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The financial data for the company has been presented in the period of three years ending September 2016, September 2017 and September 2018. The budgeted figures have also been presented in the report in order to find out the variance between the actual and budgeted data. Since the deliveries are subcontracted to one of the major parcel companies it can be observed that the on time delivery percentage have been 92% to 87% to 83%. This implies that the organization was not able to retain the on time delivery, but the production line is slow and in this manner the organization will not be able to retain the on time delivery (Alexander,et al 2017).
The breakeven point on the other hand is the point which reflects the amount of the sales either in unit or in dollars which is required to cover the total costs, which consists of both the fixed and the variable costs. The amount of the profit at time of break-even point is zero. It simply means that the revenue and the expenditure are equivalent for an accounting period. In this present scenario the, BYL company needs to maintain the breakeven point at $57063 units and in order to do so the fixed costs and the contribution per unit have been calculated. This implies that beyond this number if the sales order is low than the company might fall under the losses (Kim, et al 2017).
Actual breakeven point in units |
2018 |
|
|
Fixed costs |
1341000 |
|
|
Contribution per unit |
23.5 |
|
|
Actual breakeven point in units |
57063.83 |
|
|
On time delivery % |
2016 |
2017 |
2018 |
No of units on time |
113669 |
128530 |
156134 |
No of total units shipped |
123554 |
147736 |
188114 |
On time delivery % |
92% |
87% |
83% |
It identifies the major reasons for the poor financial performance of the company. The major reason is the fall in the delivery time as well as the increase in the variable and the operating costs. In comparison to the budgeted data, the revenue recorded is greater than the expected figure, however, the variance have occurred in variable costs and the purchases costs have been higher than the budgeted amount stated for the financial year 2018 (Karadag, 2015).
From the data given in terms of the financial as well as operating data in the table above it is advised and recommended to the management that it shall keep focus on the costs and secondly the on delivery time needs to be improved and this is necessary so that the BYL position is improved and satisfied.
KPI |
2016 |
2017 |
2018 |
Returns |
7043 |
40637 |
20692 |
Sales orders |
123554 |
147736 |
188114 |
Customer satisfaction |
5.70% |
27.51% |
11.00% |
The best way to see whether a customer is satisfied or not is through the number of the sales orders sold the customers and how many of them returns them either due to the quality issues or due to the other factors. As per the table above, which depicts the data of the year 2016 to year 2018 it can be reflected that the customer satisfaction has been increased. The customer satisfaction in the year 2016 was 5.70% whereas the same has been increased to 27.51%. Further in the year 2018, the percentage decreased to 11% and this reflects that the customer satisfaction is declining, and the most essential part is the consumers are not satisfied.
The customer satisfaction is the most essential factor in deciding the real growth of the company in terms of the performance (Hill & Alexander, 2017). The key performance indicator that has been used here is the ratio of the returns to the sales order and this is one of the best parameter to judge needs and the preferences of the customers. Further, when compared to the budgeted value of the selected KPI, it can be understood that as per the budgeted state the customer satisfaction is 4.94% and in that case, the budgeted area is serving the customers in the better manner than the actual results. Further, the returns are lower than the results of the financial year for the year 2017 and 2018. Hence, it can be said that customer satisfaction tends to be the most important factor. Therefore the returns are to be reduced on an immediate basis (Piercy & Morgan, 2015). The second parameter is the inventory management control which will help the organization in understanding the business in a better manner. When the business extends it becomes difficult for the company to maintain the stock. In that scenario it is necessary for the management to have an automatic stock updated control system that can help the company in their future years.
The company is required to invest in the inventory management as this provides a learn understanding of how well the company can form the assets. The inventory management helps in the accurate planning of the inventory and keeping balance between the supply and demand for the customers. The smarter decisions can be made if the inventory is kept in the proper ratio and in the proper amount. At the point when the stock of the company is murmuring along effectively through the offices, one bet while keeping aside a great deal of cash. Stock administration causes the company from abstaining from squandering cash on moderate moving items so that it can place it to all the more likely use in different territories of the business. Great stock administration encourages the company to make sense of precisely how much stock is needed. This makes it simpler to avert item deficiencies and keep simply enough stock close by without having excessively (Wild, 2017).
