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1. EGGS presented its quarterly report in terms of performance. Indicators such as Revenue have increased by 10% and material purchase cost have decreased by 10%. According to this outcome the CEO of the company should be happy. However ,CEO’s main concern was that the company didn’t have enough money on hand when it wanted to invest.
Explain what KPI they should measure in order to see a complete picture and how they can improve this KPI.
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- Bannister Company, an electronics firm, buys circuit boards and manually inserts various electronic devices into the printed circuit board. Bannister sells its products to original equipment manufacturers. Profits for the last two years have been less than expected. Mandy Confer, owner of Bannister, was convinced that her firm needed to adopt a revenue growth and cost reduction strategy to increase overall profits. After a careful review of her firms condition, Mandy realized that the main obstacle for increasing revenues and reducing costs was the high defect rate of her products (a 6 percent reject rate). She was certain that revenues would grow if the defect rate was reduced dramatically. Costs would also decline as there would be fewer rejects and less rework. By decreasing the defect rate, customer satisfaction would increase, causing, in turn, an increase in market share. Mandy also felt that the following actions were needed to help ensure the success of the revenue growth and cost reduction strategy: a. Improve the soldering capabilities by sending employees to an outside course. b. Redesign the insertion process to eliminate some of the common mistakes. c. Improve the procurement process by selecting suppliers that provide higher-quality circuit boards. Required: 1. State the revenue growth and cost reduction strategy using a series of cause-and-effect relationships expressed as if-then statements. 2. Illustrate the strategy using a strategy map. 3. Explain how the revenue growth strategy can be tested. In your explanation, discuss the role of lead and lag measures, targets, and double-loop feedback.Bradford Company, a manufacturer of small tools, implemented lean manufacturing at the end of 20x1. The companys goal for the year was to increase the ROS to 40 percent of sales. A value-stream team was established and began to work on lean improvements. During the year, the team was able to achieve significant results on several fronts. The Box Scorecard below reflects the performance measures at the beginning of the year, midyear, and end of year. Although the team members were pleased with their progress, they were disappointed in the financial results. They were still far from the targeted ROS of 40 percent. They were also puzzled as to why the improvements made did not translate into significantly improved financial performance. Required: 1. From the scorecard, what was the focus of the value-stream team for the first six months? The second six months? What are the implications of these changes? 2. Using information from the scorecard, offer an explanation for why the financial results were not as good as expected. 3. Suppose that on December 31, 20x2, a potential customer offered to purchase an order of goods that would increase weekly revenues in January by 100,000 and material cost by 30,000. Using the old standard cost system, the projected conversion cost of the order would be 60,000. Would you recommend that the order be accepted or rejected? Explain.A service company has the following financial information (in millions of $)a. What is the profit leverage effect of reducing the cost of the facilitating goods in this company?b. It has been suggested that the in-house services costs could be reduced by 10 percent in the coming year by implementing lean systems. What effect would thisohave on earnings increase in percentage?c. What is the profit leverage effect of in-house services relative to profits?
