20200909011113finance2 x20200909011022team_erie_report2
You can see the effect of the matching principle on your Capsim Core Income Statement. When you sell products, the amount you paid for the materials and labor will show up in the Variable Cost section, even though your company paid those bills earlier. The lesson is that those costs are matched to the sales.
When you buy additional capacity for your Capsim plant or add points to your automation rating, your investment in these assets will show up on the Balance Sheet under Fixed Assets as a positive number. That same amount will show up on the Cash Flow statement (as a negative number) under Cash From Investing, because the cash went out of the business for the equipment.
For this assignment, explain the relationship between your team’s Capsim decisions and their impact on the Income Statement and Balance Sheet for last week’s Round 2 competition. Share your decision-making logic. Include in your discussion how your decisions affected, a) sales, b) profit, and c) contribution margin, and explain the concepts and models you used to form and integrate your strategies.
Your paper should meet the following requirements:
- Be 5-6 pages in length, excluding the title and references pages.
- Be formatted according to the CSU-Global Guide to Writing and APA. (Links to an external site.)
- In addition to course resources, use the CSU-Global Library to find three additional resources to support the position you take.
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CSU-Global Online Research and Writing Lab (Links to an external site.)
. Here you can find:
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11/09/20, 06:47:40
Finance: Why the rules are the rules According to the Organic Trade Association, sales of organic food steadily growing since 2012. Americans spent $43.3 billion on organic products in 2015. One company riding that wave is Hains Celestial Group which sells organic food and personal care products through distributors to thousands of retailers. For the first half of 2016, Hains Celestial saw its share price increase 32%. Then, in August, it lost $1.3 billion from its market value overnight, after announcing profit targets would not be met for the fiscal year to June 30th and year-end results would be delayed. All because of accounting. Is it the market, or the reporting? Some commentators speculated Hains’ problems may flag a softening in the market for consumer organics. Others said the loss of value was a temporary setback, making it a good time to buy Hains Celestial shares. Whatever the final fallout, a company growing strongly and selling some of the hottest products in the food industry hit a roadblock because of accounting anomalies — and it is far from the first. The problem stemmed from the timing of Hains’ revenue reporting. When the company ships product to a distributor, it books the revenue. Distributors receive concessions that Hains applies according to a formula, rewarding them for high volumes sold in shorter periods. “Since Hain recognizes revenue before the goods are sold, it needs to make an estimate of how big those concessions will be,” said Fortune Magazine. According to the Wall St Journal: “It is reviewing whether revenue associated with the concessions should continue to be reported when products are shipped to distributors or recorded when the distributors sell them to retailers.” Perhaps more worrying is the company’s admission that it needs “to assess its internal controls over financial reporting.” Some scope for flexibility Forbes pointed to another organic food company, Annie’s, that faced similar problems due to accounting irregularities in 2014 but recovered quickly, and was bought by General Mills soon after. While there is some scope for individual companies and industries to incorporate unique aspects of their businesses in their financial reporting, the rules of accounting – laid out in the Generally Accepted Accounting Principles (GAAP) – are very strict. Clear rules means that stakeholders – including shareholders, potential buyers and even governments – can make consistent evaluations over time and between different companies. “It is no longer sufficient merely to comply with accounting rules so that there is no technical breach; 3 Investors require valid information “Investors do not like to be misled by fraudulent or dishonest managers who are economical with the truth or bend it to their advantage,” warns Jenny Rayner, in Managing Reputational Risk: Curbing Threats, Leveraging Opportunities (Wiley, September 11, 2003). “It is no longer sufficient merely to comply with accounting rules so that there is no technical breach; to restore confidence in the markets, investors also want companies to respect the spirit of the standards.” After the accounting and audit scandals that bankrupted Enron and WorldCom in the early 2000’s, new legislation in the U.S., the Sarbanes-Oxley Act, increased penalties for destroying, altering, or fabricating records in federal investigations or for attempting to defraud shareholders. The act also increased the accountability of auditing firms to remain unbiased and independent of their clients. That makes it more difficult for fraud to go unpunished, but as Hains Celestial discovered (to its detriment) any accounting irregularities can have serious implications in the marketplace.
