Operational case study exam – February 2016
Pre-seen materials – Students’ copy

February 2016 Operational case study examination
Pre-seen materials

First Class Bakery
Contents
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Introduction
Products
Production
Customers
Distribution/suppliers/recycling
Employees
Financial statements
Information and costing systems
The industry
News articles

©CIMA 2015. No reproduction without prior consent

Page
2
3
7
10
12
13
15
19
20
21

Page 1

Operational case study exam – February 2016
Pre-seen materials – Students’ copy

Introduction
First Class Bakery manufactures cakes and desserts which are packaged and sold directly to food retailers. All production is carried out on a single site in the west of Beeland, a country that has B$ as its currency.
Most of the cakes manufactured are for large food retailers who sell the cakes as their own brand. First Class Bakery packages the cakes using the brand required by each retailer.
Some cakes and desserts are sold to small independent food retailers under First Class
Bakery’s own brand. All sales are made in Beeland, in B$.
First Class Bakery was established over 30 years ago by three brothers: John, James, and
Frank Mitchell. The three brothers owned and ran the business until recently when 80% of its equity shares were sold to Universal Foods, a large group quoted on Beeland’s stock market. The two older brothers John and James retired from the business altogether. Frank
Mitchell, who is 62, has remained with the business with a 20% equity stake and is now the
Managing Director. Frank has until now always worked in the production side of the business. Since the acquisition, Universal Foods has brought in a number of key directors and managers from other parts of the group to work exclusively in First Class Bakery. This includes Rajiv Patel, the new Finance Director and Fred Knight, the new Sales and
Marketing Director.
First Class Bakery is situated on the outskirts of a major town. There are two sites: a production site and a garage site. The garage site houses First Class Bakery’s distribution fleet. The production site is large, with the main production in a single large building but with several separate buildings for stores and offices.

©CIMA 2015. No reproduction without prior consent

Page 2

Operational case study exam – February 2016
Pre-seen materials – Students’ copy

Products
First Class Bakery manufactures a range of cakes and desserts at its production site. This range is split into three product lines: slab cakes, special occasion cakes and desserts.
Slab cakes:

Slab cakes are cakes which have no frosting or decoration. They are made in the following flavours: lemon, banana, ginger, vanilla, cherry, walnut, chocolate and coffee.
The ingredients for slab cakes are mixed one flavour at a time and are baked in long deep tins. Once cooled and removed from the tins the cake is cut to size and then packaged in a clear wrapping with the appropriate food retailer or First Class Bakery label affixed.
Slab cakes are sold predominately to large food retailers under that retailer’s own brand, although some are sold to small independent retailers under a First Class Bakery brand.
Slab cakes account for approximately 60% of First Class Bakery’s revenue.

©CIMA 2015. No reproduction without prior consent

Page 3

Operational case study exam – February 2016
Pre-seen materials – Students’ copy
Special occasion cakes:

Special occasion cakes have frosting and decoration. The base cake is vanilla or chocolate flavoured, which is mixed and then baked in individual shallow foil tins. Once cool, special occasion cakes are topped with a frosting and embellished with decorations. A variety of frosting colours and decorations are used depending upon customer requirements, although most special occasion cakes are topped with sprinkles and small sweets. Seasonally appropriate decorations are also used depending on the customers’ requirements.
All special occasion cakes are sold under the food retailer’s own label, and these account for approximately 35% of First Class Bakery’s revenue.

©CIMA 2015. No reproduction without prior consent

Page 4

Operational case study exam – February 2016
Pre-seen materials – Students’ copy
Desserts:

The desserts made by First Class Bakery are cake based. This is a relatively new product line and has its own designated small production line within the production facility. Currently three flavours of dessert are made: chocolate, toffee and treacle.
The dessert is sold in a plastic pot. Each pot includes a layer of sauce below the cake. The desserts are designed so that the person eating it can warm it up and then turn the pot upside down.
Desserts currently account for approximately 5% of First Class Bakery’s revenue and are all sold with a First Class Bakery label to small independent food retailers.

©CIMA 2015. No reproduction without prior consent

Page 5

Operational case study exam – February 2016
Pre-seen materials – Students’ copy

Shelf-life
First Class Bakery products have a shelf life of between eight and 12 weeks, depending on the fruit and sugar content. The packaging that First Class Bakery uses ensures that freshness is maintained, so that the quality of the product is maintained.

