Level 4 Professional Accounting Technician End Point ... · Benton only sells its own branded footwear ; it does not sell any other brand of footwear. All of its sales are directly

Level 4 Professional Accounting Technician End Point Assessment

2019/20 Role Simulation – pre-seen material

Contents Page Introduction 2 Your role 3 Webpage: welcome to Benton 4 Organisation charts 5 The directors 7 Webpage: overview of production process 9 Benton’s sales and customers 11 Benton’s production operation 12 Benton’s distribution centres 13 The Finance Department 14 Financial statements for the year ended 31 December 2018 15 Budget information for the year ending 31 December 2019 18 Information on the industry 21

CIMA Level 4 Professional Accounting Technician End Point Assessment Role Simulation 2019/20 – pre-seen material

©CIMA 2019. No reproduction without prior consent. 2

Introduction

Benton manufactures and retails footwear for adults and children. The company is based in Beeland, a country in Europe, which has the B$ as its currency.

The company sells a range of women’s, men’s, girls’ and boys’ Benton-branded footwear in its own retail outlets, which are located throughout Beeland. Each range is further sub-divided into shoe, boot and sandal product groups. Benton currently manufactures all its shoes at its own site in Beeland; all boots and sandals are bought in from external manufacturers (some of which are located in different countries). The latest financial statements show revenue of B$261 million.

Benton does not manufacture footwear for any other business, nor does it sell any other brand of footwear in its retail stores. It operates 200 retail stores, which are located in all the major cities and towns of Beeland. It also has a well-established and reliable website, where customers can buy Benton footwear online. Approximately 20% of all sales are completed online and the rest are at the retail stores.

Benton owns one large site in the centre of Beeland, which includes its head office building, its large production facility and two distribution centres. It also owns a further three distribution centres in different parts of the country. 20 of the retail stores are owned by the business and the remaining 180 are rented. Benton has over 1,850 employees across the business.

Benton was initially founded in 1890 by two shoemakers: Thomas Benshaw and Gregor Gerton. The company started with a small production facility and just one retail store. Initially only men’s footwear was made and sold. In 1950, the company started to manufacture and sell women’s footwear and a range of children’s footwear was added in 1980. In the early days, production was completed mostly by hand, but in the last 50 years production has become highly automated. Until 1985, Benton manufactured all of its footwear ranges at its own production facility. Around that time there was a considerable upsurge in demand for the Benton brand and as a result the company decided to outsource some of its production to other footwear manufacturers.

Benton uses good quality leather and other raw materials and has an industry-respected training scheme for its manufacturing employees. It also has stringent supply agreements in place with outsource partners to ensure quality. Benton has a team of designers who constantly look at the latest fashion trends to bring a contemporary feel to the designs that they create, although Benton’s focus is not on designer fashion. Its customers perceive Benton as affordable quality for everyday footwear.



Your role

You are a Finance Assistant on an apprenticeship scheme, and you work in the Finance Department. As part of your apprenticeship, and to give you a broad range of experience, you work alongside different members of the Finance Department on a variety of tasks.



Webpage: welcome to Benton

Here at Benton, we offer you a full range of shoes, boots and sandals for women, men, girls and boys. Made from high quality materials, all of our footwear is designed with both everyday fashion and comfort in mind. Our retail stores At our retail stores you’ll find friendly staff to help you make your selection and ensure that the fit is as good as it can be. We’re on most high streets. Can’t find the style in store? Not a problem, you can order into store, or even have what you want delivered directly to your home.

At all of our retail stores we have a dedicated area for children’s footwear. Digital measuring devices allow our trained fitting staff to accurately measure your child’s foot size. Our fitting service ensures that you will get the most out of your child’s footwear. We ensure there is room to grow without losing any of the support needed.

Our website Unable to get to one of our 200 retail stores? Not a problem, our entire range is available to purchase from our website. We offer a 15-day returns policy, so if the item you purchased doesn’t fit or you don’t like the style, you can simply return it to any store or send it back to us.



