ACC00724: Financial Analysis of Pacific Telemet and Go-Go-Grow Ltd

This report provides a financial analysis of Pacific Telemet Ltd.'s three proposals for increasing profitability, evaluating each based on contribution margin, break-even point, and net operating income. It also includes a bid price justification for Go-Go-Grow Limited, considering the potential profitability of a special order. The report concludes with a reflection on the author's personal background and how their prior education and experience have contributed to their understanding of accounting principles and their future career goals.

Running head: ACCOUNTING FOR MANAGERS
Accounting for Managers
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1ACCOUNTING FOR MANAGERS
Table of Contents
Question 1: Pacific Telemet Limited.........................................................................................2
Question 2: Go-Go-Grow Limited.............................................................................................6
Requirement 1:.......................................................................................................................6
Requirement 2:.......................................................................................................................6
Question 3: Personal background...............................................................................................7
References:.................................................................................................................................8

2ACCOUNTING FOR MANAGERS
Question 1: Pacific Telemet Limited
To,
The CEO,
Sherri Watkins,
Pacific Telemet Limited
Date: 18/01/2019
Subject: Evaluation of the three proposals
This is report is in response to the three proposals considered by the different
personnel of the organisation to explore the strengths and weaknesses of each of them. In
order to conduct the required analysis, certain calculations have been made, which are
represented as follows:
Existing Plan:
Proposal of the production manager:

3ACCOUNTING FOR MANAGERS
Proposal of the sales manager:

4ACCOUNTING FOR MANAGERS
Proposal of the marketing director:

5ACCOUNTING FOR MANAGERS
Proposal 1:
It is clearly evident from the proposal of the production manager, David Groate, that
spending on quality is a strong sales booster as well as enhanced tool of profitability. This is
because it is increasing both sales revenue and sales volume. However, in this case, it is
identified that there would be increase in total variable costs as well. In this context, it is
noteworthy to mention that when profitability is viewed for a longer timeframe, all
organisations look for greater contribution margin (Collier 2015). This seems to be missing
from this option, as contribution margin per unit is the lowest compared to the other two
proposals, which is $240. Moreover, the break-even is obtained as 5,000 units and margin of
safety is calculated as 10,600 units, which are higher than the other two proposals. This
implies that the organisation has to conduct increased minimum amount of sales in order to
avoid any losses (Noreen, Brewer and Garrison 2014).
Proposal 2:
According to the proposal of the sales manager, Kirsten Arnold, there would be drop
in sales volume by 12% from the existing plan; however, there would be increase in selling
price per unit with rise in fixed cost. Therefore, the decline in sales volume is a weakness in
this proposal; however, rise in selling price per unit is soothing, which increases the
contribution margin per unit to $300, which is $60 more than the current plan. However, for a
longer timeframe, this proposal is definitely not sustaining with negative volume growth and
raising selling price and fixed costs owing to market pressure are bound to take place
(Dhamija 2015). This is because the net operating income is calculated as $2,088,000, which
is lower than the other two proposals.
Proposal 3:

6ACCOUNTING FOR MANAGERS
As per the proposal of the marketing director, Jess Sutherland, this is a unique
strategy of providing rebate to the first 2,500 customers. This could be considered as the
unique selling proposition (Fields 2016). As a result, the net operating income has been the
highest in this proposal. However, it is to be borne in mind that this strategy might not be
fruitful in the long-run, as most of the customers would be dissatisfied, if they fail to purchase
it in initial 2,500 orders. Therefore, the customers might not be enthusiastic to refer the
products to their acquaintances (Lev and Gu 2016). However, the contribution margin is
moderate with slight rise in fixed costs.
Question 2: Go-Go-Grow Limited
Requirement 1:
Requirement 2:
To,
The CEO,
Go-Go-Grow Limited

7ACCOUNTING FOR MANAGERS
Date: 18/01/2019
Subject: Justification for the bid price
In accordance with the above table, it could be seen that the bid price is obtained as
$7,200,000, if the annual capacity of the factory is 90,000 units. Moreover, since the sale
would be for a special order, no costs would be incurred for variable selling and
administrative costs and no amount needs to be incurred for fixed costs. This is definitely a
big opportunity for the organisation, as it would be able to earn more profit from the contract
with Mantel and it might receive future orders as well. However, if Mantel is not satisfied
with the output of the contract, there would be fall in net income and the other costs would
increase as well (Libby, Rennekamp and Seybert 2015).
Question 3: Personal background
Before joining MBA at Southern Cross University, I completed Bachelor of Business
Administration (BBA) from Guru Nanak University, India in 2012. After the completion of
BBA, I worked in Genpact, which is an American professional services firm, for three years.
In the past year, I completed my Advanced Diploma in Hospitality Management from Stei
Singapore. My earlier educational background has assisted me in gaining deeper
understanding of the various topics taught in this course, which include accounting reports,
financial statement analysis and working capital management. In this course, I have come
across some topics like management and cost accounting, full costing and activity-based
costing, planning, budgeting and control and financing the organisation, which have added
further to my knowledge base. This knowledge will assist me in future accounting career, as I
would be able to deal with real life issues by using this knowledge base.

8ACCOUNTING FOR MANAGERS
References:
Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for
decision making. John Wiley & Sons.
Dhamija, S., 2015. Financial Accounting for Managers, 2/e. Pearson Education India.
Fields, E., 2016. The essentials of finance and accounting for nonfinancial managers.
Amacom.
Lev, B. and Gu, F., 2016. The end of accounting and the path forward for investors and
managers. John Wiley & Sons.
Libby, R., Rennekamp, K.M. and Seybert, N., 2015. Regulation and the interdependent roles
of managers, auditors, and directors in earnings management and accounting
choice. Accounting, Organizations and Society, 47, pp.25-42.
Noreen, E.W., Brewer, P.C. and Garrison, R.H., 2014. Managerial accounting for managers.
New York: McGraw-Hill/Irwin.