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did question Jungle Co (ACCA practice exam 1). Here is my answer. How much marks out of 20 my answer could give me:
Jungle Co’s revenue from goal membership fees has fallen by 30% compared to year X5. This fall is likely to be due to the new Jungle Co’s logistic company which is not performing as good as the services that was being provided by the international delivery companies. As the % of late gold member deliveries has more than tripled. And customers being unhappy may have cancelled they gold membership which explain the 30% fall in revenue.
Compared to last year revenue from Electronic goods has increase by 26% which is higher than the 20% worldwide growth in the electronic goods market, we can say that Jungle Co did a good job.
And Compared to last year revenue from cloud computing services has increase by 90% which is higher than the average growth rate of 50%. Again a good performance by Jungle co.
The % change in revenue from household goods has fallen by 5% which indicates a bad performance for Jungle Co.
We can also see that 24% of orders were delivered late compared to 8% in 20×5, this is very bad. Delivering the parcels may have led to unhappy customers which might also explain the increase in the % of customer who complained from 5% in 20×5 to 20% in 20×6. However, this could also be due to poor quality of product or services being offered to clients.
Moreover, the increase number of complaint has also led to a significant increase of 60% in admin exp.
To conclude, it seem that the overall performance was good if we look at the financial performance of Jungle co with profit being 53% higher than 20×5. However, financial metrics are lag indicators, while they maybe good for reviewer the short term health of Jungle Co, non financial performance indicators shows a more realistic view on future performance (lead indicator). And it seem that Jungle co may struggle in future years with its rising complaints and late deliveries. If not address quickly, Jungle reputation may worsen where customer will see it as unreliable. This will be bad since the industry it operates is competitive.
Sales volumes (up to 2 marks per revenue stream) 8 at most 5
You have not said for sales:
Household
The company changed suppliers for many of its household goods during the year, buying them
instead from a country where labour was cheap. It may be that this has affected the quality of the goods, thus leading to decreased demand.
Computing
You have said the company has outperformed the market, where the average growth rate is only 50% but you haven’t said that this suggests the investment in the cloud technology was worthwhile.COS and gross margins 5
Administration expenses/customer complaints 3
Distribution costs/late deliveries 2
Net profit margin 2at most 2/3 for this section
This is the answer guide
So if I may be honest with you a maximum of 8 marksYou have made a good effort with revenues but you haven’t discussed costs much…..
The relationship between costs and revenue is importantAdministration expenses/customer complaints
These have increased by 60% from $1·72m to $2·76m. This is a substantial increase. The costs of the customer service department are in here. Given the number of late deliveries increase from 2% to 14%, and the corresponding increase in customer complaints from 5% to 20%, it is not surprising that the administration costs have increased.
As well as being concerned about
the impact on profit of this increase of over $1m, Jungle Co should be extremely worried about the effect on its reputation.
Bad publicity about reliable delivery could affect future business.Distribution costs
Despite an increase in sales volumes of 15%, distribution expenses have increased by less than 2 percentage points. They have gone down from $0·16 to $0·14 per $ of revenue. Although this means that Jungle Co has been successful in terms of saving costs, as discussed above, the damage which late deliveries are doing to the business cannot be ignored. The company needs to urgently address the issue of late deliveriesThank you so much Sir for taking the time to review my answer and provide such useful feedback. I will rework the question and try to improve on the areas you suggested. Thank you so much
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