CIMA G1 Dumps Questions Answers

One month has passed and more detailed decisions are now needed on pricing and the change management issues associated with the introduction of the new menu and hi-tech ordering system.

You have just received the following email from the Finance Director:

From: Matt Spot, Finance Director

To: Financial Manager

Subject: pricing and change management

Hello

Things are moving fast. We have just had feedback from a select group of customers. They were asked to test out the new menu and hi-tech ordering devices. The feedback was very positive, especially about the ordering devices which, they said, add an element of fun to the restaurant experience as well as speeding up the food ordering process. Families with young children were particularly enthusiastic about them and found that even young children enjoyed ordering their own food. They all agreed to keep the project secret, so we ' re hoping they will!

I have meetings arranged with Bilal Mukherjee, Marketing Director, and Helga Schmidt, Human Resources Director, to draw up plans for pricing and for change management and I need some information from you in preparation for them.

In terms of pricing, I am expecting that Bilal will suggest that we price the new menu quite high to begin with, following the example of a new burger chain which has been successful at charging higher prices for a top quality product and has attracted a lot of young working adults as customers. However, I am not convinced that this will work for Pizzatime.

Bilal has been given permission to organise a major promotional campaign to sell the health benefits of the new menu and show children and young adults having fun using the new ordering devices.

Clearly, there are going be some major changes in the roles and positions of staff within the restaurant team. Now that orders can be placed by customers from their tables the roles of restaurant staff are going to change significantly. Helga is concerned that there are likely to be some job losses and she may be right on that. We need to have a plan in place to make sure we are prepared for every eventuality so that we can manage the changes properly.

I need you to prepare some ideas on the following:

Whether I should support Bilal ' s suggestion to charge high prices initially. Do you think that this is likely to be a successful strategy for Pizzatime?

What types of concerns employees might have about the new ordering system and how we can best prepare staff for the change and help smooth the process to make this new venture an immediate success.

Matt

Extract from promotional pack addressed to potential franchisees

There is no real upper limit to the profits that you might earn as a Pizzatime franchisee. That depends on your hard work and commitment. We have prepared the following projected statement based on a typical franchise operation in I-land. We have adjusted those figures to reflect local circumstances in C-land where appropriate and have converted ongoing running costs that will be priced in I$ to C$ for your convenience.

Our projected annual figures for a typical C-land franchisee are as follows:

These estimates are based on a ' most likely ' scenario. We have based the conversion of costs that will be priced in terms of I$ on the average rate that was in force throughout the year ended 31 December 2015.

With hard work and imagination, you could easily exceed these figures. Many successful franchisees in I-land have gone on to open several restaurants and are now very wealthy.

The sky is the limit with Pizzatime!

Six months have passed since your exchange of emails with the Finance Director. Pizzatime has commenced its venture into the C-land market, but very few franchise agreements have been signed.

The Finance Director has asked you into his office

" We have signed fewer than half the franchise agreements that we had planned to have completed by now. Paradoxically, business people in C-land are complaining that the agreement looks very attractive at present because the C-land economy is strong and the C$ is at an all-time high. They are concerned that it will be a different story in the long term when the C$ weakens.

I have sent you a copy of the document we include in the proposal pack that we send out to interested applicants. We sent a copy to a potential franchisee and she complained that it was too simplistic and ignored changes in key variables such as fluctuating exchange rates.

Dennis Chan has asked me to consider acquiring a small logistics company in C-land and using it to import ingredients and consumables from I-land. It would sell at prices set in C$ and would handle the physical distribution. I am concerned about the accounting implications of having a foreign subsidiary and its impact on the overall group figures. If we proceed we will buy 100% of the equity for cash and we will fix selling prices in C$.

Could you do two things for me?

First of all, explain the issues associated with a potential franchisee conducting an analysis around key sensitive variables. How might we address the possibility that our franchise development staff in C-land might be demotivated by such concerns when attempting to find potential franchisees?

Secondly, could you use your knowledge of accounting to help me to identify the impact of currency movements on Pizzatime ' s consolidated financial statements if we buy a local logistics company and the C$ weakens? "

Extract from Bilal ' s spreadsheet

You have received the following email:

From: Matt Spot, Finance Director

To: Financial Manager

Subject: evaluating all-day opening

Things are moving fast and we need to put together a comprehensive investment appraisal for this project, for the Board to consider in three weeks ' time. Sorry to drop this on you, but I am really keen to give them some figures so that they can make a decision as quickly as possible on whether to go ahead. I suggested the idea at last month ' s Board meeting and it was received very positively.

Bilal has provided an initial costing, based on what he expects we will need to do from a marketing perspective. Apart from the equipment, we will have to change the layout of our restaurant seating and dining areas. I have attached his spreadsheet.

I am considering what discount rate might be most appropriate in a discounted cash flow analysis. We have used a 12% rate to evaluate projects for the past five years. I don ' t claim that this is a particularly scientific approach to project appraisal, but it seems acceptable to the Board.

I have just started looking at the likely impact of the project on the group results on the basis that the project is implemented across the whole group. I have calculated the following few results which now need some review and interpretation.

I need to go to another meeting now but I ' d really value your opinion on:

The relevance of the cash flows identified by Bilal in the attached spreadsheet.

The use of the 12% required rate of return in evaluating this proposal.

Whether or not I should be concerned about the apparent contradiction in the results of the ratio analysis shown above.

Matt