MA corp. is a trading company that designs, produces and sells sportswear. The company sells its sportswear through its own stores, which are typically located on shopping streets and in shopping centers. The company has existed for more than 10 years and has had a steady growth.
However, the company is having some challenges. First and foremost, it would like to earn more, in order to be able to constantly realize new ideas and develop new products. Secondly, it would like to have a better understanding of both its variable- and fixed costs. And thirdly it would like to have an assessment of the profitability of its many products.
As the company has grown fairly quickly, the management has neglected development of its administration, finance and structure, in order to have proper control and be able to make the right decisions.
The company is selling the following product series:
1. Womans sportswear 2. Mens sportswear 3. Childrens sportswear
Exercise 1 (Total 40 points)
It is not only the turnover that has increased in KMA corp. it is also the costs. Therefore, the management has decided that they will take a closer look at the accounting figures for 2019 and 2020 to try to find similarities and differences that can tell them more about the financial development of their company, as well as to investigate how they might be able to improve the company's profitability.
The overview below (Appendix 1) shows the various account balances where KMA corp. has posted items regarding the profit & loss for 2019 and 2020.
Exercise 1.1 (20 points) Based on the overview below (Appendix 1), please prepare a multistep segment-based income statement in accordance with the profitability pattern, as the multi-step income statement (incl. relevant key figures) for 2019 and 2020, respectively, for KMA corp.
987 16.200 Appendix 1 Trial balance for 2019 and 2020 Accounts in EUR 1.000 2019 2020 Turnover (Womans Sportsware) 3.500 4.200 Care expenses 350 400 Material (Childrens Sportsware) 4.320 4.200 Marketing costs 200 220 Factory wages (Childrens Sportsware) 7.800 7.780 Factory wages Womens Sportsware) 1.000 Rent expenses 175 220 Depreciations buildings 300 300 Travel costs 200 250 Turnover (Childrens Sportsware) 17.654 Salary expenses 11.000 11.450 Interest expenses 10 14 Sales discounts (Mens Sportsware) 2.560 2.575 Material (Womans Sportsware) 750 820 Other administrative expenses 187 225 Sales discounts (Childrens Sportswarel 1.256 8.500 8.545 Wages (Mens sportsware) Discarded clothing (valuated as not saleable) 155 212 Turnover (Mens Sportsware) 37.500 38.200 Sales freight 1.465 1.485 Material (Mens Sportsware) 10.050 9.995 Exercise 1.2 (20 points) Based on the income statements (incl. key figures) for 2019 and 2020. please comment on the financial development in KMA corp. Please also comment on whether there is information that is not in Appendix 1, but which could be an advantage for you to know when for analyzing the income statement Exercise 2 (15 points) Please comment on the products' profitability in your income statement, and explain why, why not, you would recommend keeping or discontinuing one or more of the products Exercise 3 (15 points) Please prepare a proposal for a budget procedure for KMA corp. Exercise 4 In total 30 points) Exercise 4.1(15 points) Please prepare a proposal for how the KMA corp. could use non-performance measures. The proposal must contain an outline for a proposal on how these should be communicated to the organization, and how often you think follow-up should be made on these measures and how you would recommend that this should be done Exercise 4.2 (15 points) Please explain why a cash budget would be relevant for the KMA Corp. and how this should be developed and reported 987 16.200 Appendix 1 Trial balance for 2019 and 2020 Accounts in EUR 1.000 2019 2020 Turnover (Womans Sportsware) 3.500 4.200 Care expenses 350 400 Material (Childrens Sportsware) 4.320 4.200 Marketing costs 200 220 Factory wages (Childrens Sportsware) 7.800 7.780 Factory wages Womens Sportsware) 1.000 Rent expenses 175 220 Depreciations buildings 300 300 Travel costs 200 250 Turnover (Childrens Sportsware) 17.654 Salary expenses 11.000 11.450 Interest expenses 10 14 Sales discounts (Mens Sportsware) 2.560 2.575 Material (Womans Sportsware) 750 820 Other administrative expenses 187 225 Sales discounts (Childrens Sportswarel 1.256 8.500 8.545 Wages (Mens sportsware) Discarded clothing (valuated as not saleable) 155 212 Turnover (Mens Sportsware) 37.500 38.200 Sales freight 1.465 1.485 Material (Mens Sportsware) 10.050 9.995 Exercise 1.2 (20 points) Based on the income statements (incl. key figures) for 2019 and 2020. please comment on the financial development in KMA corp. Please also comment on whether there is information that is not in Appendix 1, but which could be an advantage for you to know when for analyzing the income statement Exercise 2 (15 points) Please comment on the products' profitability in your income statement, and explain why, why not, you would recommend keeping or discontinuing one or more of the products Exercise 3 (15 points) Please prepare a proposal for a budget procedure for KMA corp. Exercise 4 In total 30 points) Exercise 4.1(15 points) Please prepare a proposal for how the KMA corp. could use non-performance measures. The proposal must contain an outline for a proposal on how these should be communicated to the organization, and how often you think follow-up should be made on these measures and how you would recommend that this should be done Exercise 4.2 (15 points) Please explain why a cash budget would be relevant for the KMA Corp. and how this should be developed and reported
