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Question 1 (8 marks)

Delicious Cakes Factory operates a chain of bakeries in Canberra that specializes in supplying a range of cakes to restaurants and coffee shops. Major products include lamingtons, scones and custard tarts. Until last year, sales levels were fairly stable. However, sales have been decreasing for the last 18 months. Ralph Slick, the marketing manager of Delicious Cakes Factory, is worries, and has visited major customers to find out the reasons for their decreasing sales orders. The comments of the owner of one of the most popular Canberra coffee shops sum up the general response: Ralph, your style of cakes is old-fashioned. They are not what people want any more. Our customers prefer lighter, tastier food. They want variety, and are willing to pay more for high quality innovative creations.

At a recent meeting, Slick stated that the company should expand its product offerings, or there may be no future for the company. Specifically, he believes that there are untapped markets for gourmet pies. The managing director is uncertain; he stated: I really dont think that we can afford to invest time and money into fads. We sell cakes, we are not a gourmet caterer! Slick points out that it is these new items that customers are asking for, so it makes sense from a strategic point of view to develop these products. However, the managing director is still uncertain: I have no idea whether we are going to make a profit this year, and cash is always tight. We dont need strategies, I prefer to just sell good products.

Slick understands why the managing director is resisting his plea to be more innovative with products----the bakery has been producing the same line of cakes for 30 years. Slick also knows that there has never been any formal planning undertaken within the company, or consideration of objectives or strategies.

Required:

1. Ralph Slick has asked for your help. As the new management accountant, prepare a report for the managing director outlining the advantages of implementing processes to determine organizational objectives, strategies and planning systems. (4 marks)
2. Consider the nature of the control system that you could design to report on monthly performances. What types of information do you think may be of interest to Slick and the managing director? Consider both financial and non-financial data. (4 marks)