Contents
ZP95294_1 Round 2 – 202
2
Report
Section 1 Research and Development
Section 2 Marketing Low Tech
Section 3 Marketing High Tech
Section 4 Production
Section 5 Finance
Section 6 Product Financials
Section 7 Custom Modules
0 . 1 H i g h L eve l O ve r v i e w
Andrews Baldwin Chester Digby Erie Ferris Average
Sales $32,477 $79,895 $60,598 $45,745 $31,933 $68,645 $53,21
6
Pro�t $2,664 $12,419 $8,016 $5,484 $3,783 $6,102 $6,411
Contribution Margin 38.02% 34.73% 32.49% 32.12% 32.63% 34.36% 34.06%
Stock Price $19.14 $44.58 $26.55 $21.09 $13.91 $23.70 $24.83
Emergency Loan $0 $0 $0 $0 $0 $0 $0
Market Share 10.2% 25.0% 19.0% 14.3% 10.0% 21.5% 16.7%
Section 1 | Research and Development
1 . 2 L o w Te c h
Customer Buying Criteria
Expectations Importance
Price $15.00 – $35.00 41%
Age 3 Years 29%
Reliability 14,000 – 20,000 Hours 21%
Positioning Performance 5.8 Size 14.2 9%
1 . 3 H i g h Te c h
Customer Buying Criteria Expectations Importance
Positioning Performance 8.8 Size 11.2 33%
Age 0 Years 29%
Price $25.00 – $45.00 25%
Reliability 17,000 – 23,000 Hours 13%
1.4 Perceptual Map
Performance
Si
ze
AbleAbleAble
BakerBakerBaker
CakeCakeCake
DazeDazeDazeEatEatEatFastFastFast
FrostFrostFrost
0 2 4 6 8 10 12 14 16 18
20
0
2
4
6
8
10
12
14
16
18
20
1 . 5 P ro d u c t L i s t
Name Performance Size Reliability Age Revision Date
Able 7.5 13.0 18,550 1.9 April 6, 2022
Ace — — — — April 1, 2023
Baker 8.8 11.0 23,000 1.5 December 24, 2022
Cake 7.6 12.4 21,300 2.6 December 14, 2022
Daze 5.8 14.2 20,000 1.9 May 20, 2022
Dino — — — — October 15, 2023
Eat 5.8 14.2 19,000 1.9 May 18, 2022
Fast 6.0 14.0 17,000 2.9 May 3, 2022
Frost 8.1 11.9 17,000 0.7 April 28, 2022
Section 2 | Marketing
Low Tech
2 . 1 C u s to m e r B u y i n g C r i t e r i a
Expectations Importance
Price $15.00 – $35.00 41%
Age 3 Years 29%
Reliability 14,000 – 20,000 Hours 21%
Positioning Performance 5.8 Size 14.2 9%
2 . 2 D e m a n d I n f o r m a t i o n
2022 Total Market Size 6,098
2022 Total Units Sold 5,437
2023 Demand Growth Rate 10%
2.3 Market Share
Andrews
Andrews
7.2 %
7.2 %
Andrews
7.2 %
Baldwin
Baldwin
0.0 %
0.0 %
Baldwin
0.0 %
Chester
Chester
27.0 %
2
7.0 %
Chester
27.0 %
Digby
Digby
23.1 %
23.1 %
Digby
23.1 %
Erie
Erie
16.2 %
16.2 %
Erie
16.2 %
Ferris
Ferris
26.6 %
26.6 %
Ferris
26.6 %
Andrews Baldwin Chester Digby Erie Ferris
2 . 4 To p P ro d u c t s
Name Price
Units Sold Potential
Sold
Stock
Out
Age Performance Size Reliability
Sales
Budget
Customer
Accessibility
Promo
Budget
Customer
Awareness
Customer
Satisfaction
Cake $36.00 1,465 1,072 Yes 2.6 7.6 12.4 21,300 $1,200 32% $1,200 67% 14
