ASSIGNMENT 1, HELP UNIVERSITY.

COURSE: MBA

Standard Assignment Cover Page

(To be bound with assignment)

Student Name : PRAFUL MAHALGOD BHADRAPPA

Sessions : 2 May – 12 Jun 2020
Subject Name : Accounting for Managerial Decisions
Subject Code : ACC5123
Facilitator : Dr Gopal Krishna
Assignment No. :1
Submission Due Date : 15/06/2020
Word Count : 2708
IMPORTANT DECLARATION
I am aware of the university’s requirement for academic integrity and I declare that my
assignment is my own work and confirms with these requirements.

Date: …………14/06/2020……..……….. Signature: ………PRAFUL MB…..……..

N.B
 The examiner has, and may exercise the right not to mark this assignment if the above
declaration has not been signed.
 If the above declaration is found to be false, no mark will be awarded for this assignment.

FOR OFFICE USE ONLY

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Table of Contents:
Question 1..............................................................................................................................................3

a) The Primary information needs of each manager:......................................................................3

b) Suggestion of Financial report likely used by each manager:.................................................4

c) Special purpose management accounting report designed for each manager are:......................5

Question 2..............................................................................................................................................7

Small Business may fail due to following reasons:...........................................................................7

Question 3............................................................................................................................................10

a) Computation of Ratios:.............................................................................................................10

b) Compare and comment on the ratios of both companies:.....................................................11

References:...........................................................................................................................................13

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Question 1

a) The Primary information needs of each manager:

 Rahman, Sales Manager:

Sales Manager will be aware of the organization's customer base. Since the company is engaged in

the trading of tennis related goods, Rahman will advise its sales representatives to concentrate their

attention on the people who play tennis and the cost of each product they sell at the company

includes the cost of each product. He would also be conscious of the wage paid to each of his sales

representatives. He should also know the commission rate on successful sales which allows the

company to determine the number of profits on successful sales. Measure performance in lines with

company goals and assess business operations.

 Teong Lai Shin, Technical Specialist:

Responsible for monitoring programmers of computers. Teong Lai Shin should be aware of how

many programmers are there, and of the total cost. Interested in cost information and necessary

information will relate to departmental cost data. He needs information that will help determine how

best results can be achieved by computer system, and information that will help the system achieve

targets but also encourage staff. An ERP program to have all the information provided in a

centralized, systematic source to handle all the major business processes.

 Rathika, Cost Accounting Manager:

Cost Accounting Manager will need to know the costs associated with every product the organization

makes. Such costs fall into two groups, the cost of the times and the price of the commodity. Period

costs consist mainly of the expenses incurred in the sale of the goods and the administrative costs,

while the costs of the product include the overhead costs of manufacture, labour costs, and the costs

of raw materials. A cost of the manufactured goods schedule that includes cost details to determine

the cost of manufactured goods, work-in-process costs, and total cost of manufacture.

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 Jesudas, Production manager:

The Production Supervisor will need details like that the cost accounting manager needs. There are

just a few differences that the two should have such as details. Such a discrepancy will exist in the

details that the two need. The cost accounting manager, for example, is expected to know both the

details about the cost of the time and the cost of production, while the company requires only the

cost of production. Production manager needs information on direct and indirect labour costs, all

staff roles, and a system of product-by-product allocation.

 Jones David, Engineer:

The Engineer will need details about all the new products target market. He is expected to work in

collaboration with the Sales Manager so that he can understand if the tennis players and tennis game

audience will enjoy the goods produced by the company. In any newly developed design, the

Engineer should also be told about the cost of the product. This is due largely to the fact that the cost

of the product will be important in deciding the cost of selling the product. Requires details on the

cost of manufactured products, overheads for production, sales prices, and marketing analysis to

prepare for customer demand.

b) Suggestion of Financial report likely used by each manager:

Financial reports are the income statement, statement of financial position and statement of cash

flows. Rahman, Sales Manager will use the income statement to keep the record of all the sales from

each sales representative by supervising them. Rathika, Cost Accounting Manager uses all the three

financial reports for the purpose of providing information about the results of operation, financial

position, and cash flows of the company. Jesudas, Production Manager will use the income statement

to show the cost of goods sold. Teong Lai Shin, Technical Specialist will not use any financial

reports as he is involved in the supervision of programmers. Jones David, Engineer will not use any

financial report as he is supervising all new products design team.

