MAC4868/A02/0/2021
Assignment 02/0/2021
Strategic Case Studies
MAC4868
Assignment 2 Questions
Year Module
Department of Management Accounting
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ASSIGNMENT 02: COMPULSORY FOR YEAR MARK CONTRIBUTION
Due date: 11 June 2021
2
Unique Number: 811163
MAC4868/2021
Dear Students
In order to better prepare you for your exam I have decided to do things a bit different this year.
For assignment 2 you will received a pre-seen. This will give you more practise in dealing with
a pre-seen so that when the pre-seen for your exam comes out later in the year you won’t feel
intimidated.
PRE-SEEN MATERIAL: CASE STUDY: SUPERSTORE LTD
Introduction
Superstore(S) was founded as a grocery retailer in South Africa in 1995. Its sales consist mainly
of food and household items including clothing. S now owns or franchises over 1500 stores.
The company has stores in Gauteng, Western Cape and Limpopo. S’s head office is located in
Johannesburg. S has become one of South Africa’s largest chains of stores.
S’s Board thinks that there are opportunities to take advantage of the rapid economic growth of
some African countries and the associated increases in demand for food and consumer goods.
Structure
The S Group is structured into a holding company, S, and three subsidiary companies which
are located in each of the regions of South Africa in which it operates (Gauteng, Western Cape
and Limpopo). The subsidiary companies, referred to as “Regions” within S, are respectively:
S-Gauteng, S-Western Cape and S-Limpopo.
Store operations, sales mix and staffing
S operates four types of store: supermarkets, hypermarkets, discount stores and convenience
stores. For the purpose of this case study, the definition of each of these types of store is as
follows:
A supermarket is a self-service store which sells a wide variety of food and household goods
such as washing and cleaning materials, cooking utensils and other items which are easily
carried by customers out of the store.
A hypermarket is a superstore or very large store which sells the same type of products as a
supermarket but in addition it sells a wide range of other items such as consumer durable white
goods, for example refrigerators, freezers, washing machines and furniture. Hypermarkets are
often located on out-of-town sites.
A discount store is a retail store that sells a variety of goods such as electrical appliances and
electronic equipment. Discount stores in general usually sell branded products and pursue a
high-volume, low priced strategy and aim their marketing at customers who seek goods at
prices which are usually less than can be found in a hypermarket.
A convenience store is a small shop or store in an urban area that sells goods which are
purchased regularly by customers. These would typically include groceries, toiletries, alcoholic
beverages, soft drinks and confectionery. They are convenient for shoppers as they are located
in or near residential areas and are often open for long hours. Customers are willing to pay
premium prices for the convenience of having the store close by.
S sells food products and clothing in its supermarkets and hypermarkets at a higher price than
many of its competitors because the Board thinks that its customers are prepared to pay higher
prices for better quality food products. S also sells good quality consumer durable products in
3
its supermarkets and hypermarkets but it is forced to sell these at competitive prices as there
is strong competition for the sale of such goods. S’s discount stores sell good quality electrical
products usually at lower prices than those charged in its supermarkets and hypermarkets, S
only sells electronic equipment in its discount stores. Customers have a greater range from
which to choose in the discount stores as compared with supermarkets and hypermarkets
because the discount stores specialise in the goods which they sell. S’s convenience stores do
not have the availability of space to carry a wide range of products and they charge a higher
price for the same brand and type of goods which it sells in its supermarkets.
Although S owns most of its stores, it has granted franchises for the operation of some stores
which carry its name.
Nearly 0.5 million full-time equivalent staff are employed country-wide in the Group. S tries
when possible to recruit local staff to fill job vacancies within its stores.
Value statement and mission
In recognition of the strong competitive and dynamic markets in which it operates, S’s Board
has established an overall value statement as follows: “We aim to satisfy our customers
wherever we trade. We intend to employ different generic competitive strategies depending on
the market segment in which our stores trade.”
The Board has also produced the following new mission statement:
“S practices sustainable investment within a healthy ethical and thoughtful culture and strives to
achieve customer satisfaction by giving a courteous and efficient service, selling high quality
goods at a reasonable price, sourcing goods from local suppliers where possible and causing
the least damage possible to the natural environment. By this, we aim to satisfy the expectations
of our shareholders by achieving consistent growth in our share price and also to enhance our
reputation for being an environmentally responsible company.”