Fast $34.00 1,435 1,966 Yes 2.9 6 14 17,000 $2,500 62% $2,000 100% 26
Daze $33.00 1,256 1,358 Yes 1.9 5.8 14.2 20,000 $1,000 30% $1,000 59% 19
Eat $32.25 880 1,323 Yes 1.9 5.8 14.2 19,000 $800 23% $800 41% 14
Able $41.00 390 370 Yes 1.9 7.5 13 18,550 $2,000 22% $2,000 95% 5
Frost $44.00 10 10 Yes 0.7 8.1 11.9 17,000 $2,000 62% $2,000 70% 0
Section 3 | Marketing
High Tech
3 . 1 C u s to m e r B u y i n g C r i t e r i a
Expectations Importance
Positioning Performance 8.8 Size 11.2 33%
Age 0 Years 29%
Price $25.00 – $45.00 25%
Reliability 17,000 – 23,000 Hours 13%
3 . 2 D e m a n d I n f o r m a t i o n
2022 Total Market Size 3,110
2022 Total Units Sold 3,110
2023 Demand Growth Rate 20%
3.3 Market Share
AndrewsAndrews
12.9 %
12.9 %
Andrews
12.9 %
BaldwinBaldwin
57.1 %
57.1 %
Baldwin
57.1 %
ChesterChester
7.0 %7.0 %
Chester
7.0 %
DigbyDigby
4.2 %
4.2 %
Digby
4.2 %
ErieErie
3.5 %
3.5 %
Erie
3.5 %
FerrisFerris
15.3 %
15.3 %
Ferris
15.3 %
Andrews Baldwin Chester Digby Erie Ferris
3 . 4 To p P ro d u c t s
Name Price
Units Sold Potential
Sold
Stock
Out
Age Performance Size Reliability
Sales
Budget
Customer
Accessibility
Promo
Budget
Customer
Awareness
Customer
Satisfaction
Baker $45.00 1,775 658 No 1.5 8.8 11 23,000 $2,400 61% $1,350 75% 33
Able $41.00 402 665 Yes 1.9 7.5 13 18,550 $2,000 54% $2,000 95% 13
Frost $44.00 326 691 Yes 0.7 8.1 11.9 17,000 $2,000 66% $2,000 70% 26
Cake $36.00 218 265 Yes 2.6 7.6 12.4 21,300 $1,200 34% $1,200 67% 15
Fast $34.00 149 308 Yes 2.9 6 14 17,000 $2,500 66% $2,000 100% 7
Daze $33.00 130 256 Yes 1.9 5.8 14.2 20,000 $1,000 25% $1,000 59% 9
Eat $32.25 110 268 Yes 1.9 5.8 14.2 19,000 $800 24% $800 41% 7
Section 4 | Production
Production vs Capacity
792792792
1,7821,7821,782
1,6831,6831,683
1,3861,3861,386
990990990
1,9201,9201,920
400400400
900900900
1,0001,0001,000
1,0001,0001,000
550550550
1,0501,0501,050
Production Capacity
Andrews
Baldwin
Chester
Digby
Erie
Ferris
0 200 400 600 800 1000 1200 1400 1600 1800 2000100 300 500 700 900 1100 1300 1500 1700 1900 2…
4 . 1 P l a n t I n f o r m a t i o n
Name Primary Segment Units Produced Units Sold Inventory Price Material Cost Labor Cost Contribution Margin Auto. Next Round Capacity Next Round Plant Utilization
Able High Tech 792 792 0 $41.00 $14.44 $10.19 38% 5 750 200%
Ace — 0 0 0 $0.00 $0.00 $0.00 0% 1.7 600 0%
Baker High Tech 1,782 1,775 7 $45.00 $19.20 $12.35 34.7% 2.8 1,300 200%
Cake High Tech 1,683 1,683 0 $36.00 $15.98 $10.10 32.5% 4.4 1,050 170%
Daze Low Tech 1,386 1,386 0 $33.00 $11.84 $10.67 32.1% 3 1,000 140%
