Knickknack: Case Study: Class: Red TEAM: 11
Knickknack: Case Study: Class: Red TEAM: 11
CLASS: RED
TEAM: 11
TEAM MEMBERS:
ANCHAL CHELLANI
POOJA KANKRECHA
SHUBHIKA MALHOTRA
SHIVANGI RATRA
SHREYA BAJPAI
ANMOL
Q1. ANALYSIS OF KNICKKNACK’S
RESULTS: 2005 (PART A)
Particulars Actual Approved Budget
Return on Investment 29% 25%
(Income/Investment)
Return on Sales 51.2% 46%
(Operating profit/Sales) (921/1800*100) (920/2000*100)
Asset Turnover Ratio 57.14% 54.35%
(Sales/ Assets) (1800/3150*100) (2000/3680*100)
Working Capital Ratio 1.2 2
(Currents Assets/Current
Liabilities)
Budgeted ROI was 25% and Sally’s Division was able to achieve an ROI of 29%, which is
an increment of 4%
Therefore, since
Sally has been able to achieve a higher ROI than she budgeted for
And there has been sufficient growth,
We conclude a Positive Judgement for her work as the General Manager of
Knickknac.
Q2. JUDGEMENT: SALLY’S WORK IN
KNICKKNACK DIVISION
(POSITIVE OR NEGATIVE) (PART B)
Additionally,
A. Actual Operating Income > Budgeted Operating Income
$ 921,000 > $ 920,000
Implies a Variance of 1,000 (Favorable)
B. Actual Fixed Costs < Budgeted Fixed Costs
$ 879,000 < $ 10,80,000
Implies a Variance of $ 2,01,000 (Favorable)
We would assign the agreed Bonus to Sally since her division’s economic performance
has been exemplary in 2005.
She has been able to achieve a significant increase of 4% in the Return on Investment
and a $ 1,000 increase in Operating Income
Q4. FOR BETTER EVALUATION OF
KNICKKNACK’S RESULTS: ADDITIONAL
INFORMATION REQUIREMENT
Basis of comparative analysis of Budget with Actual figures mainly comprise of 3 main
elements:
1. Profitability
2. Leverage
3. Liquidity
The information for Leverage and Liquidity ratios are missing. Mainly, Long term debt, short
term debt, cash and shareholder’s fund