Concordia University Chicago Accounting for Decision Making Worksheet

Please see the attached file “Week 8” for the two part question.

For Part 1: The attached file under name ‘Week 1 company choice’ has material that can be used.

For Part 2: See other attached files “Assignment Week 6/4 and Week 2 work”.

Accounting for Decision Making
Maaz Sheeraz Khan
Concordia University Chicago
Accounting for Decision Making
05/14/2023
1
Accounting for Decision Making
This section prepares a balanced scorecard for Apple Inc. that will be presented to the
top management. The section will measure Apple Inc.’s liquidity, solvency, and profitability
ratios.
Liquidity Measures
Liquidity measures determine an organization’s capacity to pay its debt responsibilities
and safety margin via the computation of metrics, such as operating cash flow, quick ratio, and
current ratio (Yaacob et al., 2016). This section computed Apple Inc.’s current ratio between
2020 and 2022. The higher the current ratio, the better the organization’s liquidity position.
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜 =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
Apple Inc.’s Current Ratio between 2020 and
2022
1.60
1.40
1.36
1.20
1.07
0.88
RATIO
1.00
0.80
0.60
0.40
0.20
0.00
2020
2021
2022
YEAR
Apple Inc. recorded a low current ratio between 2020 and 2022. Therefore, the company was
not in a good liquidity position.
Solvency Measures
Solvency measures determine whether an organization can remain solvent for a
prolonged period. Solvency ratios measure a company’s actual cash flow instead of net income
2
by including depreciation and other non-cash expenditures to evaluate the firm’s ability to
remain afloat (Baraja & Yosya, 2019). This section examined Apple Inc.’s equity-to-assets
ratio to determine its solvency measure. The greater the equity ratio, the healthier the company
is, whereas the lower the ratio, the more debt a firm has compared to equity.
𝐸𝑞𝑢𝑖𝑡𝑦 𝑟𝑎𝑡𝑖𝑜 =
𝑇𝑜𝑡𝑎𝑙 𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 ′ 𝐸𝑞𝑢𝑖𝑡𝑦
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
Apple Inc.’s Shareholders’ Equity Ratio
between 2020 and 2022
0.25
0.20
RATIO
0.20
0.18
0.14
0.15
0.10
0.05
0.00
2020
2021
2022
YEAR
Apple Inc.’s equity-to-assets ratio decreased from 2020 at 0.20 to 2022 at 0.14. The low values
indicated by Apple Inc.’s financial information show that the company is unhealthy and has
more debt on its books than equity.
Profitability Measures
Profitability ratios determine a company’s capacity to produce profits compared to its
shareholders’ equity, balance sheet assets, operating costs, and revenues over time (Baraja &
Yosya, 2019). To assess Apple Inc.’s profitability, this paper examines its asset turnover ratio,
which measures how efficiently it utilizes its resources to generate sales or revenue.
𝑎𝑠𝑠𝑒𝑠𝑡 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =
𝑆𝑎𝑙𝑒𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
3
Apple Inc.’s Asset Turnover between 2020 and
2022
1.12
1.20
1.04
1.00
0.85
RATIO
0.80
0.60
0.40
0.20
0.00
2020
2021
2022
YEAR
Apple Inc. recorded an assets turnover ratio of 0.85 in 2020, 1.04 in 2021, and 1.12 in 2022.
This was low, meaning the company was not using its owned resources efficiently to generate
sales or revenues.
Summary
Between 2020 and 2022, Apple Inc. recorded a dismal performance in its financial
measures. However, one significant cause for the low performance could be due to the effects
of the COVID-19 pandemic. The company should introduce and implement new measures,
such as boosting its net to help it grow financially.
4
References
Baraja, L., & Yosya, E. A. (2019). Analysis the impact of liquidity, profitability, activity, and
solvency ratio on change in earnings. Indonesian Management and Accounting
Research, 17(1), 1–17. https://doi.org/10.25105/imar.v17i1.4663
Jui, L., & Wong, J. (2013, October 18). Roles and importance of professional accountants in
business. IFAC; Chinese Institute of CPAs. https://www.ifac.org/news-events/201310/roles-and-importance-professional-accountantsbusiness#:~:text=Accountancy%20professionals%20in%20business%20assist
Yaacob, S. F., Rahman, A. A., & Karim, Z. A. (2016). The determinants of liquidity risk: A
panel study of Islamic banks in Malaysia. Journal of Contemporary Issues and
Thought, 6(1), 73-82.
DOMUS DEVELOPMENTS: TO BUILD OR NOT TO BUILD?
