Management Essentials

Participant Manual

Version 1.0
Table of Contents

Table of Contents

1. What is Management Essentials?.........................................................................................................3

1.1 Training Objectives of Management Essentials ......................................................................................... 3
1.2 Course of the Seminar .................................................................................................................................. 4
Introduction.............................................................................................................................................5
2.1 What Tasks Do You Take On as a Participant? .......................................................................................... 5
2.2 The Company................................................................................................................................................. 6
Decision Areas........................................................................................................................................7
3.1 Sales ............................................................................................................................................................... 7
3.1.1 Marketing-Mix ...................................................................................................................................... 7
3.1.2 Description of the Product and Product Policy ..................................................................................... 8
3.1.3 Pricing Policy ....................................................................................................................................... 8
3.1.4 Communication Policy.......................................................................................................................... 9
3.1.5 Distribution Policy .............................................................................................................................. 11
3.1.6 Additional Sales Opportunity: Bulk Buyer........................................................................................... 12
3.1.7 Insufficient Capacity of Supply ........................................................................................................... 12
3.1.8 Price Changes ................................................................................................................................... 12
3.2 Research & Development (R&D) ................................................................................................................ 12
3.3 Purchasing ................................................................................................................................................... 13
3.4 Production & Human Resources ............................................................................................................... 14
3.4.1 Production Lines ................................................................................................................................ 14
3.4.2 Need of and Adjustment of Production Capacity ................................................................................ 15
3.4.3 Operating Materials ............................................................................................................................ 16
3.4.4 Headcount in the Initial Period ........................................................................................................... 16
3.4.5 Adjusting the Work Force ................................................................................................................... 16
3.4.6 Non-Salary Staff Costs....................................................................................................................... 17
3.4.7 Productivity of Manufacturing Employees .......................................................................................... 17
3.5 Finance and Accounting ............................................................................................................................. 18
3.5.1 Payment Behavior of Customers ....................................................................................................... 18
3.5.2 Loans ................................................................................................................................................. 18
3.5.3 Taxes ................................................................................................................................................. 18
3.5.4 Dividends ........................................................................................................................................... 18
3.5.5 Success Value ................................................................................................................................... 19
3.5.6 Business Report of the Industry ......................................................................................................... 19
3.5.7 Accounting ......................................................................................................................................... 19
Planning Model .....................................................................................................................................21

Note: For ease of reading, the masculine form of speech for personal nouns and pronouns is used in the following. This
does not imply any discrimination against females or other gender identities but is intended to be understood as gender-
neutral for the sake of linguistic simplification.

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What is Management Essentials

1. What is Management Essentials?

Management Essentials offers a challenging, computer-based management simulation. Together with your
teammates, you will form a business team that will take over the leadership of the “mosaic GmbH” in the
headphone industry. The simulation presents a realistic model of a company and provides participants the

opportunity to:
• Learn quickly

• Learn in a risk-free way

• Gain practical experience with lasting long-term effects.

The management simulation is an interactive teaching and learning system based on the principle
of

1.1 Training Objectives of Management Essentials

• Recognize and formulate framework conditions for economic success

• Holistic experience of business contexts

• Practice cross-departmental thinking and working

• Setting and implementing goals and strategies in a dynamic competitive environment

• Master the basics of marketing

• Analyze financial figures and put knowledge into practice

• Learn to use business tools like cost accounting and income analysis

• Maintain control over the business under uncertain conditions

• Learn to think and act in an interdisciplinary way

• Develop the ability to structure and solve problems

• Develop a view for the essential problems

• Practice effective communication through visualization

• Define and solve problems in teams with the help of data-processed planning models

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What is Management Essentials

1.2 Course of the Seminar

The business simulation Management Essentials is structured into distinct phases:

Decision Phases Evaluation Phases

Make operational and strategic decisions for a fiscal Analysis of the results of the previous period and
year of your business. review of the general game strategy.

