CGMA Management Case Study Exam | Clase 10

Analizar e informar sobre el desempeño de las divisiones operativas utilizando indicadores financieros y no
financieros | Métricas financieras clave.

Variante 1 – Tarea: 3.2

Milena Rudnytska asks you into her office. She hands you a document.

I have brought a copy of a letter that arrived this morning. The Board believes that we need to launch 50
albums on vinyl in order to generate publicity and also to reassure retailers that we are serious about the
sale of vinyl. We are keen to work with Steampress Vinyl, who have specified a minimum order of
100,000 units per album, requiring us to buy 50 x 100,000 = 5 million records at a unit cost of F$2.74
which is F$13. 7 million in total.

We intend to sell these albums initially through online and High Street retailers in Fortuna. Given the
nature of the product, the major retailers would insist on a lengthy period of trade credit. The retailers in
this market will set their selling prices by adding a fixed percentage to our wholesale price. The retail
selling price of a vinyl record is currently anywhere between F$12.00 and F$22.00.

I need that you to identify the key accounting ratios that will be affected by this venture and explain
whether they will improve or deteriorate. There is no need to calculate the actual ratios.

Mr Walter Lee,

Director of Strategy and Operations, Trevel Records,

Capital City.

Dear Mr Lee,

Memorandum of Understanding

I am writing to confirm our recent discussions concerning your intention to release an extensive range of
back catalogue recordings as vinyl records. Steampress Vinyl is well equipped to assist you with this
process. We have skilled audio engineers and use the latest equipment to create high quality vinyl records.

As discussed, we could process 50 albums, with an initial production run of 100,000 copies of each, at a
unit price of FS2.74. Production and manufacturing would take three months and we would require
immediate payment on delivery. Our price includes delivery to your warehouse.

This should prove a profitable business for you. In 2019, a total of 4.8 million vinyl records were sold in
Fortuna and worldwide sales exceeded 20 million units.

Yours sincerely,

RogerSann

Head of Business Development

Steampress Vinyl