Organisation charts

The directors

Finance



Production

Sales and Marketing



The directors

Chief Executive Paula Goss

Paula has been with Benton since 1990 when she started as a retail store manager. In her current role she has overall responsibility for the business and spends much of her time with key investors and stakeholders. Paula is passionate about maintaining Benton’s reputation of affordable quality for everyday footwear and is keen that the retail stores reflect this.

Production Director Tony Voight

Tony has been with Benton since 1996 when he started as a production manager. Tony is responsible for all aspects of production. He is also responsible for maintaining good relationships with Benton’s outsource partners. Tony is focussed on quality and is often abroad visiting the factory sites of the outsource partners or looking for new sources of quality leather. He has also recently overseen the introduction of new laser cutting machinery in the Production Department.

Design Director Jani Wu

Jani has been with Benton for less than a year. She was previously a designer for Faddlers, a company based in Beeland that makes high quality hand-made shoes for the luxury market. Jani is responsible for the final approval on all designs. Jani has a keen interest in fashion and also the environment and is keen to launch a range of shoes which use recycled materials.

Sales and Marketing Director Nia Oslo

Nia joined Benton in 2016 having previously worked as a marketing executive. She is responsible for all aspects of marketing as well as the smooth operation of the retail stores. Nia’s professional expertise lies in marketing, but she is also responsible for the customer experience and is keen that Benton retail stores give the best experience possible.



HR Director Gregor Kiev

Gregor has been with Benton since 2000 and is an expert in Beeland’s employment law. He is responsible for all aspects of human resource management. Gregor is determined that Benton is perceived as a good employer and has recently overseen the introduction of various staff welfare initiatives.

IT Director Sanjay Kahn

Sanjay has only been with Benton since 2018, but has vast experience working with retail systems. He is responsible for all of Benton’s IT systems. Sanjay is keen that IT is used at both the retail stores and in production as much as possible.

Finance Director Ben Ford

Ben has been with Benton since 2015 and this is his first finance director role, although he has experience as a chief finance manager for a supermarket chain. He is responsible for all aspects of finance. Ben is keen on developing finance talent and has recently introduced a finance apprenticeship programme.



Webpage: overview of production process

How our footwear is made

Design

Pattern

Last

Cutting

Stitching

Lasting

Finishing



Design: Each piece of footwear that we sell starts as a conceptual drawing in our Design Department. Our small but talented team of designers are always looking ahead at fashion trends and translate these into new designs which fit the Benton brand of affordable everyday footwear. After approval by the Design Director, the conceptual drawing is converted into a 3D technical drawing using computer software.

Pattern: Each shoe that we produce is made from a number of segments of leather or suede and lining material that are stitched together to form what we call the upper. Therefore, the first step after the design has been approved is to create a pattern which identifies these different segments.

Last: Before production can start lasts need to be created. A last is simply a model of the foot shape for a particular shoe design and each design has its own pair of lasts for each size that we manufacture. All of our lasts are now made from hard plastic but used to be made from wood.

Cutting: We use two methods to cut out the segments of materials which are used to make the shoe’s upper. Some segments are still cut out by hand, the old-fashioned way, using cutting dies, others are cut out using modern digital laser cutting machines.

Stitching: Each segment of the upper (leather or suede outer shell and the inner lining) are stitched together by one of our skilled craftspeople using modern sewing machines. Once complete these are sent for lasting.

Lasting: Lasting is the process where the stitched upper is placed onto a last and the shoe starts to take its shape. The appropriate lasts are attached to the lasting machine at the start of a production run and the floppy upper is first stretched on its last. The bottom ends of the upper are folded over onto the base of the last and sealed onto an inner sole. The sole of the shoe is then pressed onto the upper by the machine. After the sole is added the shoe is taken off the last and is ready for finishing.

Finishing: Finishing involves adding insoles, laces and any other fixings, before a final quality check. All finished products are then packed into our distinctive Benton shoe boxes.



Benton’s sales and customers

Benton only sells its own branded footwear; it does not sell any other brand of footwear. All of its sales are directly to the end customer at one of its retail stores or through the company website.

Retail stores

Benton currently has 200 retail stores located throughout the major cities and towns of Beeland. Of these, 75 are large stores that aim to have available the full range of Benton footwear. The other retail stores are smaller and typically carry a smaller range of footwear in inventory. However, at all retail stores customers are able to place an order for a style or size to be sent to the store for them to try on.