Strategic objectives
The following objectives have been derived from the mission statement:
1. Build shareholder value through consistent growth in the company’s share price.
2. Increase customer satisfaction ratings to 95% as measured by customer feedback
surveys.
3. Increase commitment to local suppliers by working towards achieving 40% of our supplies
from sources which are local to where S stores trade.
4. Reduce carbon emissions calculated by internationally agreed measures by at least 1%
per year until S becomes totally carbon neutral.
5. Maximise returns to shareholders by employing different generic competitive strategies
depending on the market segment in which S stores trade.
Financial objectives
The Board has set the following financial objectives:
1. Achieve consistent growth in earnings per share of 7% each year.
2. Maintain a dividend pay-out ratio of 30% to 50% each year.
3. Gearing levels as measured by long-term debt divided by long-term debt plus equity
should not exceed 40% based on book value.
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MAC4868/2021
The Executive directors have indicated that they believe the Group is ideally positioned to
expand. The Finance director believes debt should be increased with interest rates at an all
time low and proposed to review the efficiency of the current working capital management
policy.
Governance
The main board comprises the Non-executive Chairman, the Chief Executive and nine
Executive directors. These cover the functions of finance, human resources, corporate affairs
(including legal and public relations), marketing, IT and supply chain. There is also one
executive director for each of the three regions, being the Regional Managing Directors of SGauteng, S-Western Cape and S-Limpopo. There are also nine non-executive main board
members in addition to the Chairman. Chairman of S has indicated his wish to retire in the next
financial year.
The main Board of Directors has separate committees responsible for audit, remuneration,
appointments, corporate governance and risk assessment and control. The Risk Assessment
and Control Committee’s tasks were formerly included within the Audit Committee’s role. It was
agreed by the Board in 2011 that these tasks should be separated in order not to overload the
Audit Committee which has responsibilities to review the governance of the company. S’s
expansion has been very rapid in some regions. The expansion has been so rapid that S has
not been able to carry out any internal audit activities in some of these regions to date. The
regional boards do not have a committee structure.
Each of the Regional Managing Directors chairs his or her own Regional Board. All of the
Regional Boards have their own directors for finance, human resources, corporate affairs,
marketing, IT and supply chain but their structure is different for the directors who have
responsibility for the stores. In S-Western Cape, one regional director is responsible for the
hypermarkets and supermarkets and another is responsible for discount stores and
convenience stores. In S-Limpopo, one regional director is responsible for the hypermarkets
and supermarkets and another is responsible for discount stores (S does not have any
convenience stores in Limpopo). In S-Gauteng there is one regional director responsible for
supermarkets and hypermarkets, one for discount stores and one for convenience stores. In all
regions the regional directors have line accountability to their respective regional managing
director and professional accountability to the relevant main board director. There are no nonexecutive directors on the regional boards. Appendix 1 shows the main board and regional
board structures.
Treasury
Each of S’s three regions has a regional treasury department managed by a regional treasurer
who has direct accountability to the respective Regional Director of Finance and professional
accountability to the Group Treasurer. The Group Treasurer manages the central corporate
treasury department which is located in S’s head office. The Group Treasurer, who is not a
main board member, reports to the Director of Finance on the main board.
Shareholding, year-end share prices and dividends paid for the last five years
S is listed on the Johannesburg Stock Exchange (JSE) and it wholly owns its subsidiaries.
Employees taken as a group hold 15% and the directors 10% of the 1,350 million total shares
in issue. The remaining 75% of shares are owned by the general public.
5
The year-end share prices and the dividends paid for the last five years were as follows:
Share price at 31 December
Net Dividend per share
2016
R
63.80
1.80
2017
R
53.00
1.80
2018
R
55.80
1.80
2019
R
60.00
2.00
2020
R
63.84
2.12
Planning and management control
S has a very structured planning process. Each regional board produces a five year strategic
plan for its region relating to specific objectives set for it by the main board and submits this to
the main board for approval. The main board then produces a consolidated strategic plan for
the whole company. This is reviewed on a three yearly cycle and results in a revised and
updated group five year plan being produced every three years.
