Superfry Limited is a new company that will produce and sell air fryers. The company will sell

to three distinct types of customers: specialist kitchen shops, main supermarkets and other

retailers. In June $2023,$ the business is expected to have the following sales revenues:

Customer Type

June sales

revenue $000$

Specialist kitchen shops $2$

Main supermarket retailers $5$

Other retailers $10$

The following additional information is provided:

$($i$)$ Market research has been conducted and the expected monthly compound sales

growth is expected to be constant for the next four months as follows:

Specialist kitchen shops: $5$ per cent;

Main supermarket retailers: $4$ per cent;

Other retailers: $3$ per cent.

$($ii$)$ In order to stimulate sales and meet sales growth targets, it has been decided to

offer the following credit periods to customers:

Specialist kitchen shops: $1$ month;

Main supermarket retailers: $2$ months;

Other retailers: $3$ months.

$($iii$)$ Superfry Limited is a small business in the growing market for air fryers. The

company currently has a small credit control department, with little or no

experience in following up with any late payments from customers.

$($iv$)$ Inventories of components used in the construction of air fryers are purchased

from a local supplier with a lead time of $4$ weeks on average.

Please Turn Over

$5$

REQUIRED:

a$.$ What factors should Superfry Limited consider when offering credit to existing and

potential customers? Provide suggestions on how the level of receivables could be

managed in Superfry Limited.

$[10$ marks$]$

b$.$ Prepare an ageing schedule of receivables for the first four months of trading at

Superfry Limited. The schedule should analyse the expected receivables outstanding

according to customer type and detail the amount $($and the percentage of total

receivables outstanding$)$ for each customer for one month or less, $1-2$ months and $2-$

$3$ months respectively. Show your workings in $000$ and give calculations to one

decimal point only.

$[15$ marks$]$

c$.$ What factors will influence the level of inventory held in an organisation such as

Superfry Limited? Evaluate the importance of using inventory budgets to manage

inventory levels at Superfry Limited.

$[10$ marks$]$

d$.$ Superfry Limited is concerned about product quality and customer satisfaction as well

as making a profit. Consider whether Superfry Limited would find the use of a balanced

scorecard helpful in performance measurement. Explain your answer.