JOGGING Buddy

 

MINI CASE #1 – JOGGING BUDDY
Alisha Flores, president and founder of ‘Jogging Buddy’, could hardly contain her excitement over the
operating results for her company’s second year of operations. Jogging Buddy is an online retailer of

a
GPS running watch that records distance, time, speed, heart rate and several other statistics. Flores’
company does not manufacture the watches, but instead purchases them directly from the
manufacturer based in China and resells them through its online shopping site. During the first two
years of operation, Flores decided to hold the selling price of the watch constant at $100 per

unit in an
effort to attract business. She was also able to negotiate a deal with the supplier to

hold Jogging Buddy’s
cost per watch constant at $80 per unit for the two years.
Operating expenses for each of the first two year of operation consist only of advertising

expenses and
salaries paid to the website designer/ administrator and the company’s bookkeeper. Because Flores is
busy with her numerous other business ventures, the bookkeeper also looks after the day-to-day
operations of Jogging Buddy and has sole signing authority to make expenditures on the company’s
behalf. The bookkeeper just completed a 6-month online course through XYZ Top Training and has three
other part-time clients. To motivate the website designer to create a website that is easy

to use and
appealing to customers, Flores decided to pay him a commission equal to 1% of annual sales in

both
2015 and 2016. The salaries paid to the website administrator and the bookkeeper were the same

in
both years and totaled $92,000. Annual advertising expenses of $8,000 were also the same in both
years.
After reviewing the operating results for 2015 (shown below). Flores roughly calculated the expected
sales and expenses for 2016 based on anticipated sales of 10,000 watches at a price of $100

per unit and
a cost of $80 per unit. She calculated expected operating expenses in 2016 based on

the 2015 cost per
unit of $13.75 ($110,000 / 8,000). Based on her calculations (shown below), Flores expected a 25%
improvement in 2016 operating income, in keeping with the results shown below for 2016, she was
thrilled. Operating income had improved 50% compared to 2015 on sales growth of 25%.
2015 2016 Expected 2016 Actual
Sales (units) 8,000 10,000 10,000
Sales $800,000 $1,000,000 $1,000,000
Cost of goods sold 640,000 800,000 800,000
Gross margin 160,000 200,000 200,000
Operating expenses 110,000 137,500 125,000
Operating income $50,000 $62,5000 $75,000
Flores has always been an entrepreneur at heart but has no formal training in financial

accounting or
management accounting. She has always had a bookkeeper prepare annual financial statements. Flores
plans on showing the financials to a bank to secure a loan for future expansion.Required:
While Flores is happy with her current results, prior to speaking with the bank she would
like a second opinion, thus you have been hired to evaluate the current financial reporting
situation. She is unsure if her current bookkeeper is providing her with the best advice and
most accurate financials and must decide whether or not to retain her services.
Your analysis and discussion may be aided by:
– reviewing the nature of the error made by Flores when calculating expected
operating income for 2016.
– recalculating the expected results for 2016. For Flores benefit, provide details on the specific
items included in operating expenses. Based on your calculations of the expected results for
2016, are the actual results for 2016 as good as Flores originally thought.
Flores will consider all recommendations. Please refer to the “Guidelines for Mini-Cases’
and prepare a mini-report for Alisha Flores. Your report should include a memo,
introduction, background including main issue identification, alternatives available, a
quantitative and qualitative analysis of the alternatives (status quo, replace bookkeeper,
other?) and recommendations.