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c) Special purpose management accounting report designed for each manager are:

 Rahman, Sales Manager:

The special purpose accounting statement on the Sales Performance of the Week are allocated to the

sales manager. Depending on the number of customers served, the document is published at the end

of the month as deemed appropriate. It includes the total sales made in the week just completed by

individual salespeople and the total sales of all the sales representatives combined. Additionally, the

document includes the priorities of each sales representative team. The milestones are divided into

weekly, monthly, quarterly, semi-annual, or annual goals. Another important part of the Weekly

Sales Report are the techniques to be used by sales managers to achieve their targets.

 Teong Lai Shin, Technical Specialist:

Indirect Labour Report is a special purpose management accounting report intended for the technical

expert overseeing the computer programmers. The indirect labour study contains the contributions of

the technical experts who control the processes of production indirectly. This report is not

specifically connected with the manufacture of goods and services. It refers to wages paid to workers

whose duties make it possible for others to produce goods and to provide services. The cost of these

forms of indirect labour is paid to overhead plant, and from there to production units produced

during the reporting period. This means that the costs of indirect labour related to the cycle of

production end either in the end of the inventory or in the cost of the products sold. This report

should be released bi-monthly basis.

 Rathika, Cost Accounting Manager:

A special accounting report called the Production Cost will be assigned to cost accounting manager.

This will be the primary document in the development of tennis related products with useful details

of varying nature. For example, this provide details on the cost of making a product. The cost is

broken-down in each way. In other words, the costs involved are divided into their different

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components so that a person concerned, view the production stages openly individually and see the

one costing the most. As the cost accounting manager is the one responsible for production, the

document will separate the parts for each of Alfanso plc 's produced components and products.

Therefore, as the cost accounting manager wants to consider the timeframe and cost of production,

this report will explain the time and cost of manufacture. The document is given out at the end of a

time in question. This depends on the duration of the firm's financial period of monthly, quarterly,

semesterly, or annually.

 Jesudas, Production manager:

The unique accounting report is allocated to the production manager given the name Cost of

Production. This includes details in the Manufacturing Cost that is almost connected to that.

However, it does not include the cost of the period because the manufacturing supervisor does not

need to know the details about the cost of the period but just the cost of manufacturing, as discussed

above. Once an accounting period ends, a special accounting report will be published.

 Jones David, Engineer:

The Cost of Design is the specific management accounting method the engineer is being given. As

the name suggests, the study includes the costs that are considered in producing new goods. This is

also because the Engineer is the one tasked with overseeing all the teams involved in the creation of

new products. As with the cost of manufacturing, this document includes the cost of the period and

the cost of the product. This report are released when the accounting period ends, in the same way

with other documents.

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Question 2

Small Business may fail due to following reasons:

1. Lack of Experience:

Entrepreneurs are motivated to fulfil a vision by a sudden business idea or a lifetime drive, but a

drive is not sufficient often. Experience is often more critical than first thought. If a new business

owner does not have the experience to start a specific company, they employ qualified staff who

assist in technical areas. Due to inexperience one area of weakness is a lack of intent. Business

should have a strong worthwhile objective to be competitive if they are to get hold of the capital.

Without proper experience a clear intention produces positive energy, a business owner will struggle

to use the energy. Another field of expertise is leadership, and a big root cause of failure is lack of

leadership [ CITATION Dea06 \l 1033 ].

2. Insufficient Capital:

Understanding a new potential client for business is extremely important. Many companies invest

huge sums of money, sometimes getting into debt by using loans from big or small business to do so,

before they really understand the needs of their customers. They end up setting up what they want

against the wishes of their customers. Things are often easy, but if the consumer wants the product,

they are more likely to consider it as basic, rather than marking it as insufficient. A new owner will

still respect the client, realize what they want against what you think they want. Funding is very

necessary once an intention is understood. It is a truly brilliant way to leverage resources, but it

should remain a clear focus. The aim of a small business loan is to have an effective business which

needs a clear plan and place to have an effective business. Networking is vital for community

members and future customers, and networking enables new business owners to look for strategic

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alliances. The people business meeting might turn into potential clients, at the very least

[ CITATION Ann15 \l 1033 ].