Product development
Other than dealing with customer specification changes in terms of flavours and decoration, there has been little product development at First Class Bakery in respect of slab and special occasion cakes for a number of years.
The focus over the past three years has been on the design and launch of the desserts range. As yet the desserts range has not secured a major customer.
Universal Foods recently brought in a new Product Development Manager, Tony Swift, who now works exclusively within First Class Bakery. His role is to:




focus on expanding the desserts range introduce a range of products which cater for the latest consumer preferences for healthier cakes, using unrefined sugars and organic ingredients develop a new range of Gluten Free cakes.

©CIMA 2015. No reproduction without prior consent

Page 6

Operational case study exam – February 2016
Pre-seen materials – Students’ copy

Production
Production can be broken down into 3 main processes for all product ranges:
1. Ingredient preparation
2. Mixing and baking
3. Finishing
Slab cake and special occasion cakes are manufactured on the main production line, whilst desserts are manufactured on a small self-contained line.

Slab cakes and special occasion cakes
Ingredient preparation:
Production is carried out on a batch basis. Each flavour of slab cake and special occasion cake is mixed in a batch which will make 500 units of finished product. Each type of product uses the same basic recipe for the cake mixture, which includes butter, sugar, flour and eggs. However different flavours are used and nuts and/or fruits may be added.
At the ingredient preparation stage, the dry ingredients (flour and sugar) are measured out and placed in 12.5kg bags. A batch of cake mixture requires 62.5kg of both flour and sugar and hence 5 bags of each are placed in a wheeled bin ready for mixing. Each wheeled bin will ultimately include the ingredients for one batch of cakes.
Butter and eggs are stored in a large refrigerated unit. Butter is purchased in 5kg blocks.
Each batch requires 62.5kg of butter and hence 12.5 blocks are used for each batch of cakes. Within the refrigerated unit, butter is stored in piles of 12.5 blocks so that it is easy to complete the ingredients for each batch. Eggs are also stored within the unit in trays of 25
(which is how they are received from the supplier). Four trays of eggs (that is 100 eggs) are needed for each batch.
The blocks of butter and trays of eggs are placed in the wheeled bins shortly before mixing.
Most of the employees in the ingredient preparation area are unskilled.
Mixing and Baking:
Mixing is carried out in large industrial mixers. The butter and sugar are initially mixed together until light and fluffy and then the flour and eggs are gradually added and beaten into the mixture. Flavourings and any fruit and nuts are added at the end of the mixing process.
The mixers are manually controlled by employees who are skilled at knowing just when to start adding the flour and eggs and when to add the flavourings. When employees are satisfied with the mixture consistency it is poured into a vat.
If the batch is for slab cakes the mixture is poured from the vat into long deep tins, which will have been placed by hand onto a conveyor belt. The pouring process itself is automated.
When full, the tins move on the conveyor belt to the ovens.

©CIMA 2015. No reproduction without prior consent

Page 7

Operational case study exam – February 2016
Pre-seen materials – Students’ copy
If the batch is for special occasion cakes, 10 individual foil trays are placed by hand on a baking tray side by side by hand. These baking trays are then placed on a conveyor belt and pass through the pouring process to the ovens.
All cakes are baked in one of three industrial ovens, with the large slab cake tins and baking trays of special occasion cakes placed in and out of the oven by hand. Each industrial oven is capable of baking five trays of special occasion cakes (based on five shelves in the oven) or 12 tins of slab cake (based on four shelves in the oven). One type of cake is baked at a time in each oven.
The ovens are computer controlled with a set baking time programmed for the type of cake, although the experienced and skilled employees do have a manual override facility if they feel that a batch needs slightly longer. After baking, the tins or trays of cake are left to cool in large stacking trolleys.
Finishing:
When cooled, the stacking trolleys are moved by hand to separate sections on the main line; one section for slab cakes and one section for special occasion cakes.
Slab cakes are taken out of the tin by hand and then placed on a conveyor belt. The rest of the process is mostly automated: the long cake is cut into the appropriate number of individual cakes by machine and wrapped in a clear cellophane wrapper. The appropriate labels will have been placed into the machine according to the batch and are also attached.
At the end of the line, the cakes are packaged into boxes by hand.
Special occasion cakes (in their foil tins) are placed by hand onto a conveyor belt individually. The line is semi-automated. Firstly, each cake will have frosting piped onto the top of the cake by machine. Frosting is made in chocolate and vanilla flavours by a small team of bakers who continually fill the vats within the machine. A significant amount of time is therefore taken up setting up machinery to ensure that the correct frosting is used.
Then the cakes are decorated with the appropriate decorations according to the customer’s requirements. This is done by hand because customer requirements are constantly changing and experience has shown that manual decoration is more efficient. It also ensures that the end product can be sold as hand finished. This work is typically undertaken by semi-skilled employees but only after they have proved their ability to do the task.
Because of the nature of special occasion cakes, a greater number of inspections are carried out compared to slab cakes; typically three times as many special occasion cakes are inspected than slab cakes.
After decoration, each special occasion cake is placed by hand into the appropriate customer box. These individually boxed cakes are then placed into large boxes ready for distribution to the customer.
Boxes of finished product are taken by forklift to the despatch warehouse.