S’s management control system, which operates throughout its regions and at head office, is
well known in the industry to be bureaucratic and authoritarian. Strict financial authority levels
for development purposes are imposed from the main Board. There is tension between the
main Board and the regional boards. The regional board members feel that they are not able to
manage effectively despite being located much closer to their own regional markets than the
members of the main Board. The main Board members, on the other hand, think that they need
to exercise tight control because they are remote from the markets. This often stifles planning
initiatives within each region. This tension is also felt lower down the organisation as the
regional board members exercise strict financial and management control over operational
managers in their regions in order to ensure that the main Board directives are carried out.
Competitive overview
S operates in highly competitive markets for all the products it sells. The characteristics of each
of the markets in which it operates are different. For example, there are different planning
restrictions applying within each region. S needs to be aware of different customer tastes and
preferences which differ from region to region. The following table provides a break-down of
S’s stores in each region.
Supermarkets and hypermarkets
Discount stores
Convenience stores
S Gauteng
345
516
458
S Western Cape
61
38
3
S Limpopo
51
78
S is one of the largest retailing companies in South Africa and faces different levels of
competition in each region. S’s overall market share in terms of retail sales for all supermarkets,
hypermarkets, discount stores and convenience stores in each of its regions is as follows:
Gauteng
Western Cape
Limpopo
Market share
20%
1%
1.5%
The following table shows the sales revenue and net operating profit earned by S in each of its
regions for the year ended 31 December 2020:
S Gauteng S Western Cape S Limpopo
R million
R million
R million
Revenue
179,798
20,210
19,416
Net Operating Profit
9,590
1,486
1,346
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MAC4868/2021
S is constantly seeking other areas into which it can expand, especially within Africa where it
perceives many countries have an increasing population and strengthening economies. The
Chairman has identified mining in Botswana as a possible investment opportunity to diversify
the current business.
Corporate Social Responsibility (CSR)
S is meeting its CSR obligations by establishing environmental targets for carbon emissions
(greenhouse gas emissions), careful monitoring of its supply chain, undertaking sustainable
investments and investing in its human capital.
Environmental targets for carbon emissions:
S’s main board is keen to demonstrate the company’s concern for the environment by pursuing
continuous improvement in the reduction of its carbon emissions and by developing ways of
increasing sustainability in its trading practices. A number of environmental indicators have
been established to provide transparency in S’s overall performance in respect of sustainability.
These published measures were verified by S’s statutory auditor and are calculated on a likefor-like basis for the stores in operation over the period measured.
In the year ended 31 December 2020, S reduced its consumption of kilowatt hours (kWh) per
square metre of sales area as compared with the year ended 31 December 2017 by 9%. The
target reduction for that period was 5%. In the same period it reduced the number of free
disposable plastic bags provided to customers per square metre of sales area, by 51% against
a target of 60%. Its overall greenhouse gas emissions (measured by kilogrammes of carbon
dioxide per square metre of sales area) reduced by 1% in 2020 which was exactly on target.
S provides funding for the development of local amenity projects in all of the regions where S
stores operate. (An amenity project is one which provides benefit to the local population, such
as providing a park, community gardens or a swimming pool.)
Distribution and sourcing:
Distribution from suppliers across such a wide geographical area is an issue for S. While
supplies are sourced from the region in which a store is located as much as possible, there is
nevertheless still a requirement for transportation across long distances either by road or air.
Approximately 20% of the physical quantity of goods sold across the group as a whole are
sourced locally, that is within the region in which the goods are sold. These tend to be perishable
items such as meat, fruit and vegetables. Adverse weather conditions and increases to fruit
and vegetable prices due to increased labour wages and utility costs (including electricity) has
lead the Procurement director to evaluate importing these goods in future.
The remaining 80% of goods are sourced from large international manufacturers and
distributors. These tend to be large items such as electrical or electronic equipment which are
bought under contracts which are set up by the regional procurement departments. S, due to
its size and scope of operations, is able to place orders for goods made to its own specification
and packaged as under its own brand label. Some contracts are agreed between manufacturers
and the Group Procurement Director for the supply of goods to the whole of the S group.
Water shortages:
S has experienced a shortage of chicken in a number of its Gauteng stores following water
supply problems in the Free State, where several of its suppliers are based.
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Polluted water sources i.e. acid mine drainage, poor management of dams, sewerage works
and treatment plants has led to a situation where South Africa’s water supply is under serious
threat, which could have a severe impact on food security in the future.
Sustainable investments:
S aspires to become carbon neutral over the long term. The Board aims to reduce its carbon
emissions by investing in state of the art technology in its new store developments and by
carrying out modifications to existing stores.
