Question 3 (25 marks) A leading automobile manufacturer and retailer known as Alpha Velocity is also one of the leading of original equipment manufacturer" OEM" in South Africa. In response to climate changes, in 2021 the 26th annual summit called the COP26 was the United Nations climate change conference that encouraged organisations to reduce their carbon emissions significantly by year 2030. The recently launched fully electric motor vehicle, comes with charging options. It's also the first OEM to train and prepare South African First Responders like fire services and paramedics on the topic of e-mobility and electric vehicles. Alpha Velocity further introduced major enhancements to new models. The plug and play application's major key features include: a) The fuel monitor which gives the user an overview of the refuelling processes and monthly fuel expenses and mileage. b) Optimises the user driving style, stores personal driving data such as acceleration, vehicle speed, engine speed and braking behaviour, is measured and displayed in a detailed statistical breakdown. c) The digital logbook has an automatic log function which makes it easy to record details such as starting point and destination, date and time of day, journey time and route, and export them via the app as required. d) Parking space which reminds the user precisely where the car has been last parked, the vehicle owner can share the GPS coordinates, for example with friends or can even keep an eye on how long the car has been parked. e) Automatic reminder for next service due dates. f) Breakdown and assistance which connects the driver with national 24-hour roadside assistance or their service hotline. g) The charging monitor which provides an overview of the charging expenses, such as how many kilometres have been driven and the charging status of the vehicle. The motor vehicle industry is very competitive in South Africa, OEMs are competing for the reduced middle class while trying to maintain loyalty amongst upper middle class and wealthy individuals. Manufacturers are expected to make every improvement possible in order to compete meaningfully. For example, research shows that only about half of new car buyers remain loyal to the brand they already owned, showing just how competitive the industry can be. With that said, the industry makes improvements in areas where it can measure its success, hence management teams are subjected to the concept of key performance indicators or performance measurement. Alpha Velocity has set targets for its Managers. The targets or six key performance indicators for the executive team has been set as follows: A. Average Downtime Average Downtime = (downtime hours in a time period) (total time available to produce vehicles in the same time period) x 100.

Downtime has to be minimised as it is known to be expensive especially for car manufacturers hence it is tracked accurately and consistently. B. Utilization Rate Utilization rate = (actual level of output) (maximum level of output) x 100. Utilisation rate measures how many vehicles a company can produce over a period of time and how many vehicles the company could potentially produce in that same period with optimal use of time and labour. The utilization rate is vital because it shows how well the company is using their time and labour, the benchmark set is 85%. C. Safety Incidents per Employee The safety of the workers in any business is always an issue of utmost importance. In a car manufacturing industry, safety incidents are a common issue that have to be continually measured carefully in order to move toward a safer workplace. The value of this metric is given by the following calculation: Safety incidents per employee = (number of safety incidents in a time period) (number of employees working during the time period). Alpha Velocity has zero tolerance for fatalities and less than 70% for injuries on duty. This measure also helps management to monitor faulty equipment. D. Throughput Throughput is a measure of the average number of units produced over a time period. Hence, it is given by the following calculation: Throughput = (units produced) (time) Alpha Velocity has set a target of 60 cars per hours. E. Inventory Turns The inventory turns KPI is calculated by the formula Inventory Turns = (cost of goods sold) (average inventory). The KPI determines the number of times inventory is sold in a time period, and it helps to determine if a business has too much inventory when compared to its sales. It also gives an idea of how much time is required to sell the company's inventory, and it is yet another way for companies to gauge their competitive advantage or their deficit.

Alpha Velocity seeks to maintain a high inventory turnover ratio, which means it wants to efficiently maintain the inventory and quickly sells it. F. EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) Alpha Velocity uses EBITDA as it is one of the best metrics for measuring a company's cash flow. EBITDA = (net income) + (interest) + (taxes) + (depreciation) + (amortization). Alpha Velocity uses the indicator to compare its performance against industry peers. This measure allows for comparison that does not take into account non-operating decisions like interest, tax, depreciation, and amortization. The Integrated Reporting Framework "IR" recognises the importance of looking at financial and sustainability performance in an integrated way, meaning it emphasises the relationships between what it identifies as the six capitals. REQUIRED:

a) Comment on the suitability of the targets set for Alpha Velocity Executives. (10 marks)

b) Discuss the benefits of effective communication of the performance measures. (10 marks)

c) Explain any of the five of the six capitals, that companies have to report on when preparing the integrated Report.