Case Study Analysis: Domus Developments: To Build or Not to Build?
Maaz Sheeraz Khan
Concordia University Chicago
Accounting for Decision Making
06/18/2023
1
DOMUS DEVELOPMENTS: TO BUILD OR NOT TO BUILD?
2
Case Study Analysis: Domus Developments: To Build or Not to Build?
Domus Developments has a project, the North Point Lofts, which was initially launched
in 2008 but faced delays due to the global financial crisis (Grasby & Furgiuele, 2015). The
company is known in London, Ontario, for excellence and creativity in home construction.
Michael Mescia, the project manager, is considering whether to proceed with the development.
This case study analysis provides a comprehensive overview of Domus’ situation, including its
corporate strengths and weaknesses, potential customers, and the factors influencing the
decision-making process.
Main Body
Domus’ corporate strengths and weaknesses.
Reputation for delivering innovative designs and high-quality structures is a major
corporate strength for Domus. This reputation has helped them establish a solid presence in the
market and gain recognition from industry associations (Grasby & Furgiuele, 2015). The
organization has also had strong relationships with landowners, giving them access to better
development opportunities. This has helped them secure Type A sites and compete with more
experienced builders (Pererva et al., 2021). In addition, the company has received awards for its
building development projects, showcasing its excellence and expertise in the industry. These
accolades enhance their reputation and credibility among potential buyers and partners. They
have also established a network of suppliers that provide high-quality building materials. This
established supplier community ensures a reliable and consistent materials supply for their
projects.
DOMUS DEVELOPMENTS: TO BUILD OR NOT TO BUILD?
3
On the other hand, Domus has various corporate weaknesses that may affect the
company’s development. The organization is associated with delayed project timelines. The
North Point project, in particular, has faced significant delays since its launch in 2008 (Grasby &
Furgiuele, 2015). This suggests a weakness in project management and the ability to execute
projects on time. The company lacks experience catering to high-end consumers, yet the North
Point project represents an opportunity to tap into this market segment. Besides, the company has
costly redesign requirements since the original design for the North Point project is considered
outdated for the current market. Domus highly relies on contract laborers for their development
projects, which means they do not have a dedicated workforce and may face challenges in
ensuring consistent labor quality and availability.
Potential Customers and The Demand for North Point in The Current Market.
Based on the case study, several factors can influence the potential customers and the
demand for North Point in the current market. The target customers for North Point are
Londoners with above-average income levels, particularly empty nesters and older couples
(Grasby & Furgiuele, 2015). These customers value customization, exclusivity, and location.
Market conditions play an important role in attracting customers. New construction projects in
London, Ontario, are expected to rise. Higher-end new homes are in demand as 45-to-64-yearolds get employment. Competition is significant since several other building projects are planned
in the surrounding area of North Point (Pererva et al., 2021). However, North Point’s unique
features, such as its modern loft design and desirable location, could differentiate it from the
competition.
Pros And Cons of Developing North Point Versus Selling the Land
DOMUS DEVELOPMENTS: TO BUILD OR NOT TO BUILD?
4
Developing North Point or selling the property is associated with various pros and cons.
North Point’s residential or commercial development can provide significant revenue for the
corporation. It can also increase the value of nearby houses, encouraging investment and
possibly raising prices (Grasby & Furgiuele, 2015). The program can provide local building,
infrastructure development, and maintenance jobs. However, developing the site would require
significant initial capital expenditure, which could be risky if unfavorable market conditions
(Marlin, 2019). Time and resources would also be needed. Concerns about environmental
effects, loss of open space, and traffic congestion may lead local communities or environmental
groups to oppose it.
Selling the land would be favorable to the company in several ways. First, it can give
instant cash, allowing the corporation to benefit from the land’s present market worth without
development or management. By selling the land, Domus can avoid construction delays, cost
overruns, and market changes. In addition, selling saves time and resources associated with
development. However, the corporation may miss out on bigger profits by selling the land. The
corporation will lose control over how the land is developed and used after it sells, missing out
on the possibility of shaping the neighborhood or benefitting future growth (Pererva et al., 2021).
The decision to develop North Point or sell the site entails a trade-off between long-term
and short-term rewards. Developing the land is riskier and costs more money, but it could create
jobs and communities. However, selling the land gives immediate financial gain, simplifies the
process, and mitigates development hazards. However, it may result in missed prospects for
bigger earnings and loss of control over future development. The company’s financial goals, risk
tolerance, long-term vision, and market conditions should be considered.
24-Month Cash Budget for Building North Point, Starting in May 2014.
5
DOMUS DEVELOPMENTS: TO BUILD OR NOT TO BUILD?