Usually, the instructors will use the time between these phases to either provide relevant background
information to the participants or to offer a detailed evaluation of recent results and events from the simulation.

2. Hand in
decisions

Introduction to the 1. Decision making in

simulation teams 3. Simulation by the
instructor

4. Evaluation of the
decisions

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Introduction

Introduction
2.1 What Tasks Do You Take On as a Participant?

Welcome to mosaic GmbH!

A success story since the foundation

A new era for the young company begins

Moritz Vallenberg studied at the University of Tübingen and used his free time for his great
passion - music production. Through his hobby he met the sound engineer Sarah. In addition
to their studies, the two produced their own songs and beats in every free minute, which
caught the attention of the music industry. By selling their works to well-known musicians,
Moritz was not only able to finance his studies, but also to turn his passion into a profession.

Together with Sarah, he developed the first prototype of an on-ear headphone with a built-in
microphone, which they named “SuperBass”. Their high-quality headphones were not only
great for music production, but also as a communication tool. They were so convinced of their
product that they pooled all their savings and founded their own company with the name
"mosaic" as a play on words from the founders' first names and their enthusiasm for music.

The young entrepreneurs rented a production hall and warehouse in Constancy, leased their
first machine, and went into series production of the SuperBass on-ear headphones. With the
help of their extensive contacts within the music industry, they were able to successfully
market their product through their own online store during the first few years after starting
their business.

Seven years have now passed, and mosaic GmbH continues to flourish. With annual sales
of 6 million euros and 40,000 units sold per year, the company has established itself on the
market. But now Moritz Vallenberg released a surprising statement:

„My goals and wishes as managing director of mosaic GmbH were not only fulfilled, but far
exceeded. We were able to successfully place our product on the market and now employ 36
people. Even though this step is difficult for me, it is now time to dedicate myself to new tasks.
I have great confidence in the new management of my company and will support them in
word and deed. “

As of January 1 of the new year, the new management team will take over the company.
Moritz emphasizes that the new team will be responsible for strategic decisions from now
on. The first step will be a rebranding. Neither Sarah nor he are still part of the company,
which is why the company name mosaic should also be renewed. The new team will be
entrusted with the task of developing a new brand. We remain curious to see how the
company will develop in the future.

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Introduction

2.2 The Company

After an evaluation of the documents of the former management, you receive the following information about
the individual business areas of mosaic GmbH:

• Our customer advisors are the interface between our customers and the company.

• This is where the course is set for a targeted customer approach through our sales

Sales policy instruments such as advertising and pricing.

• The customer advisors serve as competent contact persons for questions.

regarding our products for customers and retailers and thus also act as support.

• The company does not have its own R&D department.

• Further developments are carried out by a long-term cooperation partner.

Research & • The external cooperation partner develops new product standards and improves
Development the quality of existing products.

• The finished products are intensively tested to ensure that they meet the high-
quality standards that we set ourselves.

• The purchasing department procures the materials, parts and supply items needed
Purchasing to produce our product.

• The production department uses state-of-the-art production lines to manufacture

our headphones.
Production
• Our highly qualified employees guarantee both the craftsmanship and durability of
our product.

• The HR-team focuses on everything related to our workforce from staffing to

general personnel support, IT, and accounting.
Human
Resources • Our human resources department takes care of both the filling of vacant positions
and, if necessary, the issue of dismissals.

• The accounting department monitors all numbers, data and facts related to our
company.
Finance &
Accounting • Our accounting team is well-versed in modern accounting and business practices.
They ensure the financial success of our company.

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Decision Areas

Decision Areas
In the simulation Management Essentials, your team takes on the position as the new management of
mosaic GmbH. As the newly elected executive board, you make decisions in all major fields of corporate
activity:

The Executive Board decides on…

Human Finance &

Sales R&D Purchasing Production
Resources Accounting

The following description of the different decision areas should help you to gain an overview of all decision
parameters within the simulation, along with their corresponding impacts. The number and complexity of
decisions will increase during the simulation. Additionally, the decisions that you ultimately make will be highly
dependent on the specific scenario conditions present in each period of the simulation.

