiencing declining profits in recent years.

Factors Impacting DDW Profitability

Your general investigation has suggested the following factors have been impacting DDW’s profitability:

• The company carries out its own distribution which carries fixed costs associated with ownership of transport trucks. Distribution staff are employed on a full time basis. Samantha estimates that the variable costs of distribution are $5-$35 depending on the location of the order. Increasingly, orders are being placed by customers outside Brisbane and surrounds, meaning that the variable costs are escalating.

• Customers having indicated that it is often cheaper for them to purchase the wines via internet services, such as eBay, and often with a faster turnaround on orders.

• There is a competitor company that operates a similar business in Sydney. This company appears to be increasingly focussing on distribution in the northern NSW area.

DDW Financial Information

• The company had been experiencing a high turnover of administrative staff, particularly in the accounting department. Therefore, it was difficult to determine accurate financial information. However, your investigation established that the company had the following assets and liabilities:

Assets and Liabilities	$
Debtors (30 day terms)	1,350,000
Plant and equipment	4,500,000
Inventory	400,000
Creditors (30 day terms)	2,140,000
Overdraft	150,000
Bank Loan	4,000,000

• The company pays approximately $200,000 per month for rent for the building in which the warehouse and office operates. The building is located in an industrial area in the northern suburbs of Brisbane. Similar building spaces in areas of the Sunshine Coast are cheaper, but relocation costs would be significant.

• In August 2016, David’s son, Rupert, announced that he was getting married. As an engagement gift, David caused DDW to purchase a new car valued at $50,000, which was then provided to Rupert.

• One of DDW’s major creditors is BoxesCo Pty Ltd, a company that supplies DDW with packaging for the wines. On 20 February 2017, BoxesCo validly served a statutory demand for an outstanding debt of $350,000 under s459E of the Corporations Act 2001. It appears BoxesCo has been seeking payment for several months but DDW believes that it only owes Boxes Co $290,00. By the time your investigations were complete, DDW had still not paid this amount. However, DDW has not, as yet, applied to have the statutory demand set aside.

DDW has been selectively paying creditor

 

"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"

Rivera Company has several processing departments. Costs charged to the Assembly Department for November 2020 totaled $2,288,076 as follows. Work in process, November 1 Materials $79,000 Conversion costs 48,200 $127,200 Materials added 1,594,520 Labor 225,800 Overhead 340,556 Production records show that 34,600 units were in beginning work in process 30% complete as to conversion costs, 662,700 units were started into production, and 24,100 units were in ending work in process 40% complete as to conversion costs. Materials are entered at the beginning of each process.

Determine the equivalent units of production and the unit production costs for the Assembly Department. (Round unit costs to 2 decimal places, e.g. 2.25.) Materials Conversion Costs Equivalent Units Cost per unit $ $

Determine the assignment of costs to goods transferred out and in process. Costs accounted for: Transferred out $ ________ Work in process, November 30 Materials $ ______________ Conversion costs ____________ _____________ Total costs $ ____________

Prepare a production cost report for the Assembly Department. (Round unit costs to 2 decimal places, e.g. 2.25 and other answers to 0 decimal places, e.g. 125.) RIVERA COMPANY Assembly Department Production Cost Report For the Month Ended November 30, 2020 Equivalent Units Quantities Physical Units Materials Conversion Costs Units to be accounted for Work in process, November 1 ______ Started into production _____ Total units _____ Units accounted for Transferred out _____ _____ _____ Work in process, November 30 _____ _____ _____ Total units _____ ______ ______ Costs Materials Conversion Costs Total Unit costs Total Costs $ _____ $ ____ $ _____ Equivalent units ____ ____ Unit costs $ _____ $ _____ $ _____ Costs to be accounted for Work in process, November 1 $ _____ Started into production _____ Total costs $ _____ Cost Reconciliation Schedule Costs accounted for Transferred out $ _____ Work in process, November 30 Materials $ ____ Conversion costs _____ ____ Total costs $ ____

 

"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"

Why the earlier a ticket is booked the lower is the price? Or Why the price is

more expensive the nearer the date of departure for a flight? Discuss the

economic meaning?

 

"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"

Take a total cost function, equal to C(y)=100+0,5*y^2 Supposethere are 100 firms, all with the same cost function, in a marketwhose aggregate demand is given by ŷ=300-p Compute each firm’ssupply, aggregate (total) supply and the competitive equilibriumCompute the elasticity of demand to price, at equilibrium. . . .

 

"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"