3. Poor Inventory Management:

A business is likely to fail without a sound strategy for managing inventories. If the firm documents

inventory either electronically or manually, the procedure is the same. A company learns how much

inventory it will predict to potential costs. Additionally, if inventory is destroyed, they would need to

raise additional money to buy new inventory if the company does not want to fail immediately. This

might push a new start-up to take out additional loans from small companies and drive the start-up

into debt. When the company has some existing unpaid small business loans that are difficult to

handle as a result, this can result in credit issues for the company, including higher interest rates and

greater payments for potential small business loans [ CITATION Nic19 \l 1033 ].

4. Over-Investment in Fixed Assets:

Fixed assets are items that cannot be easily converted into cash, such as property and equipment.

Much as the housing sector overinvested in household equity, so do businesses. A company should

not invest excessively in its fixed assets such as its office building, land, or equipment. While the

assets is being sold for money theoretically if needed, the company will not be able to operate

without the required products. Both fixed and current assets are typically called when a business plan

is being developed. One of the reasons why a business plan is needed for new small business loan is

due to its overriding importance for the company's financial stability, which is a measure of a

lender's risk. Without a business plan, new and existing firms lose track of their goals, financial

security, and future [ CITATION Reb12 \l 1033 ].

5. Personal Use of Business Funds:

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Owners are their worst enemies, at times. Whether they push through with a bad idea irrespective of

their customer input or pick a poor location, owner-side mistakes will destroy the business. Some of

the worst sins is to use corporate funds directly. Strict accounting will be used, if only so that small

business loans are paid off as quickly as possible. The company will suffer if funds are used for

personal things such as purchasing gas or purchasing flights for a summer vacation. Business

equipment, land, and company resources are only used by owners when it benefits the business.

When owners fail to correctly classify funds on tax returns, it creates a complicated situation for

owners and staff members beyond legal consequences. The company accounts and tools should be

used during their daily lives to support the business and not the workers. When an owner is low of

money, they should not tap into their business account, but rather find out why they cannot pay their

own bills [ CITATION Ber19 \l 1033 ].

6. Competition:

Competition occurs in most industries. Successful businesses should take advantage of competition.

Evaluate what other related companies do or make offers that they sell. Every company is truly

finished, and sometimes adjustments should be made. If a competing local store offers a great deal

on certain products, rather than being empty during the sale of the competition. Competition is not a

bad thing to be. Getting a large network of similar enterprises in a market will help all the enterprises

succeed. A new owner should be networking with their competition as soon as possible and the

resources under the command of the owner network are more important than the owner of the

resources alone [CITATION Ste19 \l 1033 ].

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Question 3

a) Computation of Ratios:

Target Walmart
Ratios   Formulas Corporation Stores
                     
Current Assets 18,906 47 , 661
i) Current Ratio:     Current Liabilities   11,782
    58,454  
             
             
              1.60:1 0.81:1
                     
ii) Account Receivable Receivables 7,124 3,247
x 365 x 365 x 365
Days:   Net Sales   61,471
    374,526  
             
             
              42 days 3 days
                     
iii) Inventory Cost of goods sold 41,895 286,515
Turnover:     Average Inventory   6 , 517   34,433  
             
             
              6.43 times 8.32 times
                     
iv) Working Current Assets - Current 47,661 –
Capital:   Liabilities 18,906 - 11,782 58,454
             
              RM 7,124 RM -10,793
                     
v) Return on Capital Net Profit 2849 12,731
x 100 x 100 x 100
Employed:  Capital Employed    32,778  105,136  
             
             
              8.69% 12.11%
                     
vi) Return on Net Profit 2 , 849 12,731
x 100 x 100
Assets:     Total Assets x 100    44,560   163,590  