3.1 Sales
3.1.1 Marketing-Mix
In the sales department, your main task is to design an effective marketing mix. The marketing mix is a
combination of decisions in four areas: product policy, pricing policy, distribution policy and communication
policy. Those are also known as the "4 P" (Product – Price – Place – Promotion) and represent the main factors
for the determination of the sales potential. Your task is to find the mix of decisions that leads to the intended
effects.

Marketing Tools Influencing Factor

Product Product policy Level product quality

Price Pricing policy Pricing decision

Number of sales employees at the end of the

Place Distribution policy
period

Includes
Communication • Investments in advertising
Promotion
policy
• Investments in corporate identity

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Decision Areas

The table above gives you a brief overview over the four marketing tools and respective decisions. In the
following, they are described in more detail.

Your marketing decisions should be determined based on both your overall strategy as well as the overall
conditions of the market. Keep in mind that you will never be able to fully predict the actions of your competitors.
Furthermore, pricing, and competitive aggressiveness of your competitors will have an influence on your
potential sales volume. This means that in certain circumstances, sales growth could actually be higher or
lower than what is predicted in the economic news.

3.1.2 Description of the Product and Product Policy

mosaic GmbH produces and distributes the high-quality “SuperBass” headphones. These on-ear headphones
with built-in microphones are not only excellent for music production, but also as a tool for communication.

Although studio-quality headphones and headsets with built-in microphones are already on the market, the
SuperBass is the first headphone to combine these elements. With its licensed transducers, its high tones
sound melodic instead of flat, and its deep bass booms into the ear. At the same time, every online meeting
with the SuperBass runs smoothly, as the built-in and noise-isolating microphone transmits the voice clearly
to the other end of the line. This allows music to be experienced exactly as the artist intended, and for your
colleagues, your voice sounds as if you were right next to them in the office.

The award of the influential music magazine "Beat Mag" in the category "Product Innovation of the Year"
helped the start-up company achieve further success. The SuperBass headphones are on par with other
devices in terms of general features. In period 0, the headphones achieved the following rating:

Product Quality: Level 1

The publications of the specialist magazine "Beat Mag" provide guidance for customers. The level of your
headphones is an important quality criterion: the higher the level, the greater the reputation of the product on
the market. In addition to the absolute value of the two indicators, the distance to the level of the competition
also plays a role. For the improvement of the product quality, the external consulting of NiceNoise GmbH is
necessary.

For each level of product quality, NiceNoise improves one aspect of the sound, material, or design of the
headphones. In doing so, NiceNoise pays attention to the balance between these dimensions, resulting in a
high-quality product according to modern standards.

3.1.3 Pricing Policy

In competition with other suppliers, price is an important marketing instrument with an immediate effect on
sales. It thus makes a significant contribution to differentiation from the competition. Your set price in the initial
situation is EUR 150.

In general, fewer products are sold when prices are increased. Conversely, demand increases when prices
are reduced. This relationship is shown in the following table:

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Decision Areas

Price-Sales-Table

Price Sales in Units

€ 160 (+ 6.7%) Approx. 28,500

€ 150 40,000

€ 140 (- 6.7%) Approx. 53,000

However, keep in mind that the values above are shown without the sales-effective effects of the further
development of your product quality. You must expect significant business consequences if you change your
price drastically. For example, if your price is high, you should also offer high quality, or if your price is low, you
should be able to deliver and produce cost-effectively.

