Coca Cola: Financial and Management Accounting

This report focuses on the financial and management accounting of Coca Cola, discussing the impact of the company's operations on the environment and society. It also compares Coca Cola with Pepsi Co and highlights the benefits of GRI compliance for shareholders.

Running Head: Accounting and Financial Management
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Project Report: Financial and Management Accounting

Accounting and Financial Management
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Executive Summary
The main focus of the report is on Coca Cola, a leading corporation involved in the
distribution of the soft drinks. The factor affecting the company which are the financial as
well as the non-financial are discussed in detail only through the evaluation of the
performance of the business and the impact of the system on the general society and the
environment. There are several newspaper articles about the company that reflect whether the
company has evaluated the life style and the surroundings of the society.

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Contents
Executive Summary..........................................................................................................2
Part A................................................................................................................................4
Introduction...................................................................................................................4
Environment and social impacts on The Coca Cola operations...................................4
Positive impact..........................................................................................................5
Negative impact........................................................................................................6
Four key GRI disclosure...............................................................................................7
Comparison of Coca Cola and Pepsi Co.......................................................................8
Benefits to the shareholders due to the GRI compliances............................................9
Conclusion....................................................................................................................9
Part B................................................................................................................................9
Part C..............................................................................................................................12
Appendix.........................................................................................................................17

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Part A:
Introduction:
The Coca Cola Company is the American based company that deals in the
manufacturing of the carbonated soft drinks and concentrated beverages and syrup. The
company is renowned for its core product Coca Coal. The company is currently operating
worldwide with the revenue of US$35.410 billion. The company was founded in the year
1886, the headquarters are in Atlanta, Georgia and United States (Coca Cola Journey, 2019).
In December 2016, it acquired SABMiller’s Coca Cola operations and in August 31,
2018 it agreed to acquire Costa Coffee form Whitbread for pound 3.9 billion. In terms of the
rank the Coca Cola Company has been on the second position in terms of the market
capitalisation. The company is operating with 61900 employees to work consistently and
efficiently (Coca Cola, 2019).
Environment and social impacts on The Coca Cola operations:
It is the duty of the company to give in return to the society after utilising the input
factors given by the society. The production house of the Coca Cola Company emits the huge
pollution while manufacturing the beverages and thus it affects the environment a lot more
than it is expected, in order to serve the society in the better manner the company has the
motto of carrying out the operations in such a way that can lower down the environmental
pollution and the lifestyle of the customers. The two major factors that the company has
worked upon are, first in serving the society with the safe products and the improving the
society by utilisation of the energy in the positive means. There is a proper disclosure in the
sustainability report of the Coca Cola Company along with the GRI disclosures and
compliance with regards to the improvement in the society (Coca Cola, 2019).

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Positive impact:
The positive changes that have been accounted by the company to improve the welfare of
the society and the environmental performance are
 The company has worked on the sustainable packaging by recycling the bottles and
achieve the goal of the waste management. For the purpose of this the company has
taken suitable initiatives which have been announced by the company in 2013
amongst which one of the most important is in March 2017 the company joined the
hands with six leading food and drink manufactures in backing a standardised
nutrition label scheme for Europe, based on the colour coded system utilised in the
Great Britain & Northern Ireland.
 For the purpose of the improvement of the welfare of the society and the human
resource management events and programmes have been installed so that the people
can live a healthy life style and this will also help in improving the performance of the
business.
(Source: Coca Cola, 2017).
 The main focus of the company is to reduce the health issues created by the climatic
change and this can be observed by the graph above where the company performed
rigorously towards the reduction of the Carbon footprint by 30%. The zero emission

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truck has also been installed in the mission against the Alternative fuel vehicles in
North America (Coca Cola, 2019).
Negative impact:
Even though there are the positive aspects that improve the society and the performance
of the business there are some negative elements as well that shall be looked upon by the
management. Few of them have been outlined below.
 In 1903 the company dropped all the properties of the medicinal effects and the
principal ingredients used by the company are caffeine, Carmel colour, Phosphoric
Acid and other chemicals. The beverage itself is a poison to the human metabolism
and the people who consume it suffer from diseases like heart attack, stroke risk and
also the chronic obstructive pulmonary disease (Warton WANT, 2007).
 The pollution caused by the company to manufacture the carbonated drinks are global
warming, pollution, lack of diesel and the other breathing issues that are affecting the
health and the lifestyle of the company (Coca Cola Bottling Company, 2019).
 The Coca Cola Company is also responsible for dehydrating the communities in
pursuit of water resources to help in feeding the plants, drying up the farmers and
destroy the local agriculture (Warton WANT, 2007).
The positive as well as the negative impact of The Coco Cola Company explains that the
production of the carbonated drinks and the diet beverages have affected the environment at
great level but yet the company has also taken measures and the initiative to improve the
performance of the company.