- ZNet Co. is a web-based retail company. The company reports the following for the past year. The company’s CEO believes that sales for next year will increase by 20% and both profit margin (%) and the level of average invested assets will be the same as for the past year. 1. Compute return on investment for the past year. 2. Compute profit margin for the past year. 3. If the CEO’s forecast is correct, what will return on investment equal for next year? 4. If the CEO’s forecast is correct, what will investment turnover equal for next year? Sales . $5,000,000 Operating income . $1,000,000 Average invested assets . $12,500,000The Protek Company has been growing very fast, but profitability has declined from 11.85% to 2.36% in just two years. Costs have increased faster than sales and expenses are out of control. The Board of Directors has appointed Bob Smith to come up with some recommendations that are likely to help get the situation under control. He has made the following suggestions, but has hired you to actually put the numbers into proforma statements to present to the Board at their next meeting. Income Statement The company will slow down the growth of sales to 15% for the next year (20X4). Bob does not see any easy fixes to the cost of good sold situation, so those will go up 15% in line with sales, leading to the same gross margin percent as this past year. Bob has decided that the budgets for the Marketing and Research and Development departments should be exactly the same dollar amount as in 20X3. He feels that imposing that particular discipline to the Marketing Department will be good for…BendOR, Inc., manufactures control panels for the electronics industry and has just completed its first year of operations. The following discussion took place between the controller, Gordon Merrick, and the company president, Matt McCray: Matt: I’ve been looking over our first year’s performance by quarters. Our earnings have been increasing each quarter, even though our sales have been flat and our prices and costs have not changed. Why is this? Gordon: Our actual sales have stayed even throughout the year, but we’ve been increasing the utilization of our factory every quarter. By keeping our factory utilization high, we will keep our costs down by allocating the fixed plant costs over a greater number of units. Naturally, this causes our cost per unit to be lower than it would be otherwise. Matt: Yes, but what good is this if we are unable to sell everything that we make? Our inventory is also increasing. Gordon: This is true. However, our unit costs are lower because of the…
- a) Calculate the contribution margin per unit.b) Calculate the number of units Beauty Supplies Company must sell each year to break even.c) Calculate the number of units Beauty Supplies Company must sell to yield a profit of $160,000.d) Managers may use Sensitivity analysis in their accounting system.i) What is sensitivity analysis? ii) How is Sensitivity analysis useful to managers?Suppose a firm with a contribution margin ratio of 0.3 increased its advertising expensesby $10,000 and found that sales increased by $30,000. Was it a good decision to increaseadvertising expenses? Suppose that the contribution margin ratio is now 0.4. Would it bea good decision to increase advertising expenses?1.) refer to the original data. Compute the company's margin of safety in both dollar and percentage terms ? 2.) what is the company's cm ratio? If he company can sell more units thereby increasing sales by $84000 per month and there is no change in fixed expense, by how much would you expect monthly net operating income to increase?
- Frank Corporation evaluates its managers based on return on investment (ROI). Hazel B and Sarah D, managers of the electronics and housewares departments respectively, have recently suffered from declining profits in their departments. Over lunch, they discuss the problem, and how they could improve performance. Most of the discussion centers around ways to increase sales. Near the end of the lunch period, however, Sarah remarks that there are two components to consider, and that they have considered only one. She wonders whether there is some way to reduce investment, and by decreasing the denominator of the ROI fraction, to improve the final result. Back at work, Hazel continues to mull over Sarah's remarks. She decides to pursue the matter further, and before the end of the quarter she has sold quite a bit of older equipment and replaced it with equipment obtained with a short-term lease. Her performance, measured by ROI, is markedly improved, although sales continue to be…Kiley Corporation had the following data for the most recent year (in millions). The new CFO believes (1) that an improved inventory management system could lower the average inventory by $4,000, (2) that improvements in the credit department could reduce receivables by $2,000, and (3) that the purchasing department could negotiate better credit terms and thereby increase accounts payable by $2,000. Furthermore, she thinks that these changes would not affect either sales or the costs of goods sold. If these changes were made, by how many days would the cash conversion cycle be lowered? (Hint: Calculate the CCC for original and then for revised and take the difference. SHOW ALL WORK)Kiley Corporation had the following data for the most recent year (in millions). The new CFO believes (1) that an improved inventory management system could lower the average inventory by $4,000, (2) that improvements in the credit department could reduce receivables by $2,000, and (3) that the purchasing department could negotiate better credit terms and thereby increase accounts payable by $2,000. Furthermore, she thinks that these changes would not affect either sales or the costs of goods sold. If these changes were made, by how many days would the cash conversion cycle be lowered? Original Revised Annual sales: unchanged $110,000 $110,000 Cost of goods sold: unchanged $80,000 $80,000 Average inventory: lowered by $4,000 $20,000 $16,000 Average receivables: lowered by $2,000 $16,000 $14,000 Average payables: increased by $2,000 $10,000 $12,000 Days in year 365 365
