Core Core Core Core Core Core

Activity A Activity B Activity C Activity D Activity E Activity F

Task 1

Task 2

Task 3

Task 4
 Case Study Preparation assignment report

Damsara Dissanayake
Question 1
Please provide your answers to the following sub tasks in Task 1:

1. Could you prepare some briefing notes I can use to explain the issues to the rest of the board
that cover the following:

• An explanation of the four main categories of costs associated with maintaining and

operating apps post-development – i.e. functional services, administrative services,

infrastructure services and IT support services

• How we can carry out cost-benefit analysis to see if maintaining the app going forwards is
worthwhile.

2. Could you add to your briefing notes a section covering the following:

• A brief summary of what factoring involves, including whether we should use factoring

‘without recourse’ or ‘with recourse’.

• Pros and cons of using a Freeland-based factoring agency

• A clear recommendation.

Answer
Dear madam,

Here you will able to find the explanations for the questions that you have raised regarding the
different topics.
ONE NATION app

Digital product costing is a area that needs the attention more because it is not similar to the
common product costing and this means that the common methods of costing will give wrong
answers if those methods were used in the costing of the digital products.

When we consider the digital costing there is mainly fixed cost and the variable costs are very
small portion so most of the costing methods will not work on the digital products, To calculate
the cost of the digital products we need to identify the categories that the costs are being
associated to get a better understanding,

There will be mainly 4 categories that we have to be aware of,

Functional services - These are the costs that are associated with maintaining the service
from the digital product that has been produced and the cost will include the third party
providers of the different tools and repairing services that supply services as repairing and
maintaining the products in order to them to work smoothly for the end user of the certain
digital product.
Administrative services - These ae the services that are in the hands of the management of
the certain organization who owns the app and these functions will ensure that the all of the
functions that should be done are the back end of the app to make sure that the customer
gets correct information and they get the service that they were expecting.
Infrastructure services- These are the type of services that are essential for a running of a
app, The servers and the doing services for the data which are collected from the customers
and the internet services, These type of services cannot be maintained by the company itself
so the company have to out source thses type of services in order to ensure the app process
is running smoothly.
IT support services - These services are the additional support that is needed for a digital
product to run in the intended environment, All the techinitions and the it experts cannot be
found in a company so they need to hire the technitions from the outside.

Cost Beneft analysis

This is a type of analysys that is used to determine the costs of the actions that we can take and
the benefits that actions will provide for the company by taking them.
In a situation like designing an application for the process of selling and marketing a pretein bar
that could be a success in the market is a good idea because the personal best do not have
enough knowledge about the new market to decide whether they are going to be succesfull or
not by selling the protein bars and powders in the freeland, Before investing in maintaining the
app to be move forward in order to give service to the customers that will be a worthy decion to
take in order to see if the company is making the intended benefits that the company needed to
perform well in the market and earn the targetede profits from the new market in freeland.

Recivebles and cash management

What is factoring and should we factor with recourse or without recorse.

So factoring is a basically a service which is provided by a factoring agent and the goal of using
a factoring company is that of the recibles of the company is not paying the due ammounts in
the credit period the factoring agent is responsible in cillecting the relevent ammount of money
from the payable party. This will be seen mainly in oversease business operating firms.

The recorse means a service which is provided by the factoring agency to us. Which means that
if somehow the liable party which need to pay the due ammount somehow didnt pay us the
ammount then the facoring agent will pay us the full due ammount even with the part that didnt
paid by the rerlevent liable party.

so without recorse means that the factoring agent will pursue the relevent payable party and
charge the relevent ammount or the chargable ammount and if there will a less ammount than
the actual payable ammount this will not be paid by the factoring agency to the company, So here
the factoring agents charges for the service is low compared to the with recorse because then
any ammount that is not paid by the payable party should be paid by the factoring agent.

Pros and cons of using a factoring agency.

Pros

The personal bestshould not be worry about the recible balances.

The cashflow of the personal best will be maintained in good levels which can attract
 investors and secure a good continues workflow.
Supplying the fitness produxts on credit basis to retailers will be not much costly because
collecting is done by an agent.

Cons

Addition fee should be paid to the factoring agent by the personal best company.
With recorse service will be more added cost compared to the without recorse.
The reputation of the retailers will be reduced and will cause to reduce orders from the
retailers for the personal best products.
Some customers will view the personal best as a profit seeking company rather than
providing healthy products.

Recommendation.

The factoring agent is a good idea when thinking about the market that the personal best is
planning to enter because freeland is a country which has been opened recently for the foreighn
markets and most of the retailers even dont know how the process should be done and there is a
bad reputaion about the freeland retailers not paying the due ammounts to the foreighn
suppliers, Because the personal best is also a developing firm and the firm is entering a whole
new market in another country the personal best will certainly need a factoring agent in order to
secure the reciveble ammounts from the respective retailers to ewnsure that the personal best
will maintain steady cashflows.