The revenue for the period is calculated from the number of headphones sold and the respective price. The
revenue for period 0 is the amount of money that mosaic GmbH earns from the sale of 40,000 headphones at
a price of EUR 150 each. The revenue after the end of the previous financial year thus amounts to (end of
period 0):

40,000 Units * EUR 150 = EUR 6,000,000

The quantity demanded is sensitive to pricing decisions. For example, if the price is too low, sales may increase
due to increased volume, but this volume may no longer be sufficient to cover costs. Therefore, check whether
you can produce a high quantity profitably before lowering the price. Similarly, if you overprice, you may also
lose sales if you lose customers to competitors because of a high-price strategy. Customers are only willing to
pay significantly higher prices if you also deliver corresponding performance (product quality). It is assumed
here that the additional costs per headphone due to improved product quality (see section 3.2 Research &
Development (R&D)) can be roughly passed on to customers. As this price increase maintains the price-
performance ratio (increased price, simultaneously increased product quality), the clientele is prepared to
accept it without any loss of sales.

From this context, it becomes clear that not only the expected sales volume, but also the resulting revenue
must be planned when deciding on the price. Sales depend on other factors besides price. Therefore, you
depend on forecasts about the buying behavior of your customers to make assumptions about the actions of
your competitors as well as the future market development.

3.1.4 Communication Policy

Your company's communication expenses can be divided into two sub-areas for which you allocate budget:

• Advertising

• Corporate Identity

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Decision Areas

At the beginning of the simulation, you only make decisions about advertising, while corporate identity is added
as the simulation progresses. These tools combined result in your awareness index.

3.1.4.1 Advertising
The most common marketing tool is classic advertising. This includes social media posts, banner ads, online
spots, and advertorials, which together appeal to a large potential customer base. An increase in advertising
spend usually increases demand for your product as well. Because advertising increases the awareness of
your company, the effect of advertising spend is felt over several periods. However, the strongest effect is
achieved during the period in which the advertising is placed. The effect of advertising on demand is
exemplified in the following diagram:

Demand in Units

40.000

300
Advertising Expenditure in TEUR

(Note: This is an illustration and does not represent the actual function)

The figure shows: Very high advertising expenditures do not produce a clear additional effect; thus, advertising
expenditures are subject to a decreasing marginal utility. At the same time, too little advertising effort has little
effect. This is hardly noticed by the customer. The advertising budget in the initial period is EUR 300,000.
Marketing experts assume that with a budget of EUR 330,000, approximately 1,200 more headphones could
have been sold in period 0.

The impact of advertising on total demand is also influenced by the difference between your company budget
and the budget of your competitors.

3.1.4.2 Corporate Identity

Corporate identity (CI) is another communication tool that can be used to increase awareness and sales.
Advertising expenditures tend to have a short-term effect and are only product- and market-related, whereas
corporate identity increases the company's awareness across products and markets in the long term.
Consequently, the corporate identity of the company is an important factor for the long-term development of
the company. For companies like mosaic GmbH, corporate identity expenditures of approximately EUR
125,000 are appropriate. When planning your marketing budget, also consider the decreasing marginal benefit
of your corporate identity investments.

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Decision Areas

3.1.4.3 Awareness
In each period, the awareness index shows the general awareness of the company from the customer's point
of view. The awareness of the company directly influences your market share on the market.

The awareness of the company on the market is determined each period in the form of an index. Expenditure
on CI is a major influencing factor here. In addition, advertising expenditure plays a significant role. While these
have an impact on the company's awareness in a specific market, spending on CI has a positive influence on
the company's awareness across markets (scatter effect). Note that awareness can decrease over time if
spending on CI and advertising is significantly reduced. Likewise, you should check whether the sum of all
expenditures is in relation to the expected revenues. Please note that awareness can decrease over time if
you reduce expenses significantly.

