PLEASE help write an Accounting Business Memo based off this

PLEASE help write an Accounting \"Business Memo\" based off this case study of Impcorp Foods I put down below. HERES THE QUESTIONS TO ANSWER FROM THE ARTICLE BELOW:

1) introduction, writing a brief description of the business context and overview of contents

2) Product cost anaylsis

3) Appendix for any additional easy to follow calculations of best case and worst case scenarios and supporting tables

Impcorp Foods

Hoang Nguyen
Aulcorp Food Marketers and Distributors Inc.

INTRODUCTION

You were recently hired as the finance manager of Impcorp. Your position was created because the management accounting work was overwhelming Sergio Villani, the
chief executive officer (CEO), and the other staff members. Sergio needed someone other than himself to oversee that area. He further believed that improvements were needed in the management accounting and inventory areas, but he was unclear where to begin and what to do to prepare for
the continuing growth of suppliers, products, and retailers. Specifically, as profitability of suppliers, products, and retailers are currently difficult if not impossible to calculate, he asked for your suggestions for pursuing profitable growth. He also said Impcorp might need to replace its accounting software system with one with more functionality. You are to identify changes needed in the management accounting area to improve the profitability of Impcorp.

BACKGROUND

Impcorp Foods was established in Canada as a private, family-owned firm seven years ago. At that time, Sergio leveraged his more than 20 years of progressive food sales experience with a leading retailer into his own business. Sergio, his wife Lise, and one other employee, Maria Randle, were the first three employees. He was responsible for sourcing products and generating sales while Maria and Lise

Gary Spraakman York University

handled office administration work, including accounting and logistics. Internal control and operating procedures were retained in the minds of these three employees, which was not uncommon with start-up firms.

The business started with importing Italian cakes, followed by expansion into sauces, rice products, and various other product categories. The demand to which Impcorp
was responding came from customers of major North American retailers, who wanted authentic, premium quality Mediterranean food at reasonable prices. The suppliers came from various regions in Italy, many of whom manufactured products for the Italian market but had no presence in
the North American market. Impcorp gave them access to the North American market through ordering products in large volumes in return for price discounts. In the first year, Impcorp had two major Canadian retail chains as customers and three products from suppliers, for total sales of $600,000. Now, after seven years, the sales have exceeded $10 million.

A crucial component of the business is the logistic linkage between suppliers in Italy and retail chains in North America. The products are shipped from Italy directly to North American retailers or, if shipments to
the retailers need to wait, to public warehouses. Impcorp pays the suppliers and receives payment from the retailers. Presently, there are seven Italian suppliers and six major retail customers. The latter are evenly split between major Canadian and American retail chains.

Impcorp’s sales growth comes mainly from newly developed products through joint efforts with Italian suppliers for customers of retail chains in Canada and the United States. Prices are kept competitive by maintaining close supplier relationships and by volume sales to retail chains. Costs are further minimized with appropriate IT investments. As high product quality is demanded by the retail chains, Impcorp ensures meeting this criterion by working with only tier 1 suppliers.

DUTIES OF THE NEW FINANCE MANAGER

Your first task is to familiarize yourself with the company’s organizational structure, accounting system, and logistics. In recent years, Impcorp added three Italian suppliers and two retailers. You have also noticed that Impcorp successfully developed many new products with Italian suppliers and will be adding another American retail chain next year. The number of products increased from 35 to 84 over the past two years. You quickly understand why staff had become overwhelmed. The organizational chart is shown below.

FURTHER ASSESSMENT

Through further questioning of the two consultants, you realize that the existing system has a basic server, which implies that there is no backup. If the system crashes, all information would be lost and Impcorp would be in serious trouble. In contrast, the new system has a redundant server to reduce the risk of information loss and to speed up processing. The existing system slows tremendously when going from three to four users. This does not happen with the proposed new system because of its higher capacity server.

There are other advantages. The locking feature of the existing system is a disadvantage, as it requires that all users log off before any changes can be made. The proposed system does not have that shortcoming.