Madam I am sure that you will find the relevent information about the topics in my explanations,

Thank you,

Financial officer.

Question 2
Please provide your answers to the following sub tasks in Task 2:

1. Prepare notes explaining what the variances tell us about the sales performance, giving
possible reasons why the variances have occurred.
2. Could you identify and explain ONE financial and THREE non-financial KPIs that we could use
to appraise retailers in Freeland, together with justification as to why these are particularly
important for Freeland.

Answer
Dear madam,

below you will able to find the relevent explanations on the topics that you have been asked me
to provide.

Performance report.

Here in the performance report there are varinaces of that are identified after the actual report
was submitted by the personal best sales teams working in the freeland.

Only the pretein bars are being sold in the freeland and there are 2 sales teams responsible for
the sales in nothern and southern freeland covering B To C, small retailers and large
supermarkets and suppliers,

when considering the Team A and Team B sales variances,

The sales price variance for the all 3 pretein bars are showing adverse values this means that the
bars are being sold lesser than the budgeted price that they should be sold, but the main reason
behid these adverse variances will be that the penny sanchez decided to give a 10% discount on
the ONE NATION app fpr first 2 weeks of february. Because of that there is a adverse total sales
price varinace of C$ 4 050 000 from the Team A and same for the team B there is a advere
values for all 3 pretein bars and the total sales price variance is that C$ 3 050 000.

The sales mix profit variance is the variance which shows the difference between the budgeted
units of protein bars that the teams are intended to sell and the actual bars they actually sold,

When observing the variances we can identify there is adverse varinaces for the both peanut anf
the almond bars while only cashew bars are having a favourable variance for the sales team A
and adverse varinaces for the almond and the cashew while the peanut bar is being favourable
for team B,

This is could because that the minister of health in south freeland commented that the cashews
contain vitamin D that is essential for the body is being rich in the cashews and for the nothern
residents of the freeland who gets a little sunlight the cashew protein bar will be more useful,

Because of that the cashew protein bar sales in the north and has been increased,

while the peanut protein bar which the minister was seen enjoying at the press conference when
introducing personal best to the freeland has a adverse variance in the nothern freeland and have
a favourable variance in the southern freeland.

Finally the sales quantity profit varinace which is being deciding that if the quantity sold was
gaind a profit that is lower than the budgeted or higher than the budget, in the sales of the protein
bars in the freeland the personal best got both favourable variances of C$ 10 215 000 and C$ 33
215 000 for tema A and team B respectively and this shows that the produxt initial launch was
succesfull in the freeland.

KPI for the Freeland retailers.

KPI is a measurment which is used to set different expencted targets on different parties that is
involving with the organization in order to see that they are being working to achive those setted
targets by the compnay,

when consodereing the freeland retailers we have to impose 4 KPI for the retailers and they will
be,

The retailers are maintaining their cashflows in a strong and consistant manner - The cash
flow of a organization is a crucial factor of that organization which decides whether the
certain organization will continue for the foreseeble future and personal best is looking for
strong retailers and they should be financialy strong and potential inorder to withstand
economic problems of the countries and to continue for the future so thn the personal best
can constantly suppliy the pretwin products to the retailers whothout hesitation of finding
 new retailers tine to time, By considering a strong cash flow personal best can find out the
financially strong retailers in the freeland.
The customer service and the inquiry answering for the customers should be done in care
and in the correct way - This is a crucuial KPI for the personal best because the personal best
does not have a office in the freeland so all of the selling is done by retailers and the
application so the retailers are the humans thta are interacting with the personal best
customers in the freeland and they are the ones that are responsible in making the customer
feel motivated in purchasing the protein products, For this the retailers should display the
promotional materials in their shops and showrooms gyms and other places and they are the
party who are responsible in answering the inquiries and the questions that are being brought
by the customers, Because of this ther retailer should be a responsible person because they
will be the representing party of personal best to the customers in the freeland.
Retailers should be able to provide the protein produxts to the customers without delaying
the supply - The produxtso fthe personal best should be delivered to the customers of the
personal best in right time as the produxts were recived to the retailers, Because a selected
number of retailers are being incharge for the selling of the protein produxts the process of
selling should be done in the right time so the customers will not get dissapoint on the
personal best to not providing the stocks when the customers need the producxt and this will
cause the sales to go down so to prevent these circumstances the personal best need to find
retailers that have a solid supply chain.

Madam Ithink you will find the required explanations on the topics that you have asked me,

Thank you,

Finance officer.

Question 3
Please provide your answers to the following sub tasks in Task 3:

1. I would like you to look at the schedule provided by Penny Sanchez (Sales & Marketing
Director) [See reference materials] and discuss the extent to which the costs outlined are
relevant to the decision using the principles of relevant costing. Can you also explain THREE
other factors that would need to be incorporated into the final decision.
2. Can you give your thoughts on how we would forecast distribution costs for our individual
customers in Freeland going forwards and what information we will need.
3. Finally, I feel we should be stress-testing all budgets for the Freeland operations. The rest of
the board are not familiar with this concept, so could you draft me some notes on what stress
testing is and how it would apply to our distribution budget.

