Spot Computing (SPOT) specialises in a range of computer services including retail sales; consulting activities to industry, and the more recently developed forensic services including repairs and specialised data retrieval. Summarised income statement and key performance metrics are provided below.

The CEO of SPOT,Sam Nafsika, is hoping to increase the resources devoted to the forensic activity. This is based on the increasing number of queries for this type of work as well as some industry data that suggests 25 per cent growth rates per year over the last few years. According to industry experts, these growth rates are predicted to continue. Moreover, the retail business has remained relatively constant over the last three years, while consulting has grown by about 10 per cent per year. Sam was hoping to use some of the resources currently assigned to retail to the forensics activity. Moreover, she knew she would have to hire an additional IT forensic expert and engage in some targeted marketing of the forensics activity. Sam is interested to find out the impact of this likely switch in strategic emphasis on the key income statement items and metrics for next year. Required a. As a starting point, explain in detail how budgets are related to organisational strategies AND why Sam should have a good grasp of the budgetary process to help her find out the impact of the switch in strategic emphasis on the key income statement items and metrics for next year. b. Based on the information available, make an estimate of revenue across the three areas of activity. Outline your assumptions. c. Complete an estimate of the other income statement items and key metrics. Outline your assumptions. d. What recommendations would you make to Sam?

Total $1 060 000 $ 360 000 Spot Computing Summarised statement of profit or loss to June 2016 Retail Consulting Forensic Revenue $600 000 $400 000 $60 000 Gross margin $ 150 000 $180 000 $30 000 Selling, general and administrative expenses $ 100 000 $110000 $15 000 Operating income $ 50 000 $ 70000 $15000 Profit margin 8.3% 17.5% 25% Total assets Return on assets $ 225 000 $ 135 000 12.7% $1 000 000 13.5%