The existing system is “out-of-the-box” software without industry-specific features. In contrast, the proposed system is specifically tailored to the packaged food wholesale operations where Impcorp competes. The consultant or supplier for the

COSTS AND BENEFITS

The consultant has quoted the cost of the new software at $100,000. There would also be a hardware upgrade required for $12,000, an annual licensing/operating cost of $13,000, which is $11,000 more than the existing system. You estimate that training in terms of outside help, replacement staff, and staff time to cost $17,000 of which $10,000 is for initial training and $7,000 for additional post-implementation training.

It is estimated that a one-year time frame is required for staff to become sufficiently familiar with the system to do
their jobs. Training is to start one month after the software set-up and continue for two months after implementation. There are 100 hours allocated for training over the first year.
In conjunction with the independent consultant, Sergio estimates that inventory – which is at a steady level during the year – will be reduced by 10% due to the better information. (Impcorp has an inventory turn of 20 times.) With the improved

information, reduction in penalties from retailers due to late shipments and cost of expired items are estimated to represent an annual saving of 10%. There is also an estimated 10% saving in employee administration salaries from a reduction in manual entries, duplication, and quicker transaction processing. Cash flow should also improve, particularly because of the reduction in inventory as noted, which would decrease the interest and bank charges cost by 15%.

REQUIRED:

You have completed the assessment of your responsibilities as the new finance manager at Impcorp. Report to Sergio
on what Impcorp needs to do to improve its management accounting practices, and how to proceed with those improvements. Be sure to calculate the costs and benefits of your recommendations.

INSTRUCTIONS:

Write out the product cost anaylsis and include an appendix with easy to follow calculations of best case and worst case scenario. (as mentioned above)

Solution

In order to achieve the CEO Vision of \"Continuous Growth of Suppliers, Products and Customers thereby making Impcorp Foods profitable\" , we need to have controls on three areas which are Materials, Information and Money. The growth of Suppliers & products are evitable from the level of growth (35 to 84 over the past two years) in products & qualitative supply (ensuring tier I supply)of the same over the years. Impcorp’s sales growth comes mainly from newly developed products through joint efforts with Italian suppliers.

Ultimately, higher performance must have reported proportional growth in profits over the period. In order to ensure the same, suffcient controls over company\'s Materials, Information & Money is mandatory.

A Robust Material Management system software can create efficiencies in management that can significantly ease current employee workload, and in effect causing them to be more efficient. Having high volumes of inventory requires a lot of attention to detail and the skills to handle it in an efficient manner. But the most complicated part is keeping track and continuously improving the value of the inventory turnover ratio.

Our Inventory Turnover of 20 times is well managed as it is decent level of inventory for a distribution company. This means our Inventory Level is ver well under control. However, with increased business needs and frequent orders can pile up inventory at any point of time if demand forecaseted is lost due to any abnormal change in taste preferences of our customers. So, we need to mange our orders in an efficient manner. An effective software will help us do the same. Therefore the proposal for implementing a software for Inventory management is a welcome approach to the company for profitable growth. However,

A higher inventory ratio represents stronger sales performance or ineffective buying. In our case, it has been due to our strong sales performance over the years by penetrating the North American market. A Lower inventory turnover represents adverse situation wherein we are buying too much inventory for the available demand and we may be compelled to sell off at discounts in future due to perishable nature of our items.

Best Case Scenario of an efficient Inventory management System through tailor made software is Efficient management of Material, Information and Money. Worst case is Increased Inventory Level due to Low turnover rate.

In our case, Software Implementation cost is an one time fixed cost which shall be recovered over the period by amortisation of the same over the product cost. However, product cost increase due to Training and licensing cost is expected to set off with the cost benefits in terms of:

a) reduction in penalties from retailers due to late shipments and cost of expired items are estimated to represent an annual saving of 10%

b) 10% saving in employee administration salaries from a reduction in manual entries, duplication, and quicker transaction processing.

c) decrease in interest and bank charges cost by 15%.due to increased cash flow as a result of high inventory turnover.

In our industry, shortage of inventory when and where it is needed can be extremely detrimental as it affects company\'s Goodwill. Therefore, it is important to manage the inventory levels and report the performance at regular intervals for continuous assessment and growth of the company.