Assignment on Ireland Renovations

Course Title: Management Accounting

Section: 1

Course ID: ACN202

Submitted to: Nafees Reza Sir

Name ID
Tahmidur Rahman 1910554
Kazi Lamisa Nahar 1810728
Jefree Sarker 1910107

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Table of Contents
Case Synopsis.............................................................................................................................................3
Assess IR's qualitative corporate capabilities..........................................................................................3
Analysis of trends in the construction and renovation industry and how they affect IR’s future
decisions.....................................................................................................................................................4
Qualitatively assess the opportunity for Ireland to hire his son, Ryan Ireland, to work full-time for
IR................................................................................................................................................................5
Projection of IR’s cash budget for fiscal year 2020 and 2021.................................................................6
Qualitative assessment of the opportunity for IR to implement an alternative customer payment
structure...................................................................................................................................................10
As Ireland what decisions would we make?..........................................................................................10

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Case Synopsis
On June 25, 2019, Ireland Renovations (IR) owner Mike Ireland was thinking about the direction
his building and remodeling business should go. Ryan, Ireland's youngest son, had expressed
interest in working for the family firm as he prepared to enter the workforce. During the summer,
Ryan and Ireland's two elder kids would frequently work part-time on remodeling jobs. In light
of IR's current financial situation, Ireland questioned if he could afford to hire Ryan on a full-
time basis. Ireland made the decision to project and examine the cash budgets for the FYs 2020
and 2021 in order to ascertain whether appointing Ryan would be a practical choice.

Assess IR's qualitative corporate capabilities.

The Ontario cities of London and Middlesex County were served by the building and remodeling
firm IR. The business was founded in 2002 and offered a wide range of services, including but
not limited to basement development, window and door installation, fence, deck, pool house, and
shed construction, cabinet assembly and installation, flooring installation, concrete services, and
interior and exterior renovations of residential, commercial, and industrial buildings. Free
estimates were provided by IR with no obligation to proceed and no upfront payment required.
The first payment for the project was 25% of the expected total cost, with the remaining amount
being payable within 30 days of the project's completion. Most IR's clients were
recommendations. As a result, it was uncommon for clients to choose to forego paying their
unpaid invoice after the job was finished.

IR had several qualitative corporate capabilities that made them a successful and reputable
business. These included:

Experienced and skilled general contractor: Mike Ireland was a certified, insured, and fully
licensed general contractor with over 40 years of experience in the industry.

Variety of services: IR offered a wide array of services, including interior and exterior
renovations, basement development, window and door installation, construction of fences, decks,
pool houses, and sheds, cabinet assembly and installation, flooring installation, and concrete
services.

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Free estimates: IR provided free estimates with no commitment or money down until the project
began.

Referral-based business: Most IR’s customers came from referrals, which made it rare for
customers not to pay their outstanding bill upon completion of the project. It demonstrating that
the company was well-respected in the industry and had an established network of customers.

Self-sustaining workforce: Ireland was skilled and licensed in numerous areas of construction
and could often complete many aspects of the projects by himself. When he needed assistance,
he relied on his three sons or his father to work for him on an as-needed basis.

Analysis of trends in the construction and renovation industry and how they affect IR’s
future decisions
During 2017, the home renovation and improvement industry had seen an increase in interest
from all around the country. The number of Canadians planning to renovate their homes were
on the increase. Even in the year 2018, a poll conducted by the Canadian Imperial Bank of
Commerce, showed that 45% of Canadians were planning to renovate their homes within the
next year. People of Ontario were planning to spend an average of $13,600 on renovations in
some way or the other. Older citizens aged 55 and higher were mostly looking to renovate
their homes since they did not want to leave their preferred neighborhoods that they loved
and were well and truly familiar with. Mostly projects like basic maintenance such as
painting, flooring, general repairs and replacing appliances, landscaping such as decks, patios
and driveways, bathroom and kitchen renovations and window and door replacements were
at the top of the list of the said polls that were conducted. This brief analysis tells us that the
interest in the renovation industry as been on a steady rise. Almost half of Canadian
population aims to renovate their homes every year.

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 Ireland Renovations can keep the rising of interest trend of home renovations in mind while
making future decisions. This way, they can choose to recruit more employees in order to
increase manpower. The increasing interest in the home renovation industry of Canada can
affect IR's future decisions in a number of ways. Firstly, it may lead to an increase in demand
for certain products and services, such as paints, flooring, appliances, landscaping materials,
and bathroom and kitchen fixtures. This could open up new opportunities for IR to expand
their product and service offerings. Secondly, the increased demand for home renovation
services could lead to increased competition in the market, which could impact the pricing of
IR's products and services. Finally, the increased interest in home renovation could also lead
to additional regulation of the industry, which could impact IR's operations.

Qualitatively assess the opportunity for Ireland to hire his son, Ryan Ireland, to work full-
time for IR.
Ryan had begun publishing several of IR's finished projects on social media while working part-
time for Ireland. This medium enhanced the number of potential consumers who contacted IR for
free estimates and secured employment for the forthcoming summer months.

So, we can say that the opportunity for Ireland to hire his son, Ryan Ireland, to work full-time for
IR is a positive one. Ryan's experience and knowledge of the business, combined with his ability
to manage social media, will be a significant boost to the business. Additionally, the salary
Ireland is offering is fair and competitive for the area, and the cost of the laptop and online
marketing campaign are reasonable investments to make to realize the potential of the business.
All in all, the opportunity to have Ryan join the business full-time should be considered a wise
decision. However, Mike Ireland must consider the financial implications of hiring his son full-
time and ensure that he is adequately compensated and that the company has enough cash
resources to pay him. Ireland must also consider the potential impact of any changes to the
customer payment structure, such as asking for a second deposit on large-scale projects.
Ultimately, it is up to Mike Ireland to decide whether the potential benefits of hiring his son
outweigh the financial risk.