Month
May
Year
2014
June
July
2014
2014
August
2014
September
October
November
December
January
February
March
April
May
2014
2014
2014
2014
2015
2015
2015
2015
2015
June
Cash Inflows
Pre-sale phase:
$700,000
Cash Outflows
Redesign fees: $500,000
Details
Initial Design and
Architect Fees
Excavation expense:
$250,000
Excavation expense:
$250,000
Labor expense: $28,800
Labor expense: $28,800
Labor expense: $28,800
Labor expense: $28,800
Labor expense: $28,800
Labor expense: $28,800
Labor expense: $28,800
Property tax: $40,000
Concrete: $135,714
Excavation
2015
Concrete: $135,714
July
2015
Concrete: $135,714
August
2015
Concrete: $135,714
September 2015
Concrete: $135,714
October
2015
Concrete: $135,714
November
2015
Concrete: $135,714
December
2015
Concrete: $135,714
January
2016
Concrete: $135,714
February
2016
Concrete: $135,714
March
2016
Concrete: $135,714
April
May
June
July
August
September
2016
2016
2016
2016
2016
2016
Steel: $178,571
Steel: $178,571
Steel: $178,571
Steel: $178,571
Steel: $178,571
Steel: $178,571
Building Apparatus:
Concrete
Building Apparatus:
Concrete
Building Apparatus:
Concrete
Building Apparatus:
Concrete
Building Apparatus:
Concrete
Building Apparatus:
Concrete
Building Apparatus:
Concrete
Building Apparatus:
Concrete
Building Apparatus:
Concrete
Building Apparatus:
Concrete
Building Apparatus: Steel
Building Apparatus: Steel
Building Apparatus: Steel
Building Apparatus: Steel
Building Apparatus: Steel
Building Apparatus: Steel
During the
building phase:
$1,400,000
Excavation
Contract laborers
Contract laborers
Contract laborers
Contract laborers
Contract laborers
Contract laborers
Contract laborers
Holding Costs
Building Components:
Concrete
6
DOMUS DEVELOPMENTS: TO BUILD OR NOT TO BUILD?
October
November
2016
2016
Steel: $178,571
Steel: $178,571
Building Apparatus: Steel
Building Apparatus:
The cash budget is prepared from the following breakdown:
Additional Information/Workings
Initial Design and Architect Fees:
Redesign fees: $500,000 (paid upfront)
Excavation:
Total costs tied to excavation: $500,000 (expensed equally between July and August 2014)
Costs tied to labor:
Contract laborers [15 laborers * 8 hours/day * 5 days/week * 4 weeks/month * $15/hour
= $28,800 per month]
Components tied to building:
Concrete [ $1.9 million (paid in equal monthly instalments over 14 months)]
Steel [ $2.5 million (paid in equal monthly instalments over 14 months)]
Holding Expenses:
Property tax= $40,000 per year (paid in April each year)
Sales and Revenue
Pre-sale phase: 14 units * $500,000 * 10% (deposit) = $700,000
During building phase: 28 units * $500,000 * 10% (deposit) = $1,400,000
Remaining units =(Total units – Pre-sale units – Building phase units) * $500,000 * 10% (deposit)
Total revenue= $25.5 million (to be received upon completion)
Other Costs
Budgeted amount= ($500,000 (incurred evenly over the 24 months)
DOMUS DEVELOPMENTS: TO BUILD OR NOT TO BUILD?
7
Marketing Budget
Total marketing budget = $375,000 (spent over 24 months)
The working for the cash outflows is based on the assumption that there is an even distribution of
expenses over specified periods. For instance, the cost of concrete of $1.9 million is divided
equally over 14 months, bringing forth a monthly expense of $135 714. In the same way, the
steel expense of 2.5 million USD is divided equally over 14 months, bringing forth a monthly
expense of $178,571. The property tax of $40,000 is paid on one occasion every year in April.
The sales and revenue calculations are grounded on the number of units sold during different
phases and the deposit amount of 10 per cent of the selling price.
My Decision as Mescia
As Mescia, proceeding with the North Point project is the most strategic decision for
Domus Developments, driven by several compelling factors. Firstly, completing the project
aligns with Domus’s goal of establishing a respected market reputation built on its track record of
innovative designs and high-quality structures (Grasby & Furgiuele, 2015). Secondly, North
Point offers a significant growth opportunity, targeting a niche market of modern loft residences
that can attract affluent consumers, expanding Domus’s customer base and ensuring long-term
success. Additionally, improving market conditions and Domus’s competitive advantage in the
attractive North London location can drive higher demand and set the project apart.
