Question

DigitalHall operates three divisions within the same building, namely, Print, Video and Sound. The following information has been obtained from DigitalHall:

Division	Print	Video	Sound
Sales (RM)	162,000	270,000	216,000
Direct VC (RM)	97,200	135,000	108,000
Direct FC (RM)	27,000	37,800	54,000

The common costs of RM160, 000 are allocated across all three divisions, based on divisional sales.

Required:

1. Prepare a divisional performance report.
2. Sarah, the manager of the Video division, suggests that the Print division should be closed, because this division is making losses. Kim, the manager of the Print division, indicates that DigitHall will have lower overall profits if the Print division is closed, unless certain steps are put in place. Kim knows that the Print division needs to be downsized because print media is becoming less popular, rather than closed, to serve some regular customers who are dependent on this division. In addition, alternative actions should be pursued to protect overall profit, and she wants to oversee this process. Patricia, the general manager, suggests that Kim should prepare a brief report explaining why overall profits would drop and suggest two strategies that DigitalHall could pursue to prevent a drop in overall profits. You are interning at DigitalHall, and Kim asks for your help in preparing this report.

Required:

Prepare a brief report for Kim that she could present to Patricia.

Start typing here

(15 + 6 = 21 marks)

Answer 1

Answer a)

Answer b)

I believe it is surprising to know how many business owners don’t know the difference between profit and revenue. They believe that just because money is coming into their business, they are actually making it. Money coming into your business is not yours until expenses have been paid. Once these expenses are paid, the remaining is the profit. Many businesses break even or are in debt after their expenses are accounted for. There are business owners who do not even know this is occurring, they just pay out money and go about their business.

Knowing the ways to improve profitability of your business is very important to succeed. You have probably heard about businesses who have a huge customer base, but they have to shut down due to financial reasons. This is because they do not have a strategic plan that outlines how their business will achieve profitability. Then when their business is unable to handle their basic business operations or expand their operations, they are surprised as to why they have financial issues.

Leaders in your industry provide you with a blueprint of how your business needs to operate. Take their strategies and turn them into your own so that you can build your business to be among the industry leaders. Once you know how to make more money, then you will put your business in the position to be successful.

Try these steps:

1. Reduce your expenses.

• Is there anything you can cut from your spending?
• Can you reduce the amount of drawings you’re taking from the business?
• Try to negotiate better deals from your suppliers.
• Sell assets you’re no longer using.

2. Increase your sales.

• Can you charge more for your product or service?
• How can you sell more of your product or service?
• Can you get more customers?

3. Get advice — an advisor may be able to help you turn it around.

Advice from an accountant or business advisor can help you get your business back on track and avoid trouble ahead.

Suggestion :

I would suggest that even if there is loss in the Print Division the Contribution is in positive figure so care should be taken in reducing the fixed costs in using less space for printing division and bifurcate that with the division making higher profit so that it should not result in overall profitability of the company.