3.1.5 Distribution Policy

The mosaic GmbH employs customer advisors who are responsible for the sales processing of the
headphones as well as for the support in the online store. The sales chances increase with the number of your
customer advisors, since an increased presence leads to faster processing times as well as to a more
extensive support. So, it's not just the sheer number of customer advisors that matters, but also the rate of
support. At the beginning, there are eight customer advisors for in total 40,000 headphones sold. Experts
estimate that one additional customer advisor in period 0 could have increased sales by around 4.5%. The
following relationship is an example of the relationship between the number of customer advisors and the sales
to be achieved:

Demand in Units

40,000

8 Number of customer advisors

(Note: This is an illustration and does not represent the actual function)

Unlike communication activities, which build and establish awareness of your brand over the long term,
customer advisor activities only lead to sales success in the current period. However, keep in mind that
additional hires increase costs and that the number of customer advisors should be related to the expected
sales volume. Conversely, a significantly higher sales volume means that more customer advisors are needed
to maintain the quality of service.

It should also be noted that ordering from an online store incurs transport costs for delivery. However, these

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Decision Areas

are low due to long-term contracts, amounting to EUR 3 per headphone shipped.

3.1.6 Additional Sales Opportunity: Bulk Buyer

In addition to sales through your online store, there are also extra sales opportunities. From time to time,
interested parties from your network approach you with purchase offers with a large demand quantity. In this
form of sales, in which all companies can participate, the price and the maximum delivery quantity per company
are set by the bulk buyer. As a result, no quantity or a smaller quantity to your regular customers can be
offered. The delivery takes place in the decision period and has priority over the delivery to customers in the
online store, because the sales are secured, and the sold quantity can be scheduled. All distribution costs are
borne by the bulk buyer. As a rule, however, the contribution margins to be achieved are lower than when
selling through your online store. Selling to a bulk buyer has no effect on the demand of interested parties in
the online market.

3.1.7 Insufficient Capacity of Supply

Your products are supplied in the following order:

1. Commitments to bulk buyers

2. Supply to online store customers

3. Supply to retail stores

If you create demand (due to your marketing mix) that your company is unable to satisfy, you will lose these
sales due to your insufficient supply capacity. Approximately 80% of the demand that you are unable to meet
will then be distributed among the other companies in the simulation in proportion to their existing market
shares.

In the course of this redistribution, it may happen that one of the companies that is still able to supply during
the first distribution also becomes unable to supply. In this case, the demand not satisfied by this company is
not redistributed to the remaining companies. This may result in less than 80% of the unsatisfied demand being
redistributed.

3.1.8 Price Changes

Price changes also have an impact on demand. Customers prefer constant or even falling prices. These
indicate better long-term planning capability. The higher the index value, the more satisfied your customers
are, which subsequently has a positive influence on your sales. If prices are raised very drastically, especially
without a corresponding increase in your product quality, this will have a negative impact on your demand.

3.2 Research & Development (R&D)

General technological progress, increasing sensitivity for sustainability on the part of your customers as well
as increasing competitive pressure force companies to continuously develop their products. For the further
development of the headphones, mosaic GmbH can take the following measures:

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Decision Areas

Product Quality

Investing in the development of new levels of quality (e.g., improved sound

Decision experience, better feel, new design, longer battery life, greater range, and
finer sound settings).

Results Increase in product quality  maximum two levels per period

Positive impact on market share. The development of a new level improves

the quality of the product.
There are one-time research & development costs of EUR 100,000 per level
to increase product quality. In addition, variable costs are incurred on the sale
of each headphone depending on the level of product quality. These
Effect additional costs can be passed on directly to the customer.

Level 1 2 3 4 5 6 7 8 9 10 11 12 13

Var. Costs [€] 16 18 20 22 24 26 28 30 32 34 36 38 40

3.3 Purchasing
To produce a headphone, one unit of "input material" must be used at the beginning. You can purchase the
input materials for production from your supplier.

Currently, you are taking advantage of the current procurement contract of your supplier, which provides for
just-in-time delivery. Thus, as many input materials are supplied as your production needs.