Dino — 0 0 0 $0.00 $0.00 $0.00 0% 2 750 0%
Eat Low Tech 990 990 0 $32.25 $11.54 $9.97 32.6% 4 850 182%
Fast Low Tech 1,584 1,584 0 $34.00 $11.35 $9.74 35.3% 5 1,150 200%
Frost High Tech 336 336 0 $44.00 $15.73 $14.25 30.8% 1.5 400 200%
Section 5 | Finance
5 . 1 I n c o m e S t a t e m e n t
Andrews Baldwin Chester Digby Erie Ferris
Sales $32,477 $79,895 $60,598 $45,745 $31,933 $68,645
Variable Costs
Direct Material $12,055 $30,196 $23,899 $16,269 $11,640 $24,843
Direct Labor $8,073 $21,931 $17,008 $14,785 $9,874 $20,218
Inventory Carry $0 $24 $0 $0 $0 $0
Total Variable Costs (Labor, Material, Carry) $20,128 $52,150 $40,907 $31,053 $21,514 $45,061
Contribution Margin $12,349 $27,745 $19,691 $14,692 $10,418 $23,584
Period Costs
Depreciation $1,300 $1,704 $1,652 $1,200 $1,247 $2,313
SG&A
R&D $1,260 $979 $952 $1,382 $377 $657
Promotions $2,000 $1,350 $1,200 $1,000 $800 $4,000
Sales $2,000 $2,400 $1,200 $1,000 $800 $4,500
Administration $596 $1,315 $982 $737 $716 $1,122
Total Period Costs $7,156 $7,748 $5,986 $5,319 $3,939 $12,592
Net Margin $5,193 $19,997 $13,704 $9,373 $6,479 $10,992
Other (Fees/Write-offs/Bonuses/Relocation Fee) $400 $247 $369 $150 $64 $300
EBIT $4,793 $19,750 $13,335 $9,223 $6,415 $10,692
Interest (Short term/Long Term) $611 $253 $751 $614 $475 $1,113
Taxes $1,464 $6,824 $4,404 $3,013 $2,079 $3,353
Pro�t Sharing $54 $253 $164 $112 $77 $125
Net Pro�t $2,664 $12,419 $8,016 $5,484 $3,783 $6,102
5 . 2 C a s h F l o w S t a t e m e n t
Andrews Baldwin Chester Digby Erie Ferris
Starting Cash Position $18,044 $10,800 $7,934 $8,995 $9,521 $10,678
Cash From Operations
Net Income(Loss) $2,664 $12,419 $8,016 $5,484 $3,783 $6,102
Adjustment For Non-Cash Items
Depreciation $1,300 $1,704 $1,652 $1,200 $1,247 $2,313
Extraordinary Gains/Losses/Write-offs $0 $195 $145 $0 $42 $0
Changes In Current Assets And Liabilities
Accounts Payable ($78) $1,060 $615 ($42) ($557) $729
Inventory $0 ($201) $0 $0 $0 $0
Accounts Receivable $456 ($1,429) ($1,140) ($155) $179 ($1,261)
Net Cash From Operations $4,342 $13,748 $9,288 $6,487 $4,694 $7,883
Cash From Investing
Net Plant Improvements ($18,380) ($7,960) ($3,580) ($10,500) ($6,600) ($13,440)
Cash From Financing
Dividends Paid $0 ($1,439) $0 $0 ($700) $0
Sales Of Common Stock $8,000 $0 $1,900 $3,000 $0 $3,000
Purchase Of Common Stock $0 ($1,500) ($500) $0 $0 $0
Cash From Long-Term Debt Issued $0 $0 $1,600 $0 $0 $3,000
Early Retirement Of Long-Term Debt $0 ($2,000) ($2,800) $0 ($1,500) $0
Retirement Of Current Debt $0 $0 $0 $0 $0 ($1,000)
Cash From Current Debt Borrowing $0 $0 $3,500 $0 $0 $0