Each retail store has a store manager who is responsible for inventory levels held at the store as well as recruiting and training sales staff. In a Benton retail store, staff are trained to assist customers with their choice of footwear, ensuring that the fit is correct as well as processing the sale. All customers are encouraged to try on their choice of footwear prior to purchasing. Within each retail store there is an area dedicated to children’s shoes and each sales person is trained to use the digital foot measuring equipment that is installed in these areas.

Each retail store has an EPOS (electronic point of sale) system, which records all retail store inventory movements and through which all sales are processed. Customers can pay with cash or with a debit or credit card: there are no credit sales. All card payments are made through a card processing machine which automatically interfaces with the bank’s systems. Payments made by card usually appear in the retail store’s bank account the following day.

Online sales

Benton has a website which includes pictures and details of all of its footwear ranges. Customers can place an order on the website and will pay for their products at the point of ordering. Orders placed on the website can be either sent to a store local to the customer, free of a delivery charge, or can be sent to their home address for a small delivery charge.

Refund policy

Benton offers a 15-day full refund on all purchases provided that the footwear still has all the labels attached and has not been worn (other than trying on for fit). A proof of purchase is also required. Items purchased in store can be returned to any store. Items that have been ordered through the website can either be returned to a store or can be sent back to the distribution centre.



Benton’s production operation

The entire range of Benton footwear (shoes, boots and sandals) is designed by Benton designers based at Head Office. Patterns for the entire range are also created at Head Office.

All of the shoe ranges (women, men, girls and boys) are manufactured at Benton’s single production facility. Production of all boots and sandals is carried out by trusted outsource partners.

The production facility

At the production facility, shoes are typically manufactured to be held in inventory rather than for immediate despatch to the retail stores. Production is scheduled in advance of new designs becoming available for sale to ensure that adequate volumes and the appropriate size ranges are available as soon as a new design is launched.

There is a dedicated team of purchasing staff based at the production facility, which is responsible for sourcing all raw materials. The quality leather that is used in many of the shoe designs is sourced from many different suppliers around the world, although, as far as possible, Benton seeks to source most other inputs from within Beeland.

Outsource partners

There are currently four outsource partners which supply Benton with all of its boots and sandals. Each of these partners has signed a supplier agreement with Benton which sets down expectations in terms of the quality of production as well as payment terms (currently all agreements include 45-day credit terms). There is a dedicated manager whose role is to manage the relationships with these outsource partners.



Benton’s distribution centres

Benton has five distribution centres, two of which are located next to the production facility. One of these holds inventory exclusively for online sales and is where the Online Sales Department is based. Another is the receiving centre for all boots and sandals from outsource partners. The other three are located in different parts of the country and are the distribution centres from which the retail stores order their inventory.



The Finance Department

The Finance Department is based at Head Office and is headed by Ben Ford, Finance Director, who oversees finance matters across the whole business. Ben is assisted in this by Annie Thomas, Head of Finance, who also deals with corporate matters affecting finance such as the head office budget, raising and managing finance, property issues and the preparation of the financial statements.

There are two finance managers. Kate Soper is responsible for finance matters affecting the production facility and the distribution centres, including the preparation of budgets, monthly variance reporting and assisting with decision making. Caleb Schmidt is responsible for finance matters affecting the retail stores, including preparation of sales and staffing budgets, monthly variance reporting and assisting retail store managers with decision-making.



Financial statements for the year ended 31 December 2018

Statement of profit or loss for the year ended 31 December

2018 B$000

2017 B$000

Revenue 261,452 250,480 Cost of sales (177,787) (172,831) Gross profit 83,665 77,649 Selling and distribution costs (49,580) (47,840) Administrative expenses (8,790) (8,400) Operating profit 25,295 21,409 Finance costs (731) (720) Profit before tax 24,564 20,689 Income tax expense (7,345) (6,426) Profit for the year 17,219 14,263