Human Resources:
Recruitment process:
Prospective applicants go through S’s interview process of submitting his/her curriculum vitae
and filling in the standard application form, attending two interviews (one individual and one
group). The successful applicant is then offered a position.
S prides itself on the training it provides to its staff. The training of store staff is carried out in
store by specialist teams which operate in each region where S trades. In this way, S believes
that training is consistent across all of its stores. In some regions, the training is considered to
be at a sufficiently high level to be recognised by national training bodies. The average number
of training hours per employee in the year ended 31 December 2020 was 17 compared with 13
hours in the year ended 31 December 2019. In 2020, S employed 45% more staff with declared
disabilities compared with 2019.
Information systems and inventory management
In order to operate efficiently, S’s Board has recognised that it must have up-to-date information
systems.
S’s information systems are not perfect as stock-outs do occur from time-to-time. This can be
damaging to sales revenue when stock-outs occur during peak sales periods such as the days
leading up to a public holiday. S’s information technology systems sometimes provide
misleading information. This has led to doubts in the minds of some head office staff about just
how robust are S’s inventory control systems.
As is normal in chain store groups, there is a certain degree of loss through theft by staff and
customers. Another way that loss is suffered is through goods which have gone past their “sell
by” date and mainly relates to perishable food items which are wasted as they cannot be sold
to the public. In most countries, such food items which cannot be sold to the public may be sold
to local farmers for animal feed.
Regulatory issues
S’s subsidiaries in Western Cape and Limpopo have sometimes experienced governmental
regulatory difficulties which have hindered the installation of improved information systems. To
overcome some of these regulatory restrictions, S-Western Cape and S-Limpopo have, on
occasions, resorted to paying inducements to government officials in order for the regulations
to be relaxed.
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MAC4868/2021
Expanding business
S has recently employed a new Marketing Director, Mr Amir Korangy. He has two new business
models he would like to implement at S in order to remain competitive.
Food Stops
To join forces with a large well known petrol company in order to roll out mini stores that will be
located in their service stations. The partnership will see the rollout of 100 stores at service
stations in the major metropolitan areas across SA over the next five years. It will be a great
opportunity for S to extend its brand offering to existing customers and expose it to petrol station
customers. In effect S will be making their products available to younger, urban and suburban
customers in a safe environment.
The new marketing director was head hunted from a competitor where he was involved in the
launch of these mini markets while in their employ so he knows it does work and exceeded
revenue forecasts. He says that research has estimated that the forecourt convenience store
market is worth about R3.5 billion and is growing around 19% per annum, S needs to tap into
this lucrative market. Focus will be on convenience meals, prepacked fresh produce, fresh
meat, baked goods, and a selection of hot foods, 24 hours a day, seven days a week.
How these stores will work, the existing Franchisee of the petrol station will continue their
agreement with the petrol station there will be no change to the contract between the petrol
company and their petrol station Franchisee. If a Franchisee wishes to open a S mini market
in their petrol station, they would have to be suitably situated which will be determined by S and
it would have to be a petrol station that is reputable and well run. S will then provide training
on their products to the Franchisee and supply and sell their goods to the petrol station. There
are no set up cost for S.
The Finance Directors of both S and the petrol company have put together a forecast to present
to the Franchisees. From revenues generated franchisee could make the following.



a 12% probability of a 40% contribution margin
a 22% probability of a 30% contribution margin
a 66% probability of a 25% contribution margin
Forecasted revenue per Food Stop is R8 000 000 per annum for the first year of operation.
Fixed cost per annum for advertising, training etc is R20 000 per annum.
Establish an online store
The new Marketing Director would also like to introduce online shopping, convenient shopping
delivered to our customers’ doors. He mentioned that most of S’s competitors are already
offering this service and S is being left behind, and therefore losing market share.
Expanding Discount Stores
The latest market research indicates that “discount stores” offer the greatest opportunity for
future growth in South Africa. The Finance director has identified two investment opportunities.
Details about the two alternative investment opportunities are as follows:
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Alternative 1 – Build a new “discount store” in the Western Cape (South Africa)
The Western Cape offers the least number of “discount stores” compared to the Gross
Domestic Product” of any province in South Africa. S has already opened discussions with a
seller of suitable land as well as the local authority and if this is approved there will be some
financial assistance available to a purchaser such as S. However, a decision is not expected
from the local authority for at least one month.
