Page 13 - OCS Workbook - Day 1 Task (May 2018)

MANSAKO FAMILIARISATION

Marketing – distribution

The company is committed to an ‘omni-channel’ strategy that is seen to be critical to future
growth. Make sure you understand how online and store based operations can interact, such as
through ‘click and collect’ but also discuss what the implications of this could be for other aspects
of the marketing mix, such as pricing and promotional activities. Note that we are told that the
distribution centre was designed for a mainly store-based operation, suggesting potential
weaknesses in terms of internet sales.

Non-current assets
The financial reporting (F1) aspects of NCAs are a common exam theme, so make sure you revise
the different angles a question could take. For example, you could be asked to discuss the extent
to which intangible assets can be created focussing, say, on whether the brand could be
capitalised, or whether marketing costs incurred to boost the brand could be capitalised or how
much of additional investments in IT and computer systems could be recognised as an asset.
Alternatively we are told that there are plans to streamline store operations which may result in
store closures, in which case make sure you can advise of the financial reporting implications of
this. Alternatively we are also told that the company may expand its product range, in which case
there may be a need for additional investment with associated implications for the financial
statements.

The environment
The pre-seen makes it clear that customers are very concerned about ecological sustainability and
Mansako even has a code of conduct for suppliers that incorporates this. Make sure you revise
both the E1 and P1 aspects of CSR and environmental accounting to discuss how Mansako could
measure and improve its green footprint. Also ensure you can discuss how to manage suppliers
should issues arise.
Costing systems

In order to keep the brand in the minds of customers it is important to get a balance between
selling existing products and new product development. This may necessitate a change from the
current approach of absorbing overheads towards ABC (Note that we are not told the current
system but the budgeted figures would indicate that overheads are simply a % of labour costs).
Make sure you revise the pros and cons of ABC verses traditional approaches (P1) and consider
whether ABC would be suitable for Mansako and any transitional problems if it were to change
systems.
Decision making under constraints

The production process is highly labour-dependent, so it is possible in the exam that one variant
will include a scenario where there is a problem with the workforce, such as illness. Given this you
may have to discuss the basis upon which decisions to allocate the scarce resources are made
(P1). Remember that you should be using the idea of relevant costing and considering the benefit
per unit of scarce resource, either by focussing on contribution per labour hour or throughput per
labour hour.
Decision making with uncertainty

Despite healthy gross margins, the company’s overall operating margin is worryingly low. Given
this, it is likely that one of the exam variants will include a task looking at multi-product breakeven
analysis and margins of safety, possibly incorporating breakeven graphs that you have to explain.
Make sure you revise the details of such graphs and can explain what the different lines and pints
represent.

KAPLAN PUBLISHING 9