Cash From Emergency Loan $0 $0 $0 $0 $0 $0
Net Cash From Financing $8,000 ($4,939) $3,700 $3,000 ($2,200) $5,000
Effect Of Exchange Rates $0 $0 $0 $0 $0 $0
Net Change In Cash ($6,038) $849 $9,408 ($1,013) ($4,106) ($557)
Ending Cash Position $12,006 $11,649 $17,342 $7,981 $5,415 $10,121
5 . 3 B a l a n c e S h e e t
Andrews Baldwin Chester Digby Erie Ferris
Cash $12,006 $11,649 $17,342 $7,981 $5,415 $10,121
Accounts Receivable $2,669 $6,567 $4,981 $3,760 $2,625 $5,642
Inventory $0 $201 $0 $0 $0 $0
Current Assets $14,676 $18,417 $22,323 $11,741 $8,040 $15,763
Plant and Equipment $27,180 $25,560 $24,780 $28,500 $18,700 $34,700
Accumulated Depreciation ($4,287) ($7,677) ($7,865) ($7,200) ($5,353) ($8,351)
Fixed Assets $22,893 $17,883 $16,915 $21,300 $13,347 $26,349
Total Assets $37,569 $36,299 $39,237 $33,041 $21,386 $42,113
Accounts Payable $1,654 $4,301 $3,362 $2,552 $1,768 $3,704
Current Debt $867 $0 $3,500 $867 $0 $867
Current Liabilities $2,521 $4,301 $6,862 $3,419 $1,768 $4,570
Long-Term Liabilities $4,333 $1,947 $4,145 $4,333 $3,742 $9,333
Total Liabilities $6,854 $6,248 $11,007 $7,752 $5,510 $13,904
Common Stock $12,623 $2,154 $6,171 $6,323 $2,323 $7,323
Retained Earnings $18,091 $27,898 $22,060 $18,966 $13,553 $20,886
Total Equity $30,714 $30,052 $28,230 $25,289 $15,876 $28,209
Total Liabilities & Equity $37,569 $36,299 $39,237 $33,041 $21,386 $42,113
5 . 4 S to c k M a r ke t S u m m a r y
Company Closing Price Change Shares Outstanding Market Cap Book Value EPS Dividend Yield P/E
Andrews $19.14 $0.40 2,632,948 $50m $11.67 $1.01 $0.00 0% 18.92
Baldwin $44.58 $17.73 1,944,149 $87m $15.46 $6.39 $0.74 1.7% 6.98
Chester $26.55 $9.66 2,271,096 $60m $12.43 $3.53 $0.00 0% 7.52
Digby $21.09 $5.81 2,286,012 $48m $11.06 $2.40 $0.00 0% 8.79
Erie $13.91 $4.61 2,000,000 $28m $7.94 $1.89 $0.35 2.5% 7.35
Ferris $23.70 $6.09 2,349,505 $56m $12.01 $2.60 $0.00 0% 9.13
5.5 Stock Price
11.1611.1611.16
18.7418.7418.74 19.1419.1419.14
26.8626.8626.86
44.5844.5844.58
26.5526.5526.55
15.2815.2815.28
9.39.39.3
13.9113.9113.91
23.723.723.7
Andrews Baldwin Chester Digby Erie Ferris
2020 2021 2022 2023 2024 2025 2026 2027
$0
$10
$20
$30
$40
$50
5 . 6 B o n d M a r ke t S u m m a r y
Company Series Face Value Yield Closing Price S&P Rating
Andrews
12.0S2024
13.0S2026
$1,733,333
$2,600,000
11.32%
11.37%
$106.01
$114.38
AAA
AAA
Baldwin 13.0S2026 $1,946,881 11.33% $114.74 AAA
Chester
13.0S2026
9.2S2032
$2,544,816
$1,600,000
11.54%
9.14%
$112.61
$100.64
AA
AA
Digby
12.0S2024
13.0S2026
$1,733,333
$2,600,000
11.36%
11.44%
$105.64
$113.67
AAA
AAA
Erie
12.0S2024
