10. In case of extenuating situations, the relevant college policies apply. Unit Learning Outcomes: LO3 Explain the use of planning tools used in management accounting LO4: Compare ways in which organisations could use management accounting to respond to financial problems. 1 Assignment Brief and Guidance: Case Scenario Introduction You are an Assistant Accountant with Star Fashion LLC one of the premier fashions and lifestyle retailer in Sultanate of Oman. You report to the Finance Director. Your primary responsibilities include the production of the annual budget, producing the monthly management accounts and providing information to management as required. This means that you often must liaise with colleagues from other functional areas (marketing, human resource, production etc.). Background Star Fashion LLC is a company based in Oman dedicated to fashion retail since 1997. It is a well-known firm which has obtained reputation through the years. It focuses on meeting the needs of customers and on offering customer experience which gives the firm a competitive advantage. The company presently has over 300 employees to serve its customers from 30 outlets across Sultanate of Oman. Strategic Development Plan The strategy of the company is to grow the business whilst maintaining quality. There is a shift in the market towards premium customized clothing and the directors believe that Star Fashion LLC is well-placed to strengthen their position by expanding clothing range to new markets. Therefore, the management had decided form a new subsidiary called Star Sand Dune LLC. The new subsidiary is expected to manufacture and sell customized / tailor made apparels for local customers & within few years to international customers. Required raw-materials will be purchased from local suppliers & international suppliers. Star Sand Dunes LLC intends to start up in business of 1" April 2021. They have supplied you with the following information: RO 000" 2.000 Ordinary Share Capital Quarterly rent of premises, due on 25 June 50 Cash outlay on equipment payable 1 April payable 1 June 200 120 Monthly planned purchases of stock for re-sale April May June 44 48 36 All stock is bought on one month's credit Star Sand Dunes LLC intends to start up in business of 1" April 2021. They have supplied you with the following information: RO 000" Ordinary Share Capital 2,000 Quarterly rent of premises, due on 25 June 50 Cash outlay on equipment payable 1 April payable 1 June 200 120 Monthly planned purchases of stock for re-sale April May June 44 48 36 All stock is bought on one month's credit 2 60 Monthly planned sales are: April May June 60 90 All sales are made on two month's credit, The monthly cash expenditure on general expenses and salaries is estimated to be RO 10,000 per month. The stock on 30th June 2021 is expected to be RO 20,000. Depreciation of the equipment for the first quarter (April 2021 - June 2021) is estimated at RO 12,000. Financial Performance of Star Fashion LLC The company's finance department have presented the Star Fashion LLC's statement of financial position and statement of profit/loss for the last two financial years ended on 31" December (2019 and 2020). Star Fashion LLC Statement of Financial Position as at 31 December 2020 2019 RO 000" RO 000 Non-Current Assets Property, plant and equipment 6,690 6,383 Intangible assets 821 787 7,511 7,170 Current assets Inventories 508 512 Trade receivables 208 150 Cash and cash equivalents 570 745 1,286 1,407 Total Assets 8,797 8,577 Equity Share capital (OMR 1 per share) Retained earnings 3,000 4,778 7,778 3,000 4,400 7,400 Non-current liabilities Loans 442 442 735 735 June 36 All stock is bought on one month's credit 2. 60 Monthly planned sales are: April May June 60 90 All sales are made on two month's credit. The monthly cash expenditure on general expenses and salaries is estimated to be RO 10,000 per month. The stock on 30th June 2021 is expected to be RO 20,000. Depreciation of the equipment for the first quarter (April 2021 - June 2021) is estimated at RO 12,000. Financial Performance of Star Fashion LLC The company's finance department have presented the Star Fashion LLC's statement of financial position and statement of profit/loss for the last two financial years ended on 31" December (2019 and 2020). Star Fashion LLC Statement of Financial Position as at 31 December 2020 2019 RO 000 RO 000" Non-Current Assets Property, plant and equipment 6,690 6,383 Intangible assets 821 787 7,511 7,170 Current assets Inventories S08 512 Trade receivables 208 150 Cash and cash equivalents 570 745 1,286 1,407 Total Assets 8,797 8,577 Equity Share capital (OMR I per share) Retained earnings 3,000 4,778 7,778 3,000 4,400 7,400 Non-current liabilities Loans 442 735 735 442 Current liabilities Trade payables Current tax 450 127 577 350 92 442 Total equity and liabilities 8,797 8,577 Star Fashion LLC Statement of Profit or Loss Account for the year ended 31" December. 2020 RO 000 2.986 2019 RO 000 Revenue 3,048 Cost of goods sold (1,519) (1.536) Gross Profit 1,467 1,512 Distribution expenses (267) (282) Marketing and administration expenses (661) (667) 539 563 Operating profit Finance cost (28) (34) Profit before tax 511 529 Tax (133) (138) Profit after tax 378 391 The Chief Management accounted requested you to prepare a report that includes the master budgets for the new subsidiary Star Sand Dunes LLC for the three months ending on June 2021 (The management had decided to start the new venture on 01/04/2021) and calculation of relevant financial ratios considering benchmarks, key performance indicators, and budgetary targets, identify variances for last two financial years of Star Fashion LLC by applying relevant strategic planning tools, financial governance to monitor strategy, management accounting skill sets, and effective strategies and systems by comparing the way in which the Company can respond to financial problems effectively and efficiently. As requested by Chief Management Accountant of Star Fashion LLC, you are required to prepare the report evaluating how planning tools for accounting respond appropriately to solving financial problems and lead organization to achieve sustainable success. Learning Outcomes and Assessment Criteria Pass Merit Distinction LO3 Explain the use of planning tools used in management accounting P4 Explain the advantages and M3 Analyse the use of different disadvantages of different types of planning tools and their planning tools used for budgetary application for preparing and control forecasting budgets D3 Evaluate how planning tools for accounting respond appropriately to solving financial problems to lead organisations to LO4: Compare ways in which organisations could use management counting to rarond to financin probleme As requested by Chief Management Accountant of Star Fashion LLC, you are required to prepare the report evaluating how planning tools for accounting respond appropriately to solving financial problems and lead organization to achieve sustainable success. 4 Learning Outcomes and Assessment Criteria Pass Merit Distinction LO3 Explain the use of planning tools used in management accounting P4 Explain the advantages and M3 Analyse the use of different disadvantages of different types of planning tools and their planning tools used for budgetary application for preparing and control. forecasting budgets LO4: Compare ways in which organisations could use management accounting to respond to financial problems P5 M4 Analyse how, in responding Compare how organisations are to financial problems, adapting management accounting management accounting can lead systems to respond to financial organisations sustainable problems. success. D3 Evaluate how planning tools for accounting respond appropriately to solving financial problems to lead organisations to sustainable success. to