MA corp. is a trading company that designs, produces, and sells sportswear. The company sells its sportswear through its own stores, which are typically located on shopping streets and in shopping centers. The company has existed for more than 10 years and has had steady growth.

However, the company is having some challenges. First and foremost, it would like to earn more, in order to be able to constantly realize new ideas and develop new products. Secondly, it would like to have a better understanding of both its variable- and fixed costs. And thirdly it would like to have an assessment of the profitability of its many products.

As the company has grown fairly quickly, the management has neglected the development of its administration, finance, and structure, in order to have proper control and be able to make the right decisions.

The company is selling the following product series:

1. Woman’s sportswear 2. Men’s sportswear
3. Children’s sportswear

It is not only the turnover that has increased in KMA corp. it is also the costs. Therefore, the management has decided that they will take a closer look at the accounting figures for 2019 and 2020 to try to find similarities and differences that can tell them more about the financial development of their company, as well as to investigate how they might be able to improve the company's profitability.

The overview below (Appendix 1) shows the various account balances where KMA corp. has posted items regarding the profit & loss for 2019 and 2020.

Based on the overview below (Appendix 1), please prepare a multistep segment-based income statement in accordance with the profitability pattern, as the multi-step income statement (incl. relevant key figures) for 2019 and 2020, respectively, for KMA corp.

 

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Appendix 1 Trial balance for 2019 and 2020 Accounts in EUR 1.000 Turnover (Womans Sportsware) Care expenses Material (Childrens Sportsware) Marketing costs Factory wages (Childrens Sportsware) Factory wages (Womens Sportsware) Rent expenses Depreciations buildings Travel costs Turnover (Childrens Sportsware) Salary expenses Interest expenses Sales discounts (Mens Sportsware) Material (Womans Sportsware) Other administrative expenses Sales discounts (Childrens Sportsware) Wages (Mens sportsware) Discarded clothing (valuated as not saleable) Turnover (Mens Sportsware) Sales freight Material (Mens Sportsware) 2019 3.500 350 4.320 Exercise 3 (15 points) Please prepare a proposal for a budget procedure for KMA corp 200 7.800 987 175 300 200 17.654 11.000 10 2.560 750 187 1.142 8.500 165 37.500 1.465 10.050 2020 4.200 400 4.200 220 7.780 1.000 220 300 250 15.200 11.450 14 Exercise 2 (15 points) Please comment on the products' profitability in your income statement, and explain why / why not, you would recommend keeping or discontinuing one or more of the products. 2.575 820 225 1.256 8.545 212 38.200 1.485 9.995 Exercise 1.2 (20 points) Based on the income statements (incl. key figures) for 2019 and 2020, please comment on the financial development in KMA corp. Please also comment on whether there is information that is not in Appendix 1, but which could be an advantage for you to know when for analyzing the income statement Exercise 4 (in total 30 points) Exercise 4.1 (15 points) Please prepare a proposal for how the KMA corp. could use non-performance measures. The proposal must contain an outline for a proposal on how these should be communicated to the organization, and how often you think follow-up should be made on these measures and how you would recommend that this should be done. Exercise 4.2 (15 points) Please explain why a cash budget would be relevant for the KMA corp. and how this should be developed and reported Appendix 1 Trial balance for 2019 and 2020 Accounts in EUR 1.000 Turnover (Womans Sportsware) Care expenses Material (Childrens Sportsware) Marketing costs Factory wages (Childrens Sportsware) Factory wages (Womens Sportsware) Rent expenses Depreciations buildings Travel costs Turnover (Childrens Sportsware) Salary expenses Interest expenses Sales discounts (Mens Sportsware) Material (Womans Sportsware) Other administrative expenses Sales discounts (Childrens Sportsware) Wages (Mens sportsware) Discarded clothing (valuated as not saleable) Turnover (Mens Sportsware) Sales freight Material (Mens Sportsware) 2019 3.500 350 4.320 Exercise 3 (15 points) Please prepare a proposal for a budget procedure for KMA corp 200 7.800 987 175 300 200 17.654 11.000 10 2.560 750 187 1.142 8.500 165 37.500 1.465 10.050 2020 4.200 400 4.200 220 7.780 1.000 220 300 250 15.200 11.450 14 Exercise 2 (15 points) Please comment on the products' profitability in your income statement, and explain why / why not, you would recommend keeping or discontinuing one or more of the products. 2.575 820 225 1.256 8.545 212 38.200 1.485 9.995 Exercise 1.2 (20 points) Based on the income statements (incl. key figures) for 2019 and 2020, please comment on the financial development in KMA corp. Please also comment on whether there is information that is not in Appendix 1, but which could be an advantage for you to know when for analyzing the income statement Exercise 4 (in total 30 points) Exercise 4.1 (15 points) Please prepare a proposal for how the KMA corp. could use non-performance measures. The proposal must contain an outline for a proposal on how these should be communicated to the organization, and how often you think follow-up should be made on these measures and how you would recommend that this should be done. Exercise 4.2 (15 points) Please explain why a cash budget would be relevant for the KMA corp. and how this should be developed and reported

Answer rating: 100% (QA)

Overview of K MA corp s various account balances for 2019 ... View the full answer