The effectiveness of the website can be measured through one of the most important factor of how much active users are there and how much likes are there on the social media pad so that the active users and their liking can be figured out easily. The active users and the number of the likes on the Facebook website is the clear indication of how well the customers like this product and will tend to stick with the company in near future. The development of the website is also one of the crucial factors in deciding whether the product shall be continued or discontinued. The constant feedback also helps in determining the variance which the company can reduce by taking the immediate and the necessary strategic measures.
KPI |
2016 |
2017 |
2018 |
Total number of the satisfied customers |
432 |
8754 |
6541 |
Total number of the active users |
27456 |
29488 |
37177 |
Customer satisfaction |
1.57% |
29.69% |
17.59% |
The same can be explained in a better manner for the period of three years from 2016 to 2018. In the year 2016 the number of satisfied customers was 432 whereas the same position has been developed form the total number of the users. The ratio increased from 1.57% to 29.69% and thereafter it again decreased to 17.59%. Further, this KPI is one of the useful KPI’s in determining the efficiency as well as the effectiveness of the website. The likes on the social media represents the customer satisfaction and this will help in deciding how to build the website, what the requirements are and how to move in a particular direction. There are several ways to build the website so that more number of the active users can propose their likings towards the products and the services (Al Shobaki & Abu-Naser, 2018).
The report to the management of the Apex explains why the division shall be kept open even when incurring the losses and this is because the variable costs tends to be lowers than the revenue generated after the fixed costs are paid up. This is a case where the marginal revenue is greater than the marginal costs. Working at a misfortune is the situation at which you're paying more cash than is coming in to the organization. The company normally work at a misfortune stage incidentally when beginning or in times of development (Denis & McKeon, 2018). It is alright on the off chance that one can have enough money in the bank that helps to take care of the expenditures of sustain the business until your pay gets. If the business is every now and again working at a misfortune due to slow deals, it is necessary to have to roll out some enhancements to run the business. Consider counselling a counsellor to enable the owners to make something happen (Denis & McKeon, 2018).
At times the operating losses do not affect the performance of the company as it all depends upon the users. In the present case of the BYL, a fashion hub the division tends to be open as the fashion comes and goes but the sale cannot be ceased due to the variety of the customers. Secondly the users could be increased by promoting about the products and the services. This will build the larger customer base and cash will continue to be in circulation for some years (McKeon, 2017)
The activity based costing system is quite different from the traditional and the conventional methods and it is one of the most accurate methods of assigning the costs. Under this method the costs are allotted on the basis of the cost drivers that are associated with the respective costs. There are certain benefits of using the activity based costing system and this starts with when ABC gets correctness and unwavering quality item cost assurance by focused on circumstances and logical results relationship in the cost simultaneousness. It observes that exercises cause costs, not items and it is item that expend exercises. With the help of ABC, the real texture of the costs can be figured out in real (Cooper, 2017). With the help of ABC, chiefs can control various fixed expenses by working more command over the exercises that have caused these fixed expenses. ABC recovers incredibly the chief's basic leadership as they can consume progressively dependable item cost information. ABC helps in fixing selling costs of items that are increasingly and presently it is easily to manage it.
The operational gearing is also termed as relationship between the fixed cost and the variable costs. The more is the fixed cost the more will be the operational leverage of the company. Due to the high operational gearing process it becomes difficult in forecasting the earnings as it can have huge impact on the basis of huge assumptions. The understanding of the operational gearing will help in defining the level of the risk. In this present scenario the below table reflects the information of the budgeted breakeven point and the fixed administration costs (Ivanov, Rubin, Tarapanov & Kanatnikov, 2016).
Requirement 4 |
2018 |
Fixed administration cost variance |
-241000 |
Actual- Budgeted |
|
Budgeted breakeven point |
2018 |
Fixed costs |
1100000 |
Contribution per unit |
28.006173 |
Actual breakeven point in units |
39277.06 |
In this scenario fixed costs have been more than the budgeted costs and this again reflects that the fixed costs are required to be curbed so that the company can earn the profits. The foxed costs are the costs that are required to paid, off no matter what and this again results in the fixed leverage on the company. Henceforth from the overall analysis it can be stated that the bifurcation of the fixed costs and the variable costs is necessary.
From the overall analysis it can be stated that all the requirements have provided the information on the basis of the financial and the operating data have been analysed in detail and the company can improve the performance. Moreover BYL should take in all the recommendations to have a solid advantage.
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Cooper, R. (2017). Target costing and value engineering. Routledge.
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Wild, T. (2017). Best practice in inventory management. Routledge.
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