Page 14 - CIMA OCS August 2018 Day 1 Suggested Solutions

CIMA AUGUST 2018 – OPERATIONAL CASE STUDY

Question Response

Discuss whether the Arguments for
2019 budget is realistic. • Increase in revenue is lower than in 2018 so could be justified by
the same factors that explained growth in 2018. Unfortunately
we are not told what they were.
• Gross margin comparable to 2018, 2017

Against
• Increase in cost of sales of 0.1% could be too optimistic, as many
COS items will be variable, such as cost of tea.
• This would only make sense if TFT anticipated zero growth in
volumes but was planning to increase prices by 3.5%
• If this is the case then the budget is realistic but totally
uninspiring!

56 KAPLAN PUBLISHING