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Four key GRI disclosure:
The Global Reporting Initiative is an organization that assist the government and the
companies to be more transparent and the crystal clear about the impacts of the environment,
it promotes the economic standards, the change taking place in the climate, the impact of the
pollution and the human rights (Coca Cola, 2019).
The GRI disclosures are by Coca Cola Amatil is as follows:
Products and services:
The annual report of the company must include a brief description regarding the products and
services which are being produced by the company. It can be noted that the Coca Cola
Corporation, has provided all the relevant information regarding the products and services
that they are manufacturing and offering to their customers.
Emissions, Effluents and waste:
The wastage done by the various organisations in providing their products and services to the
customers, such wastage should be reused in such a manner that the environment does not get
affected. The Coco Cola Company is duly recycling and reusing the waste bottles used by the
customers. The waste has been used in such a manner that the nature of the environment is
not getting affected (Coca Cola energy, 2019).
Customer health and safety:
The health factor of the customer are one of the most crucial factor in production of goods
and services by the manufacturer. In order to ensure safety to the customers the company has
been offering quality air bags to the customers in order to ensure the safety of the customers
(Coca Cola Bottling Company, 2019).
Comparison of Coca Cola and Pepsi Co:

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The main competitors company of The Coca Cola Company is PepsiCo. The main
reason for the comparison is to find the quality and the depth in terms of the environmental
performance. The comparison is as follows:
Carbon Emission:
The Coco Cola Company has phased out HCF’s by 2015 and made a reduction in
15% on the other hand the Pepsi Co company promotes the removal of HCF,s from the
vending machines only. In this arena, The Coca Cola Company is ahead of the Pepsi Co. The
carbon Trust has licensed the Footprint expert tool to Coca Cola (PespsiCo, 2019).
Sustainability:
Both the companies have been awarded AA plus grade in terms of the water usage
and efficiency.
Vision and Strategies:
The major vision and the strategy of The Coca Cola company is sustainability
package having zero wastage and the leader in energy efficiency and climate protection
whereas in case of the Pepsi Co the strategies used by the company are reduce, recover and
reuse (Coca Cola Journey, 2019).
Initiatives:
The initiatives of The Coca Cola Company are the community water partnership taken
by the Coca Cola Company to save the water energy. The company collaborated with the
World Wildlife Fund, United Nations Development Programme whereas the PepsiCo on the
hand is to create the PepsiCo won an award towards water reduction and recycling strategies
and comes at the third position in to match 100% electricity efficient usage (PespsiCo, 2019).
Benefits to the shareholders due to the GRI compliances:

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The GRI is an organization which focuses to give the companies a framework which
can comply with standards issued by GRI, which must be followed by the businesses, also the
crucial information about the company must be disclosed so that it becomes feasible for the
shareholders and other stakeholders of the businesses. Most of the benefits are accompanied
by the shareholders so that they evaluate and analyse the performance of the company in
relation to the external environmental and the opportunities.
In case of The Coca Cola Company, the framework so followed gives the benefit and
edge towards the framework of the other competitive companies and also to attract the
investors of the business.
Conclusion:
To conclude, The Coca Cola Company has managed to secure the position in the
environment in terms of the protection of the environment. For the purpose of the welfare of
the firma the company took several initiatives to not only improve the performance in the
area of the environmental growth but also attracted a lot of investors and the shareholders so
that the company can build a strong relationship for future endeavours.
Part B:
a) The ongoing cost for the “Boost Drink” of the company is as follows:
Cost Amount
(in $
'000)
Raw Materials for Drink $1,700
Labour Cost $1,200
Sparkling Soda $450

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Carmel Colour $550
Sodium Bicarbonate $700
Other variable cost $1400
Fixed cost $4,000
b) The cost estimation is such that $ 5400 is the variable cost of the business and the
fixed cost is $4000 of the business. The raw materials to prepare the drink is involves
the cost of the $1700 whereas the other costs such as the cost of the sparkling soda,
the Carmel colour and the sodium bicarbonate are the additional costs that can be
avoided (Morano & Tajani, 2017).
c) Break even analysis is a technical tool which is incorporated by the company to
identify the stage where the production unit is minimum and can cover all the
necessary and the basic cost. Mainly recognized by the company to make the future
strategies that can be aligned with the efforts of the today for the purpose of the
margin of the safety of the business (Morano & Tajani, 2017).
d) Balance scorecard:
Balanced Score Card: Boost Drink Production
Financial
Objectives Measures Initiatives
Escalation of the sales
and the increase in the
profit by 25%.
30 % change in the
sales mix
To make most of the
turnover and utilise
it for financing the
assets.
Return on Capital
employed shall
accelerate by 15%.