S has paid a non-refundable holding deposit of R50,000 on the freehold land pending the
outcome of its investment appraisal. The seller requires a decision within a month. Any
investment appraisal will have to be done over an indefinite period.
Alternative 2 – Build a new “discount store” in Zimbabwe
S already supplies some of its “own branded” products to retailers in Zimbabwe which has
proven to be very popular although local suppliers lack the resources to maintain sufficient stock
levels and provide a variety of quality goods to customers. The government of Zimbabwe is
very keen to attract inward investment although it generally insists on some involvement in the
investment and puts certain restrictions in contracts. A suitable site is available for S on the
basis of a long-term leasehold, with an option to acquire the freehold land at an unspecified
price in 15 years’ time. There will be break clauses in the contract at five-year intervals whereby
either party can terminate the agreement. Should S wish to withdraw, the entity will not be
entitled to any refund of the lease premium. Any investment appraisal will have to be done over
15 years.
The United States Dollar (USD) is widely used in Zimbabwe and all payments in Zimbabwe can
be made in USD.
Cash flows for both alternatives
Capital costs
Alternative 1
Alternative 2
R’000
USD’000
Cost of freehold land
96,000
Purchase of 15 year lease
8,000
Building costs
50,000
3,200
Equipment costs
14,000
800
Operating cash flows:
Operating cash flows
Gross profit
10
Alternative 1
Alternative 2
R’000
USD‘000
Year 1
Year 2
Year 3
Year 1
Year 2
Year 3
28,000
31,750
35,000
5,000
5,750
6,500
MAC4868/2021
Other information
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





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In Alternative 1, fees and costs are expected to increase by 6% per annum from year 4
indefinitely. This is approximately the expected rate of inflation in South Africa.
Current spot rates are: USD 1,00 = R14,50. Assume that risk-free interest rates are currently
8% in South Africa and 5% in the US. These rates are likely to be maintained until year 3.
The Finance director has concluded that the forecast for interest rates and future inflation in
Zimbabwe is unreliable. The directors of S therefore assume, for convenience, that in
Alternative 2 the fees receivable in year 3 in South Africa Rand (R) terms will remain
constant, in nominal terms, until year 15.
Cash operating costs are assumed to be 60% of gross profit received each year in both
alternatives.
Assume that freehold land and buildings is not depreciated and no wear and tear allowances
are claimed.
Both operations will be located in “Industrial Development Zones”. This provides for
accelerated wear and tear allowances and equipment can be written off over two years for
tax purposes.
Refurbishment of buildings and replacement of equipment will be needed within the life of
both investments, but these costs have not as yet been identified and have been excluded
from the evaluation.
If Alternative 1 is chosen, there will be an increase in storage costs of 1% of gross profit
each year. This is in addition to other cash operating costs.
If Alternative 2 is chosen it will result in a loss for the South African operations of R5 million
per year. This amount is expected to remain fixed.
If alternative 2 is selected, all profits from Zimbabwe will be repatriated to South Africa at
the end of each year. The taxable income will be taxed at a rate of 28% in South Africa due
to the tax treaty that exists between the two countries. Tax is paid in the same year as the
cash flows that give rise to the tax liability.
Assume all capital costs are incurred in year 0 and all operating cash flows are received or
incurred at the end of each year.
S has not made an investment on this scale before, but for the investment in South Africa
(Alternative 1) the directors believe, with justification, that 12% would be an adequate return
to reflect the risks involved. A premium on the South Africa rate of +4% is considered
appropriate for the investment in Zimbabwe (Alternative 2).
Method of funding
The directors of S plan to utilise accumulated cash reserves of R20 million. This is not expected
to influence the stable dividend policy currently employed. The remaining capital costs will be
funded by long-term borrowings aligned with the Finance director’s suggestions that debt
should be used with the relatively low current interest rates.
If Alternative 1 is chosen, it will be funded by a 20 year commercial mortgage secured on the
land and buildings. Interest will be fixed at 9% per annum, payable annually.
If Alternative 2 is chosen, it will be funded by one of the following methods:
11
i.
ii.
iii.