Pay attention to information of your specialist department during the simulation. Possibly, quantity scales could
be requested in the long term. This means, the more units you purchase the more favorable the purchase
price. Here, the firm borders of the graduations are to be considered, whereby only starting from reaching a
certain purchase quantity, the more favorable price results. In return for his just-in-time service, your supplier
insists on immediate payment of the invoice.

The costs for storing input materials and finished products are EUR 3 and EUR 5 per unit, respectively.
Currently you have no input materials due to just-in-time delivery, but 1,000 finished headphones in stock.

The inventory values are accounted at manufacturing cost. Here is an extract from the inventory report at the
end of period 0:

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Decision Areas

Finished Products

Amount Storage Value

Units EUR / Unit TEUR

Initial Inventory 0 0,00 0,00

+ Delivery by supplier 41,000 94.91 3,891.50

- Amount processed 40,000 94.91 3,796.59

= Closing Inventory 1,000 94.91 94.91

3.4 Production & Human Resources

3.4.1 Production Lines
mosaic GmbH has four type A production lines in period 0. The following data apply to these plants:

Production Line

Remaining Net Other

Acquisition Normal Acquisition Residual
Running Depreciation Book Fixed
Period Capacity Value Proceeds
Time Value costs

TEUR / % Net
Units TEUR Periods TEUR / Period TEUR
Period Value

Type A Nr. 1 -9 12,000 1,250 0 125 0 200 25

Type A Nr. 2 -4 12,000 1,250 5 125 625 40 25

Type A Nr. 3 -2 12,000 1,250 7 125 875 40 25

Type A Nr. 4 0 12,000 1,250 9 125 1,125 40 25

Total 48,000 5,000 500 2,625 320

The machines have been in your plant for different periods of time. The machine purchased first has already
been fully depreciated.

Production equipment is depreciated on a straight-line basis. The following applies:

Yearly Depreciation = Acquisition Value / Running Time

Once production lines are depreciated, they may still be utilized for production purposes. Reasonably high
utilization of your equipment is very important for profitability, as the costs for the equipment can then be
allocated to more products.

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Decision Areas

3.4.2 Need of and Adjustment of Production Capacity

To produce a headphone, you need a capacity unit of a production line. The available production capacity can
be influenced by the following means:

• Investments in new production lines

• Disinvestments of old production lines

You can only increase the capacity of manufacturing facilities by expanding (investing in new equipment), not
by working overtime.

3.4.2.1 Investment in New Production Lines

New production equipment can be procured for the manufacture of headphones. The current performance
data can be taken from the following list:

Normal
Purchase Price Duration Other Fixed Costs Residual Proceeds
Capacity

TEUR Periods Units TEUR / Period %

Type A 1,250 10 12,000 40 25.0

Newly procured production equipment is immediately available in the period of the order.

3.4.2.2 Disinvestment of Old Production Lines

Production facilities can be sold (scrapped). A scrapped production plant is no longer available at the beginning
of the period. Assets that are already fully depreciated are not automatically sold. To sell a specific asset, place
a check mark in the Disinvestment checkbox. The corresponding production equipment will then be sold at an
asset-specific percentage of the net book value.

If you scrap machines, you will receive residual proceeds, which will flow to your company as a deposit in the
financial report. However, the loss in value equal to the difference of the net book value minus the residual
proceeds results in an "extraordinary impairment" in production equipment in cost element accounting.

You cannot sell all the machines, i.e., at least one asset must remain in your inventory.

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Decision Areas

Effects of a Divestment

Cost-type Accounting

Depreciation (residual book value) = Other expenses

Residual proceeds (scrap proceeds) = Other income

Financial Report

Residual proceeds (scrap proceeds) = Proceeds from divestments

The two items are combined in cost accounting and included directly under "Depreciation".

3.4.3 Operating Materials

For each headphone you want to produce EUR 3 are incurred for operating materials (e.g., energy). The
operating materials are procured automatically and are always available in the required amount.