Guidelines for Mini Cases and In class Case assignment – ENTR 3120
Overview
Throughout the course, students will complete four mini-cases (5% mark), one inclass case in week

7 (15%) and one in-class case at the end of the term (10%). The
mini-cases are designed to cover various managerial accounting topics, and to
prepare students for the in-class case work. They are intended to:
• Develop the students’ ability to apply their individual skills in analysis,
synthesis, evaluation and written communication.
• Connect book concepts with real life scenarios
• Evaluate the ability of the student to apply concepts covered in class to a
practical, complex scenario in a manner that is relevant to the case; and,
• Evaluate the ability of the student to develop a coherent, integrated report
that addresses the key issues in the business scenario.
The mini-case is a formal written report that will be submitted for assessment and
feedback. Mini-cases will be evaluated using a rubric based on completeness,
accuracy, concept identification, writing and application.
The purpose of the assignment is to analyze the issue(s) faced by the organization
and to develop specific, action-oriented recommendations and solutions to the
organization. The report should concisely identify the key issue(s), demonstrate
relevant analysis – both quantitative and qualitative, an ability to summarize
analysis, identification of alternatives, and recommendations that provide
constructive solutions for the identified issues. Not all analysis may be necessary for
the case analysis, but it can be provided in an appendix.
To help with the analysis, attached is a basic case preparation chart. In a mini-case
not all aspects of the chart will be applicable. It is up to the student to identify

those
elements that are relevant to the case involved. The chart is a useful tool from which
to analyze the case. Students are then required to synthesize the findings and
prepare a ‘mini’ formal written report.
Case #1 – Body Products Division of World Wide Drugs. Provide mini formal written
report apply relevant concepts from the text (see breakeven)
Case #2 –“TBA”– Provide mini formal written report.
Case #3 – TBA – Provide mini formal written report.
Case #4 – “TBA” – Provide mini formal written report.
Note: the Instructor will not accept hand written assignments.CASE REPORTS – A VERY BRIEF SUMMARY OF COMMON

ELEMENTS
• Cover page
• Executive Summary (only on major reports) Mini reports = memo
• Table of contents (only on major reports)
• Introduction – what the reader can expect from report? Provide the scope.
• Background/Situational Analysis
o what is/are the major issue(s)
o company context – business overview
o what are the alternatives available to the company?
o Who are you writing – be mindful of your audience
• Analysis of alternatives
o Quantitative analysis
o Qualitative analysis (non financial considerations)
o Other considerations
o Decision Matrix (only major reports)
• Recommendations
o SMART
o Based on decision matrix (only major reports and may be beyond this
course)
• Implementation Plan and Financial Forecast (only major reports and may be
beyond this course)
• Bibliography (if applicable)
• Appendix – both quantitative and qualitative details
Students must not only familiarize themselves with the facts but also rearrange
them for better understanding (thus the analysis and case prep chart). After careful
analysis, a report will be prepared.
The objective of the report is to arrive at a coherent and insightful view of the
organization’s significant issues and provide the best recommendations for
addressing them. The goal is to produce something of value for the organization in
question by applying the concepts and tools provided in the course. These minicases are

constructed around issues involving the course concepts.BASIC CASE PREPARATION CHART – FOR ANALYSIS PURPOSES

ONLY
Omit sections if no information is provided
Analyze the
Internal
Environment
Corporate structure, culture, management practices, strategic objectives
Issue Identification – main and secondary. (See note below)
Analyze the
External
Environment
Have any external opportunities and threats been identified?
Outside research or industry analysis
Analyze case
information
Determine both relevant and irrelevant information from reading the case?
What concepts (from the textbook) can be applied to the case?
Analyze
Alternatives
Alternatives or options identified
Quantitative Analysis: “Number Crunching”
Qualitative Analysis – Non-numeric considerations. Are there operational
issues to consider?
Other factors to consider?
How can analysis be effectively summarized in the report?
Recommendations What are the recommendations?
Clarity of recommendations
Do recommendations solve main and secondary issues identified?
How and when should the recommendations be implemented
Grammar, clarity, effective use of charts/diagrams for summative purposes
Quality of Appendix – detailed analysis
Note re: Issue identification. When performing case analysis, students should be
mindful that symptoms are different from causes or implications. Through analysis,
the use of concepts and theories, students can draw conclusions about WHY the
company is encountering the symptoms. For example, the organization has
declining gross profit margins (symptom). Declining gross profit margins due to a
sharp increase in product material costs (SYMPTOM – declining profit margin,
CAUSE – increasing product costs)

 

 

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