Answer
Dear madam,

Below you will be able to find the explanations on the topics you have given to me,

Outsourcing the production of peanut butter.

The personal best is currently producing the peanut butter in house by ourchasing the peanuts
from the local farmers in order to process them and to produce the base raw material for the
protein bars production, But this produxtion is slightly costly than purchasing already processed
peanut butter from the external suppliers,

But the production manager was thought that of the fresh peanut butter was used then the
customers will like the protei bars more and this will help to empower the local farmers and the
cmmunity will also be having a good word about the personal best, But when considering the
sales of the personal best those are decreasing and the costss of production is increasing so in
order to cut the costs of production of the protrin bar the managers should decide to outsource
the peanut butter, Whn considering the schedule provided by the marketing manager,

It includes the costs of peanut purchased as C$ 255 000

Expected labour costs and overhead costs for penut butter production as C$ 4 335 000

and after deducting the savings due to cost crunching ideas the total cost of producing peanut
butter inhouse will be C$ 4 520 000

This is a large cost compared to the revenue we are earning and the revenue is supposed to be
in 2024 is C$ 27 949 000 it is almost 16% from the total revenue.

In order to mimize thse costs the peanut butter can be supplied from an external supplier and the
cost of the peanut butter is as follows,

Cost for researching the outsourcing options C$ 5 000

expected cost of buying of C$ 1 005 000

And the total cost of buying peanut butter from external party is C$ 1 010 000
This is way less than produxing peanut butter in house and this will reducre the cost of peanut
butter by 22% and it is a huge cost saving for the company.

So when considering the cost cutting in order to keep the production alive and to run the
company without any financial problems the cost cutting and findng viable options for the raw
materials is a need, The best decion for the personal best is to outsource the peanut butter from
a trustwortyhy supplier.

Sress testing budgets.

stress testing is a method used by the managemt in order to calculate how the company will be
react in a environment which is having tough environmental factords for the company and how
well the company will perform in such environments, This will give an idea about how well the
budgets and the planning of the company is done and what are the changes needed to be done
in order to withstand a tough environmnet for the organization if that was ever occured.

I think I provided useful information about the topics that you have provided me with,

Thank you,

financial officer.

Question 4
Please provide your answers to the following sub tasks in Task 4:

1. Akida Agu has drafted a decision tree (attached) based on the directors’ estimates of the
consequences of different courses of action. In order to share this with the rest of the Board I
will need to explain what the decision tree (and associated probabilities) represents, how we
should use it to make a decision and the limitations of using this tree in this way. Please draft
me some briefing notes addressing these matters.
2. Can you please review the figures and evaluate the impact on the financial statements for the
current year ended 30th of June 2024, and subsequent years if we choose to lease. I would
also appreciate if you can draw up some notes on the lease v buy decision as I expect Julia
Matthews will have questions regarding the impact this decision would have on our financial
statements if we choose to lease as opposed to buy in this instance.

Answer
Dear madam,

Below you will find the required explanations on the topics that you have gave me,

Decesion tree.

Decesion tree is a graphical way of illustrating different possibilities that can be occured because
of different actions and decions that are taken by a certain firm.

In the personal best there was a problem in the peanut butter that was used in bars were not
tolerating the heat so after changing the composition of the peanut butter they were decided to
be replaced free of charge and there were suggestion from the director board to give further
rewards in order to enure the goodwill amoung the punlic will be protected,

Here we can observe a decion tree that has been created by Akida Agu showing us the decions
and the potential outcomes and their probabilities,

At the point A we have a decision box which means there is a decion taken by personal best
in order to provide vouchers worth of T$ 30 000.
At point B we can see another decion box after choosing no vouchers in the point A,which we
can decide either to spend extra T$ 25 000 or we do not spend the extran.
At point C after deciding to spend T$ 30 000 on vouchers and we can decide whether to
spend more T$ 25 000 extra.
And in the points D,E,F,G we can observe those are the outpus of the decions we take. and In
the point D we can see there is a 80% chance of getting contribution of T$ 150000 and at 20%
of getting T$ 90 000
At the point E there is a 60% chance on getting T$ 200 000 sales and a 40% chance on getting
T$ 100 000 .
In point F there is a chance of 80% to get sales worth T$ 100 000 amd a 20% chance to get
T$ 60 000.
In the final point G we can get a sales worth of T$ 160 000 at 60% possibility and T$ 70 000
 on 40% probability.

Then we can decide what is the most profitable decisons to make in order to take a greater
contributin from the sales.

ASSIGNMENT SCORE

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