Statement of financial position at 31 December

2018 B$000

2018 B$000

2017 B$000

2017 B$000

ASSETS Non-current assets 52,932 47,620 Property, plant and equipment Current assets Inventory 29,830 30,694 Other receivables 2,416 2,560 Cash and cash equivalents 14,479 12,765 46,725 46,019 Total assets 99,657 93,639 EQUITY AND LIABILITIES Share capital (B$1 equity shares) 600 600 Share premium 2,130 2,130 Retained earnings 47,862 42,643 Total equity 50,592 45,373 Non-current liabilities Bank loan 10,400 10,400 Current liabilities Trade and other payables 31,320 31,440 Tax payable 7,345 6,426 38,665 37,866 Total equity and liabilities 99,657 93,639



Statement of cash flows for the year ended 31 December 2018

B$000 B$000 Cash flows from operating activities Profit before tax 24,564 Adjustments Depreciation Finance costs

8,980 731

9,711 Movements in working capital Decrease in inventories 864 Decrease in other receivables 144 Decrease in trade and other payables (120) 888 Cash generated from operations 35,163 Tax paid Finance costs paid

(6,426) (731)

(7,157) Net cash inflow from operating activities 28,006 Cash flows from investing activities Purchase of property, plant and equipment (14,292) Net cash outflow from investing activities (14,292) Cash flows from financing activities Dividend paid (12,000) Net cash outflow from financing activities (12,000) Net increase in cash and cash equivalents 1,714 Cash and cash equivalents at the start of the year 12,765 Cash and cash equivalents at the end of the year 14,479

Statement of changes in equity for the year ended 31 December 2018

Share capital B$000

Share premium

B$000

Retained earnings

B$000

Total

B$000 Balance at 1 January 2018 600 2,130 42,643 45,373 Profit for the year - - 17,219 17,219 Dividend - - (12,000) (12,000) Balance at 31 December 2018 600 2,130 47,862 50,592



Property, plant and equipment note

Property

B$000

Plant and equipment

B$000

Total

B$000 Cost: At 1 January 2018 16,800 47,690 64,490 Addition - 14,292 14,292 Disposals - - - At 31 December 2018 16,800 61,982 78,782 Accumulated depreciation: At 1 January 2018 7,550 9,320 16,870 Charge for the year 420 8,560 8,980 Disposals - - - At 31 December 2018 7,970 17,880 25,850 Carrying value: At 31 December 2018 8,830 44,102 52,932 At 1 January 2018 9,250 38,370 47,620

Extract from accounting policies note

The depreciable value of an item of property, plant or equipment is depreciated over its useful economic life. Depreciation is charged in the year of acquisition and in the year of disposal on a pro-rata basis.

Staff numbers note

At 31 December 2018 Number

At 31 December 2017 Number

Production 890 899 Retail stores 780 762 Warehouse 136 130 Head Office 82 80 Total 1,888 1,871



Budget information for the year ending 31 December 2019

Budgeted gross profit

Shoes B$000

Boots B$000

Sandals B$000

Total B$000

Revenue 143,255 103,780 20,650 267,685 Cost of sales (91,622) (72,845) (14,037) (178,504) Gross profit 51,633 30,935 6,613 89,181

Budgeted sales

Shoes Women Men Girls Boys Total Average selling price per pair (B$) 46 47 34 34 Sales volume (in ‘000s) 1,075 965 715 710 3,465 Revenue (B$000) 49,450 45,355 24,310 24,140 143,255

Boots Women Men Girls Boys Total Average selling price per pair (B$) 67 64 42 40 Sales volume (in ‘000s) 930 310 415 105 1,760 Revenue (B$000) 62,310 19,840 17,430 4,200 103,780

Sandals Women Men Girls Boys Total Average selling price per pair (B$) 30 28 18 16 Sales volume (in ‘000s) 290 130 435 30 885 Revenue (B$000) 8,700 3,640 7,830 480 20,650



Manufactured footwear: average budgeted contribution and gross profit per pair

Shoes Women B$

Men B$

Girls B$

Boys B$

Average selling price 46.00 47.00 34.00 34.00 Direct material cost (14.52) (15.70) (8.65) (9.00) Direct labour cost (7.75) (8.06) (5.91) (5.91) Variable production overhead (1.02) (1.06) (0.80) (0.80) Contribution 22.71 22.18 18.64 18.29 Fixed production overhead (6.43) (6.68) (5.01) (5.01) Gross profit 16.28 15.50 13.63 13.28 Contribution / sales ratio 49.4% 47.2% 54.8% 53.8% Gross profit margin 35.4% 33.0% 40.1% 39.1%