13.0S2026
$1,141,942
$2,600,000
11.38%
11.47%
$105.46
$113.31
AAA
AAA
Ferris
12.0S2024
13.0S2026
10.0S2031
9.8S2032
$1,733,333
$2,600,000
$2,000,000
$3,000,000
11.5%
11.69%
9.71%
9.62%
$104.37
$111.22
$102.94
$101.88
A
A
A
A
Next Year’s Prime Rate: 7%
5.7 Net Pro�t
Andrews Baldwin Chester Digby Erie Ferris
$0
$2500
$5000
$7500
$10000
$12500
$15000
Section 6 | Product Financials
6 . 1 A n d re w s I n c o m e S t a t e m e n t
Able Ace Total
Sales $32,477 $0 $32,477
Variable Cost $20,128 $0 $20,128
Fixed Cost $6,156 $1,000 $7,156
Net Margin $6,193 ($1,000) $5,193
Other (Fees, Writeoffs) $400
Long Term Interest $546
Taxes & Tariffs $1,464
Pro�t Sharing $54
Net Pro�t $2,664
6 . 2 B a l d w i n I n c o m e S t a t e m e n t
Baker Total
Sales $79,895 $79,895
Variable Cost $52,150 $52,150
Fixed Cost $7,748 $7,748
Net Margin $19,997 $19,997
Other (Fees, Writeoffs) $247
Long Term Interest $253
Taxes & Tariffs $6,824
Pro�t Sharing $253
Net Pro�t $12,419
6 . 3 C h e s t e r I n c o m e S t a t e m e n t
Cake Total
Sales $60,598 $60,598
Variable Cost $40,907 $40,907
Fixed Cost $5,986 $5,986
Net Margin $13,704 $13,704
Other (Fees, Writeoffs) $369
Long Term Interest $478
Taxes & Tariffs $4,404
Pro�t Sharing $164
Net Pro�t $8,016
6 . 4 D i g by I n c o m e S t a t e m e n t
Daze Dino Total
Sales $45,745 $0 $45,745
Variable Cost $31,053 $0 $31,053
Fixed Cost $4,319 $1,000 $5,319
Net Margin $10,373 ($1,000) $9,373
Other (Fees, Writeoffs) $150
Long Term Interest $546
Taxes & Tariffs $3,013
Pro�t Sharing $112
Net Pro�t $5,484
6 . 5 E r i e I n c o m e S t a t e m e n t
Eat Total
Sales $31,933 $31,933
Variable Cost $21,514 $21,514
Fixed Cost $3,939 $3,939
Net Margin $6,479 $6,479
Other (Fees, Writeoffs) $64
Long Term Interest $475
Taxes & Tariffs $2,079
Pro�t Sharing $77
Net Pro�t $3,783
6 . 6 Fe r r i s I n c o m e S t a t e m e n t
Fast Frost Total
Sales $53,865 $14,781 $68,645
Variable Cost $34,833 $10,228 $45,061
Fixed Cost $7,709 $4,883 $12,592
Net Margin $11,323 ($331) $10,992
Other (Fees, Writeoffs) $300
Long Term Interest $1,040
Taxes & Tariffs $3,353
Pro�t Sharing $125
Net Pro�t $6,102
Section 7 | Custom Modules
7 . 1 Wo r k f o rc e S u m m a r y
Andrews Baldwin Chester Digby Erie Ferris
Number of Employees 135 368 294 269 168 338
First Shift 68 184 173 192 93 169
Second Shift 67 184 121 77 75 169
Overtime % 0% 0% 0% 0% 0% 0%
Turnover Rate 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
New Employees 14 117 73 51 17 93
Separated Employees 19 0 0 0 44 0
Productivity Index 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%