1. Calculate and evaluate the comparative financial performance of the four centres and implications for Wingdart inc. as a whole.
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Aim
To build upon the intermediate level knowledge and skills acquired in AC2200 Management Accounting. Students will apply their problem solving skills to more complex problems in management accounting and will develop the ability to critically apply management accounting solutions to realistic problems.
Wingdart inc. are an American based global supermarket chain, selling groceries, beverages, clothes and electrical items. Ten years ago the firm’s sales were solely in the US (65%) and Europe (35%). They now have stores and sales on a global basis in America, Europe, Asia and Africa. Extracted financial results are shown (y/e 30 September) in the table below.
|
$ billion
|
America
|
Europe
|
Asia
|
Africa
|
|
Sales $ 2016
|
5.4
|
3.6
|
2.4
|
0.6
|
|
Sales $ 2015
|
5.5
|
3.52
|
1.65
|
0.33
|
|
Sales $ 2006
|
4.55
|
2.45
|
|
|
|
Costs $ 2016
|
4.8
|
3.2
|
1.6
|
0.4
|
|
Costs $ 2015
|
4.41
|
3.06
|
1.26
|
0.27
|
|
Costs $ 2006
|
3.5
|
1.5
|
|
|
|
Inv’t $ 2016
|
104
|
32
|
25
|
8
|
|
Inv’t $ 2015
|
100
|
30
|
20
|
5
|
|
Inv’t $ 2006
|
75
|
25
|
|
|
Sales and costs are in $ billion. The Inv’t (Investment) is the actual net asset value in $ of investment in the stores.
The firm operate on the basis of a depreciation charge of 5% - this has been included in the cost figures. The expected return (on assets) for similar businesses is 3%.
Wingdart inc. operates on the basis of four separate divisions: America and Europe are considered as investment centres; Asia is viewed as a profit centre; Africa is viewed as a cost centre.
You are to create a report to the Board of Directors covering the following issues:
Required:
- Calculate and evaluate the comparative financial performance of the four centres and implications for Wingdart inc. as a whole.
- Evaluate relevant performance measures for Wingdart inc., including those calculated in Q1, and comment on risk issues.
- Evaluate the implications of Wingdart inc. using investment, profit and cost centres. Use your findings in Q1 and 2 to inform the discussion.
- Critically evaluate other the issues for Wingdart inc. in operating as a global firm, including: decentralisation and centralisation; performance measurement; motivation and PRP.
- Report format, presentation and use of referencing and research.
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