©CIMA 2015. No reproduction without prior consent

Page 8

Operational case study exam – February 2016
Pre-seen materials – Students’ copy

Desserts:
The production process for desserts is similar to cakes, although it is carried out on its own line. The desserts production line is only two years old and is mostly automated.
Ingredient preparation:
The ingredients for desserts are stored in their own storage area. The procedures for measuring ingredients for a batch are the same as for cakes.
Mixing and baking and finishing:
The mixing of the cake mixture is carried out in the same way as cakes. The sauce that is included in the desserts is made in large industrial pans because it involves the heating of butter and sugar as appropriate to create the sauce. Cake and sauce mixtures are poured into the appropriate vats at the start of the production line.
The rest of the process is automated with a facility for the production employees to halt the production line, if for example they believe that the desserts need to be baked for longer or if there is a problem with the operation of the line. Each flavour of dessert requires a slightly different programme on the production line and hence there is a period of set up time required to ensure that the correct programme is selected. Typically, because the vats also need to be cleaned out for each change of flavour, only one flavour a day is produced and hence the set up occurs at the start of the day.
The production line starts with sauce and then cake mixture being poured into the individual dessert pots which then pass along the production line straight into ovens. The desserts are baked for a set time and once baked are passed through a cooling phase before being packaged. All of this is automated.
As with the slab cakes and special occasion cakes, a mix of unskilled, semi-skilled and skilled employees is used in the manufacture of desserts. The skilled employees are used in the mixing process for both the cake and sauces and to supervise the production line. The cleaning of vats and ensuring that the production line is stocked with empty desserts pots and the appropriate packaging for the flavour is carried out by semi-skilled and unskilled employees. ©CIMA 2015. No reproduction without prior consent

Page 9

Operational case study exam – February 2016
Pre-seen materials – Students’ copy

First Class bakery customers
Slab cakes:
Approximately 85% of slab cakes manufactured are sold to three national food retailers under the retailer’s own label. Each of these major retailers purchases different flavours, although the lemon and coffee slab cakes are common to all three.
The other 15% of slab cakes manufactured are sold with a First Class Bakery label to small independent food retailers. At any one time there are approximately 30 small independent retailers, although this does fluctuate, as customers come and go.
Special occasion cakes:
All of the special occasion cakes manufactured are sold to three national food retailers under the retailer’s own label. Two of these three retailers also purchase slab cakes from First
Class Bakery, although one does not. Therefore across slab cakes and special occasion cakes there are four national food retail customers.
Each retailer has its own specifications for special occasion cakes in terms of frosting colours and decorations. These specifications regularly change due to the time of year.
Desserts:
All of the desserts manufactured are sold as First Class Bakery branded products. Currently these desserts are only sold to small independent retailers, although one of the large national retailer customers did order a trial amount a number of months ago. This large retailer has not yet placed a larger order.
Customer relationships:
First Class Bakery has close relationships with its large food retailer customers through personal contact, but due to resource constraints has not been able to develop such links with smaller retailers. As a result, sales to smaller retailers have achieved very little growth.
The competitors of First Class Bakery all use up to date information systems to assist in the management of customer relations and other areas of business.
Credit terms:
First Class Bakery offers 30 day credit terms to all its customers. Two of the national retailers pay promptly, although the other two national retailers often delay payment for the smallest discrepancy in paper-work. The small independent customers often pay late.
Customer perception:
First Class Bakery is regarded by its national and independent food retail customers as a manufacturer of high quality cakes and desserts. Whilst occasionally cakes and desserts have had to be returned as a result of damage in transit, a customer has never returned any products as a result of poor manufacturing quality.
In a recent customer survey to all customers, First Class Bakery scored highly in respect of quality of product and value for money, although was marked down in respect of promptness
©CIMA 2015. No reproduction without prior consent

