Bragan Manufacturing Ltd. Case Analysis
Essay Preview: Bragan Manufacturing Ltd. Case Analysis
Report this essay
CASE ANALYSISOverview:Case Name:                Bragan Manufacturing Ltd.Student Name:                Zixuan (Yvonne) LiuStudent Number:        100280409Short Cycle Process: Who: Jim Marshall When: June 3, 1987 Where: Canada Case Analysis: Issues:Issue 1. Lease or buy the equipmentThe case mention that BML should lease the equipment in order to generate more profit and there will be no debt to show up on the balance sheet. However, Bill think is too expensive to lease the equipment. There is not clear that whether BML should lease or buy the equipment.Management Accounting/Business Concepts: Capital lease  AnalysisAs the given information from the case and under Exhibit 1, BML has been provide a purchase option at the end of 5 years, which cost $10,000. Therefore, the equipment will be capital lease. The present value of the equipment is $289,600 under Exhibit 1. For capital lease, the leasing equipment will be recorded as an asset and a liability. The payment for the equipment will be recorded in yearly bases, so the liability is reducing. However, the debt will still show up in the balance sheet. The total cost for 60 months leasing will be $435,000 (7250*60). To purchase the equipment at the end of five years will cost $10,000, so the total cost will be $445,000. If BML decided to buy the equipment at the list price will cost $300,000, is $145,000 less than leasing.  Recommendation:After analysis, leasing equipment is cost too much money compare to buy out the equipment. Therefore, BML should buy the equipment instead of leasing. Issue 2. Hire internal auditorBill wants to hire an internal auditor in order to track of business and help business growth. However, the idea is been rejected because the extra cost was not warranted, and the external auditors already looked after systems related to internal control. It is not clear that whether BML should hire an internal auditor or not.

Management Accounting/Business Concepts: external auditor and internal auditor.AnalysisAn external auditor is to help tracking with the business transactions system, financial statements, and managing the external financial risks for the company. Internal auditor is different, the duty of internal auditor is to add value and improve the business operations. Internal auditor will monitor the business internal financial risks and provide insight and recommendation base on analyses. Even though external auditor focuses on financial risks and evaluate internal financial system, it is not able to monitor the internal system in a continuous basis because external auditor only audits the company once a year. In order to help business consistently growing and expend the business, it is important that BML to hire an internal auditor. RecommendationBML should hire an internal auditor to manage the business and monitor the internal financial system. If BML is planning expend the size from small manufacturer to medium manufacturer, it is very important that to hire an internal auditor. Issue 3. Keep a separate record from U.S sales BML has been recommended that no need to keep a separate record from U.S market sales since there is no difference than other sales.Management Accounting/Business Concepts: recording business transaction from business point of viewAnalysisBML recently escalated almost 30% of its sales in U.S market. This shows BML company try to enter the U.S market by understanding and tracking the customer’s performance. This also can help BML to analyse the market positioning for itself and identify the potential growth opportunities in both U.S and Canada market. As a Canadian company, that means 30% of BML U.S sales and profit influence by foreign exchange rate. The unstable foreign exchange rate will affect the actual profit that appears on the financial statement. If BML did not record the sales from U.S market, the company may have inaccurate financial statement and lead to either lose profit or over stated the profit.

Get Your Essay

Cite this page

Internal Auditorbill And Business Concepts. (July 9, 2021). Retrieved from https://www.freeessays.education/internal-auditorbill-and-business-concepts-essay/