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Projection of IR’s cash budget for fiscal year 2020 and 2021

Small-Scale Cash Budget for 2020

Q1 Q2 Q3 Q4 Total
B.B. 12000 1815 880 945 12000
Inflow 38250 52500 52500 52500 195750
Outflow:
Material 26250 26250 26250 26250 105000
Equipment 1250 1250 1250 1250 5000
Salary 5250 5250 5250 5250 21000
Fuel Cost 2645 2645 2645 2645 10580
Withdraw 22500 22500 22500 22500 90000
Phone 240 240 240 240 960
Internet 300 300 300 300 1200
Total 58435 58435 58435 58435 233740
Outflow

Excess (Def) (8185) (4120) (5055) (4990) (25990)

Financing
Borrowing 10000 5000 6000 5000 26000
Return
Interest
Net 10000 5000 6000 5000 26000
Financing

Ending 1815 880 945 10 10

Balance

Large-Scale Cash Budget for 2020

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 Q1 Q2 Q3 Q4 Total
B.B. 12000 10003 443 883 12000
Inflow 36438 48875 48875 48875 183063
Total Inflow 48438 58878 49318 49758 195063
Outflow:
Material 26250 26250 26250 26250 105000
Equipment 1250 1250 1250 1250 5000
Salary 5250 5250 5250 5250 21000
Fuel Cost 2645 2645 2645 2645 10580
Withdraw 22500 22500 22500 22500 90000
Phone 240 240 240 240 960
Internet 300 300 300 300 1200
Total 58435 58435 58435 58435 233740
Outflow
Excess (Def) (9997) 443 (9117) (8677) (38677)
Financing
Borrowing 20000 10000 10000 40000
Return
Interest
Net 20000 10000 10000 40000
Financing
Ending 10003 443 883 1323 1323
Balance

Large Scale Cash Budget 2021

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 Q1 Q2 Q3 Q4 Total
B.B. 10 499 888 14457 15854
Inflow 70000 35000 70000 35000 210000
Total Inflow 70010 35499 70888 49457 225854
Outflow
Materials 35000 17500 35000 17500 105000
Equipment 1250 1250 1250 1250 5000
Salary 10500 10500 10500 10500 42000
Advertising 0 200 200 200 600
Depreciation 1166 1166 1166 1166 4664
Fuel 525 525 525 525 2100
Insurance 530 530 530 530 2120
Phone 240 240 240 240 960
Internet 300 300 300 300 1200
Withdraw 24000 2400 2400 2400 31200
Total
Outflow 73511 34611 52111 34611 194844
Excess -3501 888 18777 14846 31010
Financing 0
Borrowing 4000 4000
Return -4000 -4000
Interest -320 -320
Net
Financing 4000 0 -4320 0 -320
Ending
balance 499 888 14457 14846 30690

Small-scale cash budget 2021

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 Q1 Q2 Q3 Q4 Total
B.B. 1323 2562 21401 51040 76326
Inflow 59500 93500 93500 42500 289000
Total Inflow 60823 96062 114901 93540 365326
Outflow 0
Materials 29750 46750 46750 21250 144500
Equipment 1250 1250 1250 1250 5000
Salary 10500 10500 10500 10500 42000
Advertising 0 200 200 200 600
Depreciation 1166 1166 1166 1166 4664
Fuel 525 525 525 525 2100
Insurance 530 530 530 530 2120
Phone 240 240 240 240 960
Internet 300 300 300 300 1200
Withdraw 24000 2400 2400 2400 31200
Total
Outflow 68261 63861 63861 38361 234344
Excess -7438 32201 51040 55179 130982
Financing 0
Borrowing 10000 10000
Return -10000 -10000
Interest -800 -800
Net
Financing 10000 -10800 0 0 -800
Ending
balance 2562 21401 51040 55179 130182

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Qualitative assessment of the opportunity for IR to implement an alternative customer
payment structure.
The proposed alternative customer payment structure could have a positive effect on IR's cash
position. The upfront deposits could give IR a much-needed buffer of cash that can be used to
pay for materials, labor, and other costs associated with the project. Additionally, the second
payment provides a further sense of security for IR that the customers will not take advantage of
the situation and leave IR with an unfinished job.

The main benefit of the alternative payment structure is that it puts IR in a more secure financial
situation. With the upfront deposits, IR can pay for any costs associated with the project and
have an easier time operating without having to wait for payments from customers. This also
helps IR plan ahead and budget for upcoming projects more accurately.

The main disadvantage of the alternative payment structure is that customers may be less likely
to agree to it, as it requires more upfront payments than they may be used to. Additionally,
customers may be wary of IR's ability to complete the project, as they will have to pay two
deposits before the project is even finished.

Overall, the alternative customer payment structure has the potential to be a benefit to IR's cash
position. However, IR should consider customer concerns and willingness to agree to the
alternative before making a final decision.

As Ireland what decisions would we make?

As Ireland we would like to employ Ryan Ireland in the near future of the company. It is vital
that IR increase investing into the company more often to maximize productivity of the company
in order to increase revenue. Renovation firms usually employ less people compared to other
similar firms. This is why, as including Ryan in the firm would maximize the average rate of
work from 3 small-scale projects to 5 small-scale projects, it would definitely mean an increase
in the long-term revenue stream of the firm. And as there is an increasing trend with Canadians
wanting to renovate their homes in one way or another be it small or big changes, it would be
beneficial for the firm to invest while taking risks for long-term growth.

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