Page 9 - CIMA MCS Workbook August 2018 - Day 2 Tasks

MANAGEMENT ACCOUNTING (P1) - PRACTICE TASKS

EXERCISE 2 (DECISION MAKING)

UPDATE

Next week the Thomas Fine Teas Board and other senior managers will be discussing results to
date, the budget for 2018 and whether or not changes are required to the product portfolio going
forwards.

TRIGGER
This morning you received the following email from Jessica Treewood:

To: You
From: Jessica Treewood (Marketing Director)
Subject: Favour

Hi

In preparation for a Board meeting next week I asked Nicola Collette, the Chief Financial Officer,
for her thoughts on our product portfolio and she sent me a chart and some notes [See
reference materials below]. Unfortunately she is now on holiday and I must confess that I am
not sure what she is talking about. However, from what I can tell, it looks like it could be quite
useful for discussions with the Board. Normally I talk to Steven Potter if I get stuck on something
like this but he is tied up with auditors today and suggested I speak to you.

Nicola suggested that:

• “we were over-reliant on full-fee membership”
• “our safety margin was only 22%”
• the performance on other sources of income was disappointing, so we should consider
stopping them
• “vital that we try to find new customer groups, such as B2B selling”.

As stated above, I cannot see how she made these conclusions from her analysis.

Please send me an email which explains the following:

• What the points A, B, C, D, E and F represent and the difference between the two lines
shown on the chart. As part of this can you explain what is meant by “C/S ratio” and
“safety margin”
• The usefulness of this chart to us
• Whether Nicola’s comments can be deduced from the chart.

Many thanks
Jessica

TASK

Respond to Jessica Treewood’s email.
Time allowed (40 Minutes)

KAPLAN PUBLISHING 29