Accounting for Managers: Pacific Telemet Ltd Profitability Report

This report analyzes the profitability of Pacific Telemet Ltd, a manufacturer of high-end smartphones. The assignment, focused on ACC00724 (Accounting for Managers), evaluates suggestions from the production, sales, and marketing departments to improve profitability. The report calculates profit m...Read More

Running head: ACCOUNTING FOR MANAGERS
Accounting for managers
Name of the student
Name of the university
Student ID
Author note

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Table of Contents
Question 1..................................................................................................................................2
Introduction............................................................................................................................2
(a) Suggestions by production manager............................................................................2
(b) Suggestions by sales manager.....................................................................................3
(c) Suggestions by marketing director..............................................................................3
Conclusion..............................................................................................................................4
Question 2..................................................................................................................................5
Introduction............................................................................................................................5
Present scenario......................................................................................................................5
(a) Annual factory capacity is 90,000 units......................................................................5
(b) Annual factory capacity is 75,000 units......................................................................6
Conclusion..............................................................................................................................7
Question 3..................................................................................................................................7
Reference....................................................................................................................................8

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Question 1
Introduction
Pacific Telemet Ltd is engaged in manufacturing of high end smart phones with dual
sim cards and the phone is popular with business executives those frequently travel to
overseas. Based on the last year’s performance of the company CEO of the company is under
pressure to enhance the profitability of the business and hence asked the executives from
various departments to provide their suggestions (Cafferky 2017). The main objective of the
report is to find out the most profitable suggestion provided by the managers from various
departments.
(a) Suggestions by production manager
If the suggestion provided by the production manager is implemented it will reduce
the profitability to 30.13% against the last year’s profit margin of 34.68%. However, the

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break even units for sales that is to start earning profits on product the company must sell
5000 units against last year’s break even for 4000 units. Further the margin of safety (MOS)
that represents the units of sales above the break even units are 67.95% against last year’s
MOS of 66.67% (Havaldar and Cavale 2017).
(b) Suggestions by sales manager
If the suggestion provided by the sales manager is implemented it will increase the
profitability to 38.02%. However, the break even units for sales are 3600 units and MOS is
65.91%.
(c) Suggestions by marketing director
If the suggestion provided by the sales manager is implemented it will increase the
profitability to 35.49%. However, the break even units for sales are 4208.33 units and MOS
is 69.94% (Donnell et al. 2016).

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Conclusion
Considering all the factors above it can be concluded that among all the suggestions
provided, the suggestion of sales manager is best. Though the margin of safely level is lower
as compared to others, it provides highest profit margin and lowest break even units for sales.

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Question 2
Introduction
The report will focus on the profit that can be earned by Go-Go-Grow Ltd in case it
takes up the order from Mantel Ltd under 2 given circumstances.
Present scenario

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(a) Annual factory capacity is 90,000 units
It can be identified from the above that if the annual factory capacity is 90,000 then
the company can produce the new order of 20,000 along with the existing (5000*20) =
60,000 units. However, to maintain the present profit level of 50% the company shall bid $
620 per unit

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(b) Annual factory capacity is 75,000 units
It can be identified from the above that if the annual factory capacity is 75,000 then
the company cannot produce the new order of 20,000 along with the existing (5000*20) =
60,000 units. Hence, it has to reduce the existing production to (75,000 – 60,000) = 55,000
units. However, to maintain the present profit level of 50% the company shall bid $ 744.30
per unit (Cooper 2017)
Conclusion
From the above it can be concluded that under the 1st option the company is better –
off for its position. For the 2nd option it has to forego 5000 units from its existing production.
Foregoing exiting production for accepting new order may attract various risks like bas debt

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and revenue opportunity of 5000 units. Further, under this option the profit margin from
existing production is coming down to 49.17% from 50%.
Question 3
Before came to do MITHM I have completed intermediate level in hotel management
from Nepal Tourism and Hotel Management College and hotel management Sambharam
College of Hotel Management, India in 2016.
During the 4 years course of hotel management I had gained lots of theoretical and
practical knowledge about hotel industry that influenced my understanding regarding the
subject.
During the course, think the excel spreadsheet tool for financial accounting is most
useful for future career as it will help to manage big calculation with ease of using formula.
Further, with excel I can maintain the data in arranged manner of the company or hotel for
which I will be working on.

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Reference
Cafferky, M.E., 2017. Estimating retail breakeven using markup pricing. Management
Accounting Quarterly, 18(2).
Cooper, R., 2017. Supply chain development for the lean enterprise: interorganizational cost
management. Routledge.
Donnell, E., Wood, J., Himes, S. and Torbic, D., 2016. Use of side friction in horizontal
curve design: A margin of safety assessment. Transportation Research Record: Journal of
the Transportation Research Board, (2588), pp.61-70.
Havaldar, K.K. and Cavale, V.M., 2017. Sales and Distribution Management, 3/e: Text &
Cases. McGraw-Hill Education.