Page 9 - OCS Workbook - Day 2 Tasks (May 2018)

MANAGEMENT ACCOUNTING (P1) - PRACTICE TASKS

EXERCISE 2 (DECISION MAKING)

UPDATE

Next week the Mansako Board and other senior managers will be discussing the budget for 2018
and whether or not changes are required to the product portfolio.

TRIGGER
This morning you received the following email from Melanie Zhang:

To: You
From: Melanie Zhang (Sales and Marketing Director)
Subject: Favour

Hi

In preparation for a Board meeting next week I asked Simon Jones, one of my sales managers,
for his thoughts on our product portfolio and he sent me a chart and some notes [See reference
materials below]. Unfortunately he is now on holiday and I must confess that I am not sure what
he 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 Roberto or Gwen if I get stuck on something like
this but they are both tied up with auditors today and suggested I speak to you.

Simon suggested that we were:

• “over-reliant on accessories” and that
• “our safety margin was only 9%” and it was
• “vital that we try to boost the range of bags we make”.

As stated above, I cannot see how he made these conclusions from his 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 Simon’s comments can be deduced from the chart.

Many thanks
Melanie

TASK

Respond to Melanie Zhang’s email.
Time allowed (40 Minutes)

KAPLAN PUBLISHING 29