Bought in footwear: budgeted gross profit per pair

Boots Women B$

Men B$

Girls B$

Boys B$

Average selling price 67.00 64.00 42.00 40.00 Average cost of buying in (47.00) (44.00) (30.00) (29.00) Gross profit 20.00 20.00 12.00 11.00 Gross profit margin 29.9% 31.3% 28.6% 27.5%

Sandals Women B$

Men B$

Girls B$

Boys B$

Average selling price 30.00 28.00 18.00 16.00 Average cost of buying in (20.00) (19.00) (12.50) (11.00) Gross profit 10.00 9.00 5.50 5.00 Gross profit margin 33.3% 32.1% 30.6% 31.3%



Example standard cost card

Women: Model GG1432 Size 40 per pair

Quantity Standard

price / rate B$

Standard

cost B$

Standard

cost B$

Materials: Leather for upper 0.42 square metres 21.50 9.03 Lining for upper 0.42 square metres 6.50 2.73 Sole and heel 2.10 Insole 0.62 Fixings 0.30 Packaging 0.82 Total 15.60 Direct labour: Cutting 0.05 hours 14 0.70 Stitching 0.40 hours 17 6.80 Lasting and sole 0.06 hours 11 0.66 Finishing 0.05 hours 11 0.55 Total 0.56 hours 8.71 Variable production overhead 0.56 hours 2.04 1.14 Fixed production overhead 0.56 hours 12.85 7.20 Total production cost 32.65

Note

Variable and fixed production overheads are absorbed on the basis of direct labour hours using factory-wide blanket rates.



Information on the industry

The footwear retail market in Beeland

The Beeland footwear market was estimated to have generated total sales of just over B$6 billion in 2018, with approximately 42% relating to women’s footwear, 30% to children and 28% to men’s footwear. Between 2008 and 2018, the Beeland retail footwear market has grown by a compound rate of 2.8% a year, driven by changing fashion trends.

There are four main ways in which footwear is sold in Beeland:

• Specialist footwear chains which have multiple retail store operations (such as Benton) • Clothing store chains which include a footwear range • General merchandisers such as department stores and supermarkets • Online-only retailers

The following charts show the percentage of total footwear sales revenue in Beeland in 2018 and 2008 for each of these.

38%

24%

26%

12%

Percentage of total footwear sales revenue in Beeland in 2018

Specialist footwear chains (38%)

Clothing store chains (24%)

General merchandisers (26%)

Online-only retailers (12%)

48%

26%

20%6%

Percentage of total footwear sales revenue in Beeland in 2008

Specialist footwear chains (48%)

Clothing store chains (26%)

General merchandisers (20%)

Online-only retailers (6%)



Benton is the largest of three specialist footwear chains that sell a full range of women’s, men’s and children’s footwear for everyday wear. Other specialist footwear chains exist, but these specialise in different types of footwear.

Footwear manufacturing in Beeland

In 1980, over 60% of the footwear sold in Beeland was manufactured there. From 1980 until 2010, there was a gradual but significant decline in the footwear manufacturing base in the country, as production was transferred to other parts of the world to benefit from cheaper labour. By 2010, only 15% of footwear sold in Beeland was manufactured there.

From 2010 there has been a resurgence in demand for products that can claim to be ‘Made in Beeland’. As a result, in 2018 20% of the footwear sold in Beeland was manufactured in Beeland. In addition, there is a small export market for high-quality footwear manufactured in Beeland.

Future outlook

In Beeland, like many countries in the world, there is an increasing consumer interest in the environment and in reducing waste. This poses a threat to the footwear industry, as increasingly consumers are more interested in making things last and recycling rather than buying new. This also poses an opportunity as consumers look for footwear which is made from sustainable sources.

Documents

Level 4 Professional Accounting Technician End Point ... · Benton only sells its own branded footwear ; it does not sell any other brand of footwear. All of its sales are directly