2510 case

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2510

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Accounting

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Apr 3, 2024

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ACCT 2510 case study Sabah Taher, Dalia al-qadi Dr. Jerry Sun March 14th, 2023

Initially the overall view of the agreement amongst Super Software Co (SSC) and ABC limited seems to be a thorough and successful execution partnership that both parties are involved in. although there are several inconsistencies. For example, ABC is being paid 300,000 to offer lunch packages to staff every day for a year which is missing some relevant information that could be useful towards the company. The first obstacle is that the precise number of SSC employees is unknown. Without this amount, ABC would find itself having to provide for an excessive number of workers on a daily basis, which could put a strain on its finances and inventory. This can lead to a shortage in serving sandwiches to SSC employees because they do not have enough resources for this. This will not only affect ABC limited but also the supermarkets and grocery stores that it produces for. Another important issue that is occurring in this situation is that the uncertainty agreement based on dependency regarding the amount of lunch packages that is picked up begins to further complicate the situation. This is because in the agreement it was stated that “not dependent on the number of lunch packages picked up” which means that occasionally some employees may come to pick up their lunch packages and others may not. Employee attendance fluctuations may result in ABC experiencing unpredictable financial constraints because there are no explicit guidelines in place to control changes in packages. If ABC Limited decides to take on similar projects in the future, it would be wise to obtain an estimate of the number of employees at the company for which meal packages are being provided. ABC would be less likely to feel overburdened if they had access to this SSC information since they could plan ahead and make the appropriate number of meals. The second

suggestion is to set a maximum number of meals that can be bought. The limit would depend on how many workers the companies they support have. Setting such a restriction would enable ABC to determine the precise amount of profit they would be making from deals such as these. Additionally, ABC Limited can maintain efficiency by implementing this measure, ensuring resources are used wisely and avoiding overcommitment to meal provision. This aligns with the company's goal of boosting profitability while providing high quality services to employees. In conclusion, obtaining employee estimates and setting maximum meal purchase limits based on workforce size are important steps for ABC Limited to enhance profitability analysis, operational planning, and overall project management moving forward. Secondly, ABC limited is facing another issue regarding the $30,000 purchase of frozen chicken meat from a fresh meat butcher (FMB). financial difficulties in regards to a meat supplier is being investigated for contamination of the chicken produce. Upon the investigation ABC limited has been suspended and is no longer able to provide any chicken or meat to consumers. Using the perpetual inventory method this may benefit ABC limited greatly because it will allow them to avoid future purchases of perishable. They could have avoided losing $30,000 if they were able to delay the purchase from FMB and were educated on the matter beforehand. Due to the purchase of the chicken, if they would have held off it would have been possible that they would be made aware of the investigation and not make any purchases. The next issue is in regards to the agreement of ABC limited which allows them to

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provide lunch packages. This means that the number of sold packages is dependent on the amount of packages bought by customers. In doing so, this is an issue for ABC because they are losing profit because when they do not sell the items before the expiration date then they are no longer legally able to sell that item or it will result in a lawsuit. The packages are being sold for $3.50, and they are being delivered for $30,000 of the packages. If there were no packages left to sell it would result in ABC earning a profit of $105,000. ABC Limited's profits can be protected, it is advisable for them to reconsider the statement stating that “the amount of packages ABC sells to stores depends on the number of packages sold to consumers before the expiration date.” ABC would benefit more from providing businesses a set number of packages according to their needs, with the stores having to sell the lunch packages before they expire. This strategy would guarantee more profitability and shield ABC Limited from losses on unsold lunch packages. Retailers would also continue to gain from the lunch package discounts. Regarding loyalty programs, there is a problem with the existing program being unduly strict, even when efforts like ABC Limited's can drive higher customer spending. Regular customers would benefit from it, but new or occasional customers might not be drawn in because they would have to spend a lot more on numerous meals in order to accrue enough points for a free lunch package. Customers who purchase standard lunch boxes will get one point, and they will need to accumulate 20 points to be eligible for a free regular lunch package. It would take a client 20

lunch packages, each costing $8.00, to earn enough points for a reward. Therefore, it would need $160 to get 20 points. An individual who regularly purchased these lunch packages—even before the loyalty program—would greatly benefit from this program; on the other hand, an individual who did not often purchase these lunch packages would not be prepared to pay more than $160 to redeem one standard lunch box for free. To make the program more appealing to existing and new customers, it is advised that ABC Limited reduce the amount of points required to redeem a standard lunch box to a more reasonable 10 points. This adjustment strikes a balance between consumer appeal and financial feasibility. Additionally, there could be an issue with ABC's strategy for recording redeemed lunch packages. ABC limited has a perpetual inventory system meaning, every change must be recorded continuously. Subtracting the lunch box cost from retailers that have already bought them might result in confusion and accounting mistakes. It is advised that ABC separate the meals that are redeemed from those that are sold to retailers in order to resolve this problem. Better monitoring of redeemed meals would be possible as a result, eliminating the need for ongoing retail purchase deductions, guaranteeing more precise and effective record-keeping in ABC Limited's perpetual inventory system.