Page 10

Operational case study exam – February 2016
Pre-seen materials – Students’ copy of delivery. This survey also showed customers increasing concerns about environmental issues and the notion of responsible sourcing of ingredients.
The First Class Bakery brand currently has a limited presence in the market. The launch of the desserts range two years ago has made a start in terms of building the brand, although
First Class Bakery branded products are still only available in small independent food retailers. Universal Foods has brought in a marketing expert, Fred Knight, in the role of
Sales and Marketing Director to improve this brand perception. Fred Knight now solely works for First Class Bakery.

©CIMA 2015. No reproduction without prior consent

Page 11

Operational case study exam – February 2016
Pre-seen materials – Students’ copy

Distribution:
First Class Bakery has a fleet of ageing delivery vehicles which are used to transport products to customers. These vehicles only just comply with current legislation regarding emissions. When not in use, the fleet is kept at a site five kilometres from the main production site, known as the garage site.
This site includes a fully functioning garage facility which is used to maintain and repair the trucks as and when needed. The garage has on occasion been unable to cope with the demand for vehicle repairs which has caused delays in scheduled deliveries with particular regard to the smaller customers.
The distribution site is in what has recently become a residential area, and is surrounded by new housing developments.
There are a number of qualified mechanics that work at the garage site and there are 15 drivers. Suppliers:
First Class Bakery sources most of its ingredients from single suppliers. To date, the directors of First Class Bakery have believed that single sourcing ensures better quality of both product and service.
Flour is purchased directly from a single flour mill which is located near the First Class
Bakery production site. The directors have always considered that to create the best quality products, flour should be as fresh as possible to ensure that the rising agents in the flour worked to the optimum. Hence they have always been keen that the flour supplier is reasonably close by so that deliveries can be small and often.
Sugar is sourced from a major importer and distributor of sugar and sugar products. This supplier has warehouses and a distribution network all over Beeland.
Butter is purchased from a national dairy products supplier.
Eggs are usually purchased from a nearby supplier. Occasionally an additional supplier is used for eggs, if the local supplier is unable to fulfil the order.
Flavourings and decorations used in the cakes and desserts are sourced from a total of seven different suppliers, some of which are located in other countries. Each of these suppliers supplies a different type of flavouring or decoration.

Recycling and environmental policy:
First Class Bakery seeks as far as possible to recycle packaging for ingredients. Sacks used to transport flour and sugar and egg trays are usually given back to suppliers for further use.
The majority of production waste is sold to local farms as pig feed. A small amount of waste is disposed of at a cost to the business.

©CIMA 2015. No reproduction without prior consent

Page 12

Operational case study exam – February 2016
Pre-seen materials – Students’ copy

Employees:
First Class Bakery has four directors:





Frank Mitchell as Managing Director (MD)
Rajiv Patel as Finance Director (FD)
Nisha Sanders as Production Director (PD)
Fred Knight as Sales and Marketing Director (SMD)

There are also a number of senior managers within the business. The key senior managers are detailed on the next page.
Total employee numbers:
Number
325
23
30
378

Production
Administration
Distribution
Total

Production employee numbers:
Departments
Ingredient preparation Production operatives
Supervisors
Management
R&D kitchen
Total

Mixing and baking 30
2

120
10

32

Warehouse Total and general factory support
130
0
280
10
10
32
10
10
3
3
140
23
325

Finishing

130

Administration employees:
Number
Directors (MD, FD and SMD)
Finance *
Sales and marketing
Purchasing administration support
Production scheduling and stores administration support
Human Resources and payroll
Information technology support
Total

3
4
6
2
3
3
2
23

*Finance includes the Finance Manager, Tim Walker, who is a qualified accountant, a Senior
Accountant and two Junior Accountants. You are one of the Junior Accountants. None of the finance employees are qualified in credit control.
©CIMA 2015. No reproduction without prior consent

Page 13

Operational case study exam – February 2016
Pre-seen materials – Students’ copy
KEY PEOPLE
The key members of management and the chain of command are shown in the following organisational chart.