3.4.4 Headcount in the Initial Period

The personnel situation of mosaic GmbH in period 0 is as follows:

Salary Without Non- Total Cost (Incl. Non-salary Staff

Cost Center Headcount
salary Staff Cost Cost)*

Purchasing 3 TEUR 35 TEUR 151.5

Administration 2 TEUR 32 TEUR 83.2

Production 23 TEUR 40 TEUR 1,241.0

Sales 8 TEUR 38 TEUR 425.2

TOTAL 36 TEUR 1,900.9

*With permanently fixed ancillary personnel costs of 30%.

The Administration cost center includes the personnel costs of human resources, finance and accounting, and
general administrative services.

3.4.5 Adjusting the Work Force

In principle, the adjustment of the headcount takes place via the final headcount.

As management, you can determine the final headcount for production employees and customer service
representatives in the production and sales divisions. Hiring and firing is done automatically according to the
desired headcount.

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Decision Areas

The number of employees in the Purchasing and Administration cost centers depends on the company's sales.
In case of sales fluctuations, the headcount is automatically adjusted by hiring and firing. Again, the ratio is not
linear, so if your turnover doubles, you will not need twice as many employees.

Cost Center Purchasing: Required Staff Based on Sales Revenue:

14
Required Purchasing Staff

12
10
8 7
6
6 4,5 5
3,5 4
4 2,5 3
2
2
0
2 4 6 8 10 12 14 18 22
Total Revenues [MEUR]

Cost Center Administration: Required Staff Based on Sales Revenue:

Required Administration Staff

14 12
12
9,5
10
8 7
5,5
6 4
4 3
1,5 2
2 1
0
2 4 6 8 10 12 14 18 22
Total Revenues [MEUR]

Each new hire and dismissal in a cost center incurs one-time costs of EUR 15,000 (hiring) and EUR 10,000
(dismissal) at the beginning.

3.4.6 Non-Salary Staff Costs

Non-salary staff costs are a constant 30% of the respective salary totals of the cost centers, as this is in line
with legal requirements such as employer's contribution to social security, paid holidays, etc.

3.4.7 Productivity of Manufacturing Employees

The regular productivity of a production employee is 2,000 headphones per period. This parameter results
from the work processes in production as well as the setup times of the machines. The value of 2,000 units
manufactured can therefore not be increased by training, process optimization or motivational measures. The
production capacity of the staff can - in contrast to the production equipment - be increased by overtime.
Overtime is automatically applied if the planned production quantity cannot be manufactured with the available

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Decision Areas

number of people. The number of possible overtime hours is limited to a maximum of 20%. In the event of
overtime, production employees are subject to an overtime surcharge of 25% on wages and salaries that
accrue during the overtime period. The overtime surcharges are not shown separately in the staff report.

3.5 Finance and Accounting

3.5.1 Payment Behavior of Customers
The following applies to all periods: 80% of the revenues in a period result in immediate payments, 20% of the
revenues result in payments in the following period. This does not apply to large customers who settle the
entire invoice in the current period.

The payments still outstanding at the end of a period appear in the balance sheet under the asset item "Trade
receivables".

3.5.2 Loans
To be able to ensure the liquidity of the company, you must decide about taking out loans. At the beginning of
the simulation, the required liquidity is automatically ensured by taking out an overdraft. This is the credit line
that your house bank automatically grants you. Until the decisions to take out a loan are activated, financing
through the overdraft is not a disadvantage for you. The interest rates for the overdraft will increase only after
you are able to control the liquidity independently (information on this can be found in the economic news).

3.5.2.1 Short-term Loans

In each period, a short-term loan (duration: 1 period) can be taken out as required. It bears interest in the
current period and is automatically repaid in the following period.

3.4.9.2 Overdraft Loans

If the available liquidity in a period is not sufficient to cover all payment obligations, the company is
automatically granted an overdraft loan (current account credit) to avoid insolvency. The cash balance must
be at least EUR 10,000. Just enough is drawn down to reach this cash balance. Interest is due in the current
period. The overdraft itself is automatically repaid in the following period.