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Customer
Objective Measures Initiatives
The customer
preference is the
critical view for the
company
The boost drinks are
produced according
to the demands of
the customers
To launch the
products in the new
cities and expand the
business efficiently.
Lag: the substitute
products
Internal Business Process
Objective Measures Initiatives
Cater the human
resource management
and develop the
program to secure
internal database.
Identify the
variances and the
gaps
The company shall
focus on the
empowerment of the
women employees
and motivate the
existing employees
with some awards or
rewards.
Accept the changes
after operations
have been changed.
Learning and Growth
Objective Measures Initiatives
Advanced technology Evaluate the right
technology for the
manufacturing of
the boost drink
It is the duty of the
company to update
the technology and
make aware the

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employees about it.Involve the right
people
(Coca Cola, 2017)
The above measurement for Boost drink in the balanced scorecard has been chosen
because of its survival and the sustainability and the competitive level of the business in the
market.
Part C:
a) Breakeven point:
Sales mix Cost
47%
$
15.00
33%
$
4.58
36%
$
10.84
Weighted Average CM per
Unit 30.42
Composite BEP
Fixed cost 443,000.00
Weighted Average CM per Unit 30.42
BEP units 14,562

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Sales mix 47% 33% 36%
Break even units 14,562 14,562 14,562
Product units at BEP 6,903 4,766 5,259
(Appendix)
b) After tax profit:
Calculation of after tax
profit Sparkling Soda Carmel Color
Sodium
Bicarbonate
Expected units 2057 2660 2414
Sales
$
210,000.00
$
145,000.00
$
160,000.00
Less:
Labor cost
$
20,571.43
$
37,234.04
$
24,137.93
Material cost
$
41,142.86
$
43,138.30
$
30,172.41
Variable overhead
$
1,748.57
$
2,101.06
$
1,182.76
Fixed cost
$
127,804.92
$
165,232.42
$
149,962.66
Total cost $ $ $

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191,267.77 247,705.82 205,455.77
Net profit/Loss
$
18,732.23
-$
102,705.82
-$
45,455.77
Tax rate 30% 30% 30%
NPAT
$
13,112.56
-$
71,894.08
-$
31,819.04
c) Memorandum:
To: Sales team
From: Financial Analyst
Date: 7th January 2019
Subject: Production system and Annual Profits
Dear,
After making the calculations it has been observed that the company needs to make the
improvement in the area of the production as the basic calculations are based on the
production units. Furthermore, the units of the company currently are less than the breakeven
units of the company this suggests that the company shall focus on maintaining current units
equals to the breakeven units to entirely cover the costs associated. However in case of the
Carmel Colour and the sodium bicarbonate the net profit after tax is negative in nature and
the company shall focus on improving the after tax profit by reducing the operational costs or
increasing the turnover. The change can be brought by changing the sales mix and reduction
in the fixed costs to the company. This way the costs can be improved (Coca Cola, 2017).

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References
Coca Cola Bottling Company, (2019). Health and Wellness. Retrieved from https://coca-
colahellenic.com/en/sustainability/health-wellness/
Coca Cola energy, (2019). Energy Efficiency and Climate Protection. Retrieved from
https://www.coca-colacompany.com/our-company/sustainability-update-energy-
efficiency-and-climate-protection
Coca Cola Journey, (2019). Annual Sustainability Reports. Retrieved from https://www.coca-
colacompany.com/stories/sustainability-reports
Coca Cola, (2017). 2017 Sustainability Report: Disclosure Index. Retrieved From
https://www.coca-colacompany.com/stories/gri-index
Coca Cola, (2019). Sustainable Packaging. Retrieved from https://www.coca-
colacompany.com/learn-more-about-sustainable-packaging
Morano, P., & Tajani, F. (2017). The break-even analysis applied to urban renewal
investments: a model to evaluate the share of social housing financially sustainable
for private investors. Habitat International, 59, 10-20.
PespsiCo, (2019). ENVIRONMENTAL SUSTAINABILITY. Retrieved from
http://www.pepsibottlingventures.com/news/environment/water.html
Warton WANT, (2007). COCA-COLA: DRINKING THE WORLD DRY. Retrieved from
https://waronwant.org/media/coca-cola-drinking-world-dry

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Appendix
Calculation of Break Even Point
BEP (in units) Fixed cost / Contribution
Sparkling Soda Carmel Colour
Sodium
Bicarbonate
Sales 62.5 45 53
Materials 20.00 16.22 12.50
Labor 10.00 14.00 10.00
Overhead 0.85 0.79 0.49
Total variable cost 30.85 31.01 22.99
Contribution 31.65 13.99 30.01
Equipment depreciation
$
205,000.00
Rent
$
63,000.00
Marketing
$
140,000.00
Other
$
35,000.00
Total Fixed cost
$
443,000.00

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Sales mix Cost
47%
$
15.00
33%
$
4.58
36%
$
10.84
Weighted Average CM per
Unit 30.42
Composite BEP
Fixed cost 443,000.00
Weighted Average CM per
Unit 30.42
BEP units 14,562
Sales mix 47% 33% 36%
Break even units 14,562 14,562 14,562
Product units at BEP 6,903 4,766 5,259

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