Conclusion
Deciding to proceed with the North Point project presents a strategic opportunity for
Domus Developments. By leveraging its strong reputation, targeting a niche market, and
capitalizing on market conditions and location advantages, Domus can establish itself as a
prominent player in the residential building industry. While there are risks and challenges
DOMUS DEVELOPMENTS: TO BUILD OR NOT TO BUILD?
associated with development, the potential long-term rewards and the alignment with Domus’s
corporate goals make moving forward with the project a compelling choice.
8
DOMUS DEVELOPMENTS: TO BUILD OR NOT TO BUILD?
9
References
Grasby, E. & Furgiuele, E. (2015). Domus Developments: To Build or Not to Build?
Khan, Z. (2021). What Are the Pros and Cons of Selling Your Property?
https://www.sirmaya.com/blog/what-are-the-pros-and-cons-of-selling-your-property/
Pererva, P. G., Kobielieva, T. O., Tkachov, M. M., & Diachenko, T. A. (2021). Management of
relations with enterprise stakeholders based on a value approach.
http://dx.doi.org/10.21511/ppm.19 (1).2021.03
Marlin, C. (2019). The pros and cons of real estate development opportunities.
https://www.uglobal.com/en/investment/posts/the-pros-and-cons-of-real-estatedevelopment-opportunities/
Part 1
Why might an advertising agency use job costing for an advertising campaign by Pepsi, whereas a bank
might use process costing to determine the cost of checking account deposits? How are these
approaches similar? What importance to these results do managers?
Please use at least one citation (APA 7th) and write 250-300 words.
Part 2- Case Study – Space & Light Studio CVP Analysis and the Business of Yoga
As yoga grew in popularity in Singapore, there were many new yoga studios set up in attempts to tap into
this growing service industry. Space & Light Studios Pte Ltd was one of them. A small and medium
enterprise set up in December 2012, it differentiated itself by offering yoga classes that emphasized on
the optimal alignment of the body. This case study explores the entrepreneurial journey of the owners of
Space & Light Studios and examines the viability of this yoga business utilizing Cost-Volume-Profit
analysis – a management accounting tool.
Space & light studios Cost-volume-profit Analysis and the Business of Yoga.PDF
Case Study Questions:
1. Estimate the current profit figures of SLS from December 2012 to May 2013 to evaluate the
viability of the business.
2. Examine SLS’s break-even point for May 2013.
3. Estimate the profitability of conducting each type of yoga class – i.e. group classes, private
classes, and “salt cave” classes.
4. Consider the implications of the analyses above for SLS.
5. Conduct sensitivity analyses based on different scenarios of rental costs, fees paid to yoga
teachers and pricing.
6. Recommend a plan of action for the owners of SLS.
In 3 pages, and applying material from the chapter readings of this module, answer the above
questions. Integrate references (minimum of 3). Reply to these questions in essay (not Q & A)
format. Provide a graduate level introduction paragraph, and conclusion paragraph.
Use the provided writing template, and follow 6th edition APA writing conventions.
1
Customer Profitability and Hockley Industry Analysis
Maaz Sheeraz Khan
Concordia University Chicago
Accounting for Decision Making
06/05/2023
2
Customer Profitability and Hockley Industry Analysis
An external analysis considers the larger business environment that impacts a company.
An increasing number of consumers are choosing local craft beer over international brands.
Therefore, established microbreweries have an excellent chance for rapid expansion (LaMarco,
2010). The breweries’ executives certainly know what they are undertaking. Smellie seems to be
struggling to set a fair price for his new product in light of customer feedback. Smellie has
planned and allocated funds to advertise its new Hockley Classic beer. However, the prices of the
products will change based on what customers choose. The Hockley Classic may seem expensive
from the outside, but that is not the reality. The recommended retail price of $2.55 seems high,
given the beer’s high quality. Hockley Valley Brewing should perform a competitive study since
Hockley Classic places the brewery in direct rivalry with its two major rivals, Steam Whistle
Brewery and Mill Street Beer. Hockley Valley saw that their light beer sold quite well during
Orangeville’s 150th-anniversary party, so they are considering expanding their line to include
other light beers. They have to decide whether or not they think the Hockley Classic can hold its
own against other brewers. They need to discover a way to satisfy both their current clientele in
the dark beer market and potential new clients in the light beer market.
1.