12
A 15-year commercial loan taken out in South African Rand (R) at 9.5% interest per
annum, capital repayable at the end of the term;
A 15-year interest-free, non-repayable Zimbabwe government loan in USD, but for the
duration of the loan the Zimbabwe government would take a “dividend” each year
equivalent to 20% of the profits earned in Zimbabwe;
A USD-denominated loan from a bank based in the United States. Borrowing rates in
this market appear very favourable at the present time. The interest rate will depend on
the bank’s perceived risk of the project.
MAC4868/2021
A Main Board Structure
Chairman (Non-Executive)
Ms America Ferrera
Appendix 1
Chief Executive
AmOfficer (CEO)
Mr Colton Dunn
Regional MD
S-Gauteng
Ms Lauren
Ash
Regional MD
S-Western
Cape Mr
Ben
Feldman
Regional
MD
SLimpopo
Ms Justina
Machado
Finance
Director
Mr Steve
Agee
Human
Resources
Directors Mr
Nico
Santos
Corporate
Affairs
Director Ms
Kaliko
Kauahi
IT
Director
Ms
Nichole
Sakura
Marketing
Director
Mr Amir
Korangy
Regional
IT Director
Mr Sean
Whalen
Regional
Marketing
Director Mr
Josh
Lawson
Supply
Chain
Director Ms
Isabella Day
Group
Treasurer
Ms Linda
Porter
B Regional Board Structure
Regional MD Ms Christine Grace
(S-Gauteng, S-Western Cape, S-Limpopo)
Regional Director
Supermarkets and
Hypermarket Ms
Jennifer Irwin
Regional Director*
Discount
and
Convenience
stores Mr Baron
Vaughn
Regional
Finance
Director Ms
Maria Den
Regional
Treasurer Mr
Ben Norris
Regional
Human
Resources
Director Ms
Jee Young
Han
Regional
Corporate
Affairs
Director Ms
Kelly
Stables
Regional
Supply Chain
Director Ms
Jane Huck
*Applies to S-Western Cape only. In S-Limpopo, where there are no Convenience stores, there is a Regional Director responsible for Discount stores as well
as the Regional Director responsible for Supermarkets and Hypermarkets. S-Gauteng’s structure has three Regional Directors responsible for the stores, one
each responsible for supermarkets and Hypermarkets, Discount Stores and Conveniences Stores.
APPENDIX 2
S’s income statement and statement of financial position.
Income statement for the year ended 31 December 2020
Notes
Revenue
Cost of Sales
Operating costs
Net operating profit
Interest income
Finance costs
Corporate income tax
PROFIT FOR THE YEAR
R million
219,424
(138,001)
(69,001)
12,422
330
(1,704)
(3,866)
7,182
Statement of financial position as at 31 December 2020
R million
ASSETS
Non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
115,004
15,340
3,042
7,694
26,076
141,080
EQUITY AND LIABILITIES
Equity
Share capital
Share premium
Retained earnings
Total equity
1
Non-current liabilities
Long term borrowings
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
4,050
6,080
37,908
48,038
31,488
61,554
93,042
141,080
Notes:
1. There are 1,350 million R3.00 shares currently in issue. The share price at 31 December
2020 was R63.84
End of Pre-seen Material
14
MAC4868/2021
For all the questions below you are the Management Accountant at Superstore Ltd
QUESTION 1 (22 marks)
You have just received the following email from Mr Steve Agee (Finance Director)
From:
Mr Steve Agee
Sent:
2 May 2021
To:
Management Accountant
Subject: Re: Balanced Scorecard and Mission statement
I hope you had a good workers day yesterday. In preparation for our next board meeting, Mr
Dunn (CEO) has requested that the finance department prepare a balanced scorecard in
order to evaluate the Food Stop expansion.
The board also wants inputs from all departments on their suggested new mission statement,
as they would like to finalise it at their next meeting.
To summarise, please will you prepare a report that I can send to our board of directors
on the following issues:

Prepare a balanced scorecard appraisal of Superstore’s new “Food Stop” strategy. Also
include in your report based on forecasted figures if you think the petrol station
franchisees would want to have S Food Stops in their forecourts? Your discussion should
include at least sixteen (16) valid points. Marks will be awarded for calculations.

Evaluate S’s new mission statement. Your discussion should include at least six (6)
valid points.