3.5.3 Taxes
The company's tax burden is 35% on the result from ordinary activities. Any losses are carried forward and
offset against the pre-tax profit generated until a positive balance remains, which must then be taxed. Tax is
paid in the current period.

3.5.4 Dividends
mosaic GmbH does not distribute profits. The net profit generated for the period remains in the company
(retained earnings) and is shown cumulatively as profit carried forward in the balance sheet.

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3.5.5 Success Value

The performance value of mosaic GmbH is determined in each period. In addition to key financial figures for
the current periods, long-term parameters are also used.

The success value is made up of the following key figures (which, however, are included with different
weighting):

Influencing Factor Change of Influencing Factor Impact on Success Value

Total Revenue

Return on Sales

Net Profit

Equity

Debt Ratio

Quality of Planning

Awareness

Product Quality

3.5.6 Business Report of the Industry

As part of the reporting system, you will receive a free overview of the most important data from the income
statement and the balance sheet of the competitor companies in each period.

3.5.7 Accounting
mosaic GmbH has a modern accounting system. In its design, care was taken to ensure that cross-
comparisons within the industry are possible. The evaluations of the operational accounting system, consisting
of cost type, cost center and cost unit accounting, form an important basis for the planning and monitoring of
costs. The evaluations of financial accounting comply with legal requirements and show the financial situation
of the company. With the help of contribution margin accounting, you can determine your operating result.

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Decision Areas

3.5.7.1 Depreciation for Buildings

The depreciation amount per period for buildings is TEUR 30. This depreciation amount is allocated to the cost
centers as follows:

Purchasing Production Sales Administration

10% 60% 20% 10%

3.5.7.2 Costs in Administration

Administrative wages and salaries are charged to the Administration cost center as overhead costs. These are
allocated to the products in accordance with the proportion of sales

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Planning Model

Planning Model
The Planning model is a tool that is available only in certain simulations. This tool can be optionally selected
by your instructor. The planning model lets participants simulate the results of the following period on the basis
of certain assumptions (for example, assumed sales) for a certain price. Thereby, it helps participants to
understand the complexity and connection of different decisions. Every calculation costs EUR 10,000 unless
stated otherwise.

This section explains the usage of this planning model within the TOPSIM - Cloud.

1. First, save all your decisions prior to opening the planning model. Each decision category on the left -
hand side includes information as to if and when the decisions have been saved.

2. Then, open the planning model by clicking on the button on the right in the bottom.

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Planning Model

3. Import: To import the decisions you made in the game to the planning model, click on "Import" and
then on "Import Decisions". After confirming the import, the decisions are imported to scenario 1. By
clicking on scenario 1, you can switch to a different scenario. Clicking on "Import", you can either
import the decisions you made in the game or copy the decisions from a different scenario.

4. Save Scenario: You can also make decisions in the planning model. After making your decision, you
should save them.

5. Simulate: Click "Simulate" afterwards. You will see a decision overview of your saved scenario. Click
"Simulate" again and your assumptions will be simulated. Afterwards, the most important KPIs are
shown.

6. Reports: After closing the KPI-overview, you can open "Reports" on the left -hand side. Here, you can
see the reports that have been calculated on the basis of your calculated scenario.

7. This shows the period for which the scenario has been simulated.

8. You can share calculated scenarios with your teammates. To do this, first click on "Share" and then on
"Release". Your team mates now can import the decision of this scenario or view the calculated KPIs.
By clicking on "Share" again, you can end the release.

9. After clicking "Apply" you will see an overview of all simulated scenarios and their KPIs. To copy the
decisions, you made in one of these scenarios, press "Team-Decision".

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Planning Model

We wish you a lot of fun and good luck with our Business Simulation Management Essentials!

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