Assessment Information

This assignment is an individual assignment designed to assess the following learning outcomes: 2. Apply numeracy skills and qualitative judgment to aid financial decision making. 3. Understand apply and evaluate management accounting concepts and techniques in decision making. Coursework Assignment You have just started a new job as general manager of Pooma Sports Ltd a UK-based company whose principal activity is the distribution of sports clothing and equipment. After discussions with a number of senior managers at Pooma Sports Ltd, you have concluded that the current budgeting system is not operating effectively and that the company does not employ a strategic planning process. You have therefore carried out some background research on budgeting and strategic planning and have obtained the following documents (available on the module Moodle page). Document 1 – A journal article on the behavioural aspects of budgeting (Raghunandan, M., Ramgulam, N. and Raghunandan-Mohammed, K. (2012) ‘Examining the behavioural aspects of budgeting with particular emphasis on public sector/service budgets.’ International Journal of Business and Social Science 3, (14) 110-117)

Document 2 – Income statements The following income statements relate to Pooma Sports Ltd. Year-ended 31/01/16 31/01/15 01/02/14 02/02/13 28//01/12 29//01/11 30/01/10 £000 £000 £000 £000 £000 £000 £000 Turnover 3,146 3,648 4,678 5,254 6,129 6,473 6,398 Cost of Sales -2,204 -2,402 -3,759 -3,657 -4,276 -3,957 -4,617 Gross Profit 942 1,246 919 1,597 1,853 2,516 1,781 Operating Expenses -1,367 -1,344 -3,226 -2,736 -2,878 -2,678 -3,163 Operating Profit -425 -98 -2,038 -1,139 -1,025 -162 -1,382 Net Interest -2 Profit (Loss) before Tax -425 -98 -2,038 -1,139 -1,025 -162 -1,384 Taxation 79 42 545 288 263 89 388 Profit (Loss) for Period -346 -56 -1,493 -851 -762 -73 -996 The last seven years have been very difficult for the company, and it has survived through the support of its parent company, to whom it currently owes a total of £10,039,000. However, the company now intends to engage in a number of income generating, costsaving and efficiency measures in order to improve its financial performance. Pooma Sports have recently embarked on a major sponsorship deal. Although this will increase costs in the short-term, management hope it will enhance awareness of the brand and increase sales and return the company to profitability in the longer term.

Document 3 – New product line Pooma Sports Ltd are considering introducing a new style of Rugby boot to the market. The boot has been developed and is ready to go into production. However, management need to decide whether to manufacture the boot in a new factory unit near their main premises in North West England or to outsource production to a partner company. Information relevant to this decision is given in the following table: In-house manufacture Outsourced manufacture Sales price (per pair) £80.00 £80.00 Direct materials cost (per pair) £20.00 £0.00 Direct labour cost (per pair) £15.00 £0.00 Buy-in cost from outsourced manufacturer £0.00 £50.00 Fixed manufacturing overheads £100,000 £0 Fixed administrative overheads £50,000 £50,000 Fixed selling and distribution overheads £40,000 £40,000 Break-even point (pairs of boots) 4,223 3,000 Margin of safety at budgeted profit level 57% 74% Unit sales required to achieve budgeted profit of £250,000 (pairs of boots)

Assignment requirements

You are required to write a report for the Board of Directors of Pooma Sports Ltd (italicized words in brackets indicate the approximate word count for each section). The report should cover the following key areas: 1. An executive summary outlining the key challenges that the company is facing and the main outcomes from the analysis work you have under taken so far (250-300 words). 2. A discussion of the need for budgets and strategic planning focusing on whether budgets are actually needed or should be dispensed with (Document 1) (225-275 words). 3. A discussion of the break-even analysis of the proposed new Rugby boot (Document 3) with particular emphasis on the following areas : a. An explanation of the different types of cost behaviour and why all fixed costs are in reality stepped fixed costs (90-110 words). b. A review of the risk and return offered by the two manufacturing options with reference to the concept of operating gearing and a recommendation on which option Pooma Sports Ltd should choose (210-240 words). 4. A discussion of the reasons for the differences between the net cash flows and the operating profit in the statements above (Document 4), and in particular why net cash flow remains negative when the company returns to profit at the end of the six-month period (325-375 words). 5. A discussion of the original and proposed costing methods above (Document 5) with particular emphasis on the following areas: a. A critical appraisal of the reasons for the choice of apportionment bases used in both the original and proposed costing methods (275-325 words); b. A critical appraisal of the Sales Director’s view that the proposed costing method is superior because it reduces the overheads chargeable to the Sports Clothing and Sports Equipment cost centres (180-210 words). 6. A critical appraisal of the results of the capital investment appraisal of the Superstitcher and Gluemaster (Document 6) with particular emphasis on the following areas: a. A discussion of the reasons for the apparent conflicts between the investment advice provided by each method (375-425 words);

b. A discussion of the risk and return presented by each option and a recommendation as to which option should be chosen, given the lack of investment capital available to the company (170-200 words).

Word Count The word count is between 2,000 and 2,250 (see guidance above on word count for each section). There will be a penalty of a deduction of 10% of the mark (after internal moderation) for work exceeding the word limit by 10% or more. The word limit includes quotations, but excludes the reference list. How to submit your assessment The assessment must be submitted by 16.00:00 on 08/01/18. No paper copies are required. You can access the submission link through the module web.  Your coursework will be given a zero mark if you do not submit a copy through Turnitin. Please take care to ensure that you have fully submitted your work.  All work submitted after the submission deadline without a valid and approved reason (see below) will be given a mark of zero.  The University wants you to do your best. However we know that sometimes events happen which mean that you can’t submit your coursework by the deadline – these events should be beyond your control. If this happens, you can apply for an extension to your deadline for up to two weeks, or if you need longer, you can apply for a deferral, which takes you to the next assessment period (for example, to the resit period following the main Assessment Boards). You must apply before the deadline. You will find information about the process and what is or is not considered to be an event beyond your control at https://share.coventry.ac.uk/students/Registry/Pages/Deferrals-andExtension.aspx  Students MUST keep a copy and/or an electronic file of their assignment.  Checks will be made on your work using anti-plagiarism software and approved plagiarism checking websites.