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              6.39% 7.78%
                     
vii) Debts to Assets Debts 17,471 40,452
x 100 x 100 x 100
Ratio:     Total Assets    44,560  163,590  
             
             
              39.21% 24.73%
             
viii) Times Interest 21,437 5 ,272
Income Before Tax∧Interest
Cover:           1,798 647  
Interest Expenses
             
             
        8.15 times 11.92 times
                     

Notes:

Income Before Tax and Interest formula is (Profit + Income tax expense + Interest Expense) and

computation for Target and Walmart companies i.e., (2,849+1,776+647=5,272) and

(12,731+6,908+1,798= 21,437).

b) Compare and comment on the ratios of both companies:

 Profitability Ratios:

In terms of Return on capital employed, Target corporation has 8.69% whereas Walmart stores has

12.11% by this we can say that Walmart has high 3.42% of ROCE compare to Target company. In

terms of Return on assets, Target corporation has 6.39% whereas Walmart stores has 7.78% by this

we can say that Walmart has high 1.39% ROA compare to Target company. Overall, profitability of

Walmart stores has increased and improved compare to Target corporation.

 Liquidity Ratio:

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In terms of Current ratio, Target corporation has 1.60:1 whereas Walmart stores has 0.81:1 and it is

below the benchmark of 2, by this we can say that Target has 0.79 more current ratio compare to

Walmart stores. In terms of Working capital, Target corporation has RM 7,124 whereas Walmart

stores has RM -10,793, here Walmart have deficit working capital whereas Target have surplus

working capital, by this we can say that Target has positive working capital whereas Walmart has

negative working capital. Overall, liquidity of Target corporation has improved and increased

compare to Walmart stores.

 Efficiency Ratios:

In terms of Account receivable days, Target corporation has 42 days whereas Walmart stores has 3

days, by this we can say that Walmart has lesser Account receivable days compare to Target

company which is suitable for the business by not letting customers to hold out cash of company for

more days. In terms of Inventory turnover, Target corporation has 6.43 times whereas Walmart

stores has 8.32 times, by this we can say that Walmart has more Inventory turnover of 1.89 times

compare to Target corporation which is better for company to show the number of times the

inventory turns over. Overall, efficiency of Walmart stores is better and improved compare to Target

corporation.

 Solvency Ratios:

In terms of Debts to assets ratio, Target corporation has 39.21% whereas Walmart has 24.73%, by

this we can say that Walmart has 14.48% lesser debts to assets ratio compare to Target corporation,

which is better for the Walmart company by having less debts. And the debts of Target corporation is

near to 40% which is not good for the company as debts should not exceed 40%. In terms of Times

interest cover, Target corporation has 8.15 times whereas Walmart stores has 11.92 times, by this we

can say that Walmart has more 3.77 times interest cover compare to Target corporation, the more

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times the better for company. Overall, solvency of Walmart stores is better and improved compare to

Target corporation.

References:

Burns, S. (2019). Why Entrepreneurs Fail. Retrieved from Forbes:

https://www.forbes.com/sites/stephanieburns/2019/04/30/why-entrepreneurs-fail-top-10-

causes-of-small-business-failure/#6eaebc5c7102

Bushe, B. (2019). The causes and impact of business failure among small to micro and medium

enterprises. Africa’s Public Service Delivery and Performance Review, 1-26.

Coleman, R. (2012). Top Ten Reasons why Small Businesses Fail. Retrieved from Loans.org:

https://loans.org/business/articles/top-ten-reasons-small-company-fail

Johnson, A. (2015). Top Reasons Businesses Close Down. Retrieved from chron:

https://smallbusiness.chron.com/top-reasons-businesses-close-down-20466.html

Shepherd, D. A., & Wiklund, J. (2006). Successes and Failures at Research on Business Failure and

Learning from It. Foundations and Trends in Entrepreneurship , 105-156.

Walters, N. (2019). Why do small businesses fail? Retrieved from Shopkeep-Small Business Hub:

https://www.shopkeep.com/blog/why-small-businesses-fail#step-1

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