Strategic Accounting Case

Analysis (ACCO 435)

Lecture 1

Dr. Afua Asante

Department of Accountancy
Case Analysis structure for ACCO 435 (1/2)
Structure

1. Executive Summary (only for the report)

▪ This entails Introduction, issues, and recommendations

2. Table of Contents (only for the report)

3. Situation Analysis
▪ This includes a qualitative analysis (e.g., SWOT, and other relevant frameworks, depending on the
case)
▪ Internal: mission, goal, objectives, key success factors, core competencies Strengths, weakness,
▪ External: Opportunities, threats, competitive advantage, PESTEL, Porter’s Five Forces, Industry life
cycle, critical success factors
▪ This include a quantitative Financial Analysis, using the relevant (management) accounting concept(s)
(depends on case):

4. Strategic Alternatives
▪ Deriving relevant and realistic alternative and assessing their advantages and disadvantages
▪ Strategic elements: target market, geographic market, product, competition

5. Recommendations & Implementation Pan

6. Exhibits
▪ To be added at the end of the report
▪ Calculations to be provided via Excel spreadsheet

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1. Synopsis: What is the case about?

▪ Society of Business Academics (SBA), a non-profit organization of

business professors, organizes among others annual conferences in
various cities across Canada.
▪ Conferences operate as a profit center and are budgeted to break-even.

▪ Recent conference generated a loss, despite greater than expected (350

actual attendees vs 300 expected attendees) attendance.

▪ Angie Dickenson, Executive Director of SBA, needs to understand what

causes the financial loss and in her role as executive director she needs
to develop recommendations on how to prevent the risk of future
financial losses.
Case Analysis structure for ACCO 435 (1/2)
Structure

3. Situation Analysis
▪ Qualitative analysis: Internal Analysis
▪ Mission: advance business research and teaching
▪ Goal of Conference Chair (Earl): attract more attendees
▪ Goal of Membership Chair (Gali): recruit new members
▪ Goal of Executive Director (Angie): financial success and risk management of
the society
▪ Potential misalignment between mission and financial objective to break-even

▪ Strength: organizes among others annual conferences in various cities across

Canada; success at organizing; funds availability
▪ Weakness: Misalignment among board members; cost of expenses; cost
classification; forecast challenges
▪ Opportunity: High attendance; hotel availability; online conference
▪ organization of business professors; sponsorship
▪ Threats: conference generated a loss; unpredictability of Attendance; viability of
organization given losses

▪ Quantitative Financial Analysis: CVP

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Case Analysis structure for ACCO 435 (1/2)
Structure

3. Situation Analysis
▪ Quantitative Financial Analysis: CVP
▪ Rental of meeting rooms FC
▪ Travel costs for guest speaker FC
▪ Cost of meals VC
▪ Registration materials VC
▪ Transportation VC
▪ Cost of breaks/ refreshments VC

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2. Quantitative Analysis

▪ Conference operates at a loss

Why? Look at the profit function and compare actual with budget (P = Q x p – Q x VC – FC)
▪ Higher attendance than expected. Attendance is too high.

Why leads attendance to loss?

▪ Revenues < Costs (FC + Q x VC)
▪ Revenues = Ticket fee + Sponsorship
▪ Costs = VC + FC
▪ Negative CM
Dilemma!
Why negative CM?
▪ Budgeted to break-even
▪ Ticket fee too low
▪ Subsidized to keep ticket fees low(er)

Why?
▪ Attract more people

Why?
▪ Mission: reach out to professors, bring academics together → attendance growth

Dilemma or trade-off between attendance growth and financial viability of the conference!
Misalignment between SBA’s intent to grow conference attendance (strategy) and the financial viability of its
strategy
4. Quantitative analysis

▪ CM per unit = p – VC
= $200 registration fee - $250 VC
= - $50 CM per unit

BEP in units = FC / CM per unit

= ($20,000 - $35,000) / - $50 CM per unit
= - $15,000 / - $50 CM per unit
= 300 units
4. Quantitative analysis
▪ Comparing budgeted and actual income statement
CVP Income Statement BUDGETED ACTUAL
Revenue
Registration fees $60,000 $70,000
(=300 x $200) (=350 x $200)
Variable Costs
Cost of meals $51,000 $59,500
(=300 x $170) (=350 x $170)
Registration materials $6,000 $7,000
(=300 x $20) (= 350 x $20)
Transportation to an off-site dinner reception $3,000 $3,500
(=300 x $10) (=350 x $10)
Cost of breaks/refreshments $15,000 $17,500
(=300 x $50) (=350 x $50)
Total Variable Costs $75,000 $87,500
Contribution Margin -$15,000 -$17,500
Fixed Costs
Rental of meeting rooms and audio-visual equipment $10,000 $9,800
Travel costs for guest speakers and staff $10,000 $10,200
Total Fixed costs $20,000 $20,000
Sponsorship $35,000 $35,000
Surplus/deficit $0 -$2,500
4. Quantitative analysis

▪ CVP Chart
Case Analysis structure for ACCO 435 (1/2)
Structure
4. Strategic Alternatives
▪ Deriving relevant and realistic alternative and assessing their
advantages and disadvantages:
Problem statement:

How can me meet our mission without jeopardizing our financial situation?

Alternative:
How to align SBA’s intent to grow conference attendance (strategy) with
the financial viability of this growth?

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4. Quantitative analysis

Discussion of Quantitative Results:

▪ negative CM is the problem and therefore profit decreases the more
people attend the conference

▪ with budgeted attendance level of 300, conference would have broken

even, which complies with SBA policy

▪ sponsorship donations subsidies the registration fee. Sponsorship helps

to cover fixed cost and subsidizes the registration fee of 300 conference
participants
5. Qualitative analysis

Discussion points:
▪ Discussion whether conference should be viewed as a standalone profit
center in the SBA
▪ Discussion of how to budget for break-even
▪ Discussion of conference location
▪ Discussion whether to alter growth strategy
▪ SBA’s strategy and the financial side of the strategy
▪ Different interests and potential conflicting interests in the executive
board
▪ High attendance as one time effect
5. Recommendation

▪ Two phase registration: early bird and normal fee!

▪ Negotiate VC and FC with suppliers

▪ Transfer VC to customers

▪ Seek more sponsorship

▪ Increase the ticket price

▪ Have fixed and variable sponsorship agreement

5. Recommendation

Discuss Pros and Cons of alternatives:

▪ Set a price where CM > 0

▪ Set registration fee based on maximum anticipated number of attendees
▪ Early bird and late registration price
▪ Renegotiate sponsorship agreements
▪ Renegotiate cost contracts with venue
▪ Change location to less popular or smaller cities
▪ Include resulting revenues from conference / spill-over revenues from
the conference

Discuss: Actionable implementation plan