An organization’s potential is mapped out through corporate capacity analysis. The
capacity to adapt is crucial to the success of any company. Capabilities evaluate both the level of
performance and the degree of risk involved. Achieving the same result through different means
is possible but not guaranteed (Kouropalatis et al., 2018). Hockley began with a light ale called
Hockley Gold and then developed a dark beer called Hockley Dark. Hockley Stout followed
3
shortly after. After that, Hockley Village discontinued Hockley Gold in favor of other offerings,
including the blond lager Georgian Bay Beer. In 2013, Hockley Valley Brewing Company
already became well-known for its Dark, Amber, Black and Tan, Georgian Bay, and Hockley 100
beers. The debut of Hockley Classic implies the need to provide a light beer capable of
competing with the market leaders. Hockley Valley has to go beyond only its signature Dark
Beer to maximize revenues. Because entering a new market is challenging, executing this launch
will be complex.
2.
Hockley Valley manufactures whatever goods they think customers desire most. When
new items enter the market, they bring an opportunity for expansion. Hockley Valley has to
determine whether it can afford to launch a new product line and if the potential revenues from
selling the new product would be worth the initial investment. The new product would have
about the same direct expenses but increased factory manufacturing costs of around 50 percent.
As a result of the hefty price tag, they decided to phase out one of their offerings. In light of its
poor performance in the market, it was decided to discontinue the production of Black and Tan
Beer. Hockley could dedicate more resources to developing the new product, and more room
might be made available for manufacturing. Hockley Valley should add this beer to its
product line because of its huge market potential. They would only be exchanging their least
popular beer for a potential increase in earnings so it would be worth the risk.
3.
It is crucial to set the pricing of a product where one will make the maximum profit. It is
incumbent upon Hockley Valley to settle on a reasonable fee for the Hockley Classic. A can of
4
their goods will set you back anything from $2.55 to $2.75. The Liquor Control Board of Ontario
suggests selling Hockley Classic for $2.55, which is less than the price of some of their rivals but
would help them break into the light beer market by attracting new consumers. As a new player
in the market, Hockley Valley recognizes the need to differentiate itself from the competition.
Selling price = $2.55
Variable costs = $1.62 plus the extra 50% from the factory costs ($0.35)
= $1.97
= (($2.55 – $1.97) x 100 then divided by $2.55
Unit Contribution= 0.23
4.
Hockley can choose between the LCBO and The Beer Store as potential locations.
Besides the LCBO’s charge of around 11% of sales, there were no listing fees or other expenses
associated with selling via the LCBO. 50 “boutique-style” The Beer Stores also carried dark
brew and sampler packs. The Beer Store added $275 to the price of each product sold in its
boutique stores, for a total of $3,750.
Sales required to break even for The Beer Store
a) Upfront listing fees. This can be calculated as one-time listing fees added to the extra
individual boutique fee i.e.
= $3000 + ($275 x 50)
=$16, 750
5
b) Hockley Classic cost for each can
= beer ingredients + packaging fee + new factory production costs (extra plant costs + old
factory production costs) + excise tax + provincial levy
= $0.33 + $0.28 + ($0.35 + $0.70) + $0.02 + $0.29
= $1.97 for each can
c) Profit from each can
= Set price – cost for each can
= $2.55 – $1.97
= $0.58 per can
d) The Beer Store’s minimum necessary sales price to recover listing costs
= Upfront listing fees / Profit made on each can
= $16,750 / $0.58
= 28,879.3
= 28,880 cans
From the above, The Beer Store’s break-even point is 28,880 cans
How a product gets to the consumer is described by its distribution strategy. It considers
all points of contact throughout the supply chain, from the point of origin (the factory or other
production facility) to the final destination (the customer’s hands) (Karaxha & Karaxha, 2015).
Using the LCBO as a channel of distribution is the most effective option. This is the most secure
option available. Since there are no hidden charges or listing fees besides the commission on
sales. It is a government-owned enterprise with multiple outposts around the province of Ontario.
6
Hockley has a long history of success with the LCBO, which has resulted in a mutually
beneficial working relationship between the two parties.
7
References
Karaxha, H., & Karaxha, H. (2015). The Strategies of Distribution Channels: Kosovo’s Case.
Academic Journal of Interdisciplinary Studies, 4(2), 555.
https://www.mcser.org/journal/index.php/ajis/article/view/7206
Kouropalatis, Y., Giudici, A., & Acar, O. A. (2018). Business capabilities for industrial firms: A
bibliometric analysis of research diffusion and impact within and beyond Industrial
Marketing Management. Industrial Marketing Management, 83.
https://doi.org/10.1016/j.indmarman.2018.11.012
LaMarco, N. (2010). Why Is Industry Analysis Important? Chron.com.
https://smallbusiness.chron.com/industry-analysis-important-3292.html