Kind regards,
Mr Steve Agee
Finance Director
15
QUESTION 2 (22 marks)
You have just received the following email from Ms Nichole Sakura (IT Director)
From:
Ms Nichole Sakura
Sent:
15 May 2021
To:
Management Accountant
Subject: Re: Digital Technologies and risks associated with an online store
I am very excited to hear from Steve that you are studying CIMA. I know they are leading the
way with regard to digital technology in the finance function. I thought it would be beneficial
for you to be part of the online store project team.
Our next project meeting is next week, I would like you to prepare yourself for a discussion
on what type of digital technologies would be best suited for our new online platform and why
you say so. Together with this to also discuss the risks associated with implementing an online
platform.
I really want you to apply your mind to this, I don’t want a whole lot of theory from your
textbooks or the internet. Consider our organisation and all our stakeholders.
To summarise, please will you prepare a briefing document for our next project
meeting on the following issues:

Discuss which digital technologies would be best suited for our new online store with
reasons why you would recommend these. Your discussion should include at least
twelve (12) valid points.

Discuss the risks associated with implementing an online store for the organisation and
all its stakeholders. Your discussion should include at least ten (10) valid points.
Kind regards,
Ms Nichole Sakura
IT Director
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MAC4868/2021
QUESTION 3 (38 marks)
You have just received the following email from Mr Steve Agee (Finance Director)
From:
Mr Steve Agee
Sent:
28 May 2021
To:
Management Accountant
Subject: Re: Viability of the two investment options
I need your help, the board has been working on two investment opportunities with regard to
discount stores. You need to get your thinking cap on as we need to present them with figures
by the end of next week. If you wouldn’t mind doing the ground work and then we can sit
together and go through your figures say next Tuesday. Sorry this may mean some overtime
and working over the weekend.
As you know we use the Net Present Value (NPV) method to appraise our investments. I
would like you to calculate the NPV on the two alternative investments being, build a new
discount store in SA or in Zimbabwe. To also evaluate the two options and discuss the risks
involved for each.The board will also want to know the pros and cons of the three types of
funding for the Zim Option.
To summarise, please will you prepare a draft document that we can go through next
Tuesday on the following aspects:



Calculate the (NPV) in South African Rands for the two alternative investments, using
the cash flows and discount rates given in the pre-seen, showing all your calculations.
Eighteen (18) marks
Evaluate the two investments that you have just calculated the NPV’s for, include a
discussion of the key risk factors S should consider. Your discussion should include at
least ten (10) valid points
Discuss the pros and cons of the three methods of funding outlined in the pre-seen for
Alternative 2. Use appropriate calculations, where possible, to support your arguments.
Your discussion should include at least ten (10) valid points.
Kind regards,
Ms Steve Agee
Finance Director
17
QUESTION 4 (18 marks)
You have just received the following email from Mr Nico Santos (HR Director)
From:
Mr Nico Santos
Sent:
2 June 2021
To:
Management Accountant
Subject:
Re: Confidential
I hope you are doing well.
I’ve just had a very distressing call from the company that handles our whistleblower hotline. They
then sent an email with the following allegations:
Someone very senior in your department is in the habit of making accounting adjustments to the
financial statements in order to smooth out variances if actual performance is not as planned.
Secondly, someone else in your department recently made significant errors in completing the VAT
returns to SARS, which resulted in a penalty and interest charges for the underpayment and nothing
has been done to discipline this person for this.
Lastly, it was reported that our Western Cape and Limpopo staff have been paying bribes to
government officials.
I would like your advice on how to deal with each of the above issues, and how to improve the ethical
standards in your department. I would also like to know what problems you think you may encounter
when you attempt to bring about any changes.
Please also note that this email highly confidential and the above is to be kept between the two of us.
To summarise, please will you prepare a report on the following issues:



Advise how to deal with the above three issues. Your discussion should include at least six (6)
valid points
Discuss how to improve the ethical standards in the Finance Department.
*(This question is not asking for a discussion on CIMA’s code of ethics)
Your discussion should include at least six (6) valid points
Indicate any problems that might be experienced when the ethical improvement plans are
implemented. (You are not being asked how to bring about change successfully, but what
problems may be experienced).
Your discussion should include at least six (6) valid points.
*The CIMA code is a code that CIMA members need to adhere to, SAICA member have their own
code as do other professional bodies and companies also have their own code. Only when specifically
asked about the CIMA code of ethics should you discuss it.
Kind regards,
Mr Nico Santos
HR Director
[Grand Total 100 marks]
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UNISA 2021
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