©CIMA 2015. No reproduction without prior consent

Page 14

Operational case study exam – February 2016
Pre-seen materials – Students’ copy

Financial statements for the year ended 31 December 2015
First Class Bakery
Statement of profit or loss for the year ended 31 December:

2015
B$000
56,125

2014
B$000
58,243

(39,849)

(40,188)

Gross profit

16,276

18,055

Distribution costs

(2,578)

(2,160)

(11,964)

(11,358)

Finance costs

(191)

(183)

Profit before tax

1,543

4,354

Tax

(465)

(1,304)

Profit for the year

1,078

3,050

Revenue
Cost of sales

Administrative expenses

©CIMA 2015. No reproduction without prior consent

Page 15

Operational case study exam – February 2016
Pre-seen materials – Students’ copy
First Class Bakery
Statement of Financial Position at 31 December:
2015
B$000
ASSETS
Non-current assets
Property, plant and equipment Current assets
Inventories
Trade and other receivables
Cash and cash equivalents

2015
B$000

2014
B$000

5,463

1,814
5,620
-

2014
B$000

6,146

1,672
5,146
870
7,434
12,897

Non-current liabilities
Bank loan
Current liabilities
Bank overdraft
Trade and other payables
Tax payable

1
5,356
5,357

1,800

EQUITY AND LIABILITIES
Ordinary share capital issued
Retained earnings
Total equity

13,834

1
5,934
5,935

Total Assets

7,688

2,500

385
4,312
465

4,673
1,304
5,162

Total equity and liabilities

©CIMA 2015. No reproduction without prior consent

5,977

12,897

13,834

Page 16

Operational case study exam – February 2016
Pre-seen materials – Students’ copy
First Class Bakery
Statement of Cash Flows for the year ended 31 December 2015
B$000
Cash flows from operating activities
Profit before tax
Adjustments
Depreciation
Finance costs

B$000

1,543

1,083
191
1,274

Movements in working capital
Increase in inventories
Increase in trade and other receivables
Decrease in trade payables

(142)
(474)
(361)
(977)
1,840

Cash generated from operations
Tax paid
Finance costs paid

(1,304)
(191)
(1,495)
345

Net cash from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Net cash from investing activities
Cash flows from financing activities
Dividend paid
Loan repayment

(400)
(400)

(500)
(700)

Net cash from financing activities

(1,200)

Net decrease in cash and cash equivalents

(1,255)

Cash and cash equivalents at the beginning of the year

870

Cash and cash equivalents at the end of the year

(385)

©CIMA 2015. No reproduction without prior consent

Page 17

Operational case study exam – February 2016
Pre-seen materials – Students’ copy
BUDGET INFORMATION
Summary budget information for the year ended 31 December 2016
Average selling price and gross margin for each product line:

Slab cake
B$
Average selling price per unit
Average gross profit per unit

Special
Occasion
B$

Desserts
B$

1.17

3.35

1.50

0.34

0.96

0.57

Budgeted sales volume:

Budgeted sales volume in units

Special
Occasion
5,800,000

Slab cake
28,500,000

Desserts
2,090,000

Budgeted gross profit (based on average selling prices and gross margins):

Total budgeted sales
Total budgeted cost of sales
Gross profit

Slab cake
B$’000
33,345

Special
Occasion
B$’000
19,430

Desserts
B$’000
3,135

Total
B$’000
55,910

(23,655)

(13,862)

(1,944)

(39,461)

9,690

5,568

1,191

16,449

©CIMA 2015. No reproduction without prior consent

Page 18

Operational case study exam – February 2016
Pre-seen materials – Students’ copy

Information Systems:
The current management information system within First Class Bakery is outdated and only provides basic day-to-day information for management. The system is unable to provide information to meet the increasing needs of management such as the provision of information relating to environmental and quality related costs.

Costing System:
First Class Bakery uses a traditional absorption costing system. The treatment of production overheads is as follows:






Production overheads are first allocated across five departments; three production and two service. The three production departments are ingredients preparation, mixing/baking and finishing. The two service departments are stores and general factory support. Allocation bases include the carrying value of machinery, employee numbers and area of factory space utilised.
The production overhead allocated to the service departments is reallocated to the production departments on a pre-determined basis that has remained the same for the last two years.
Each of the three production departments has its own overhead absorption rate which is based on direct labour hours.

Budgeting and standards:
Up until now First Class Bakery has used an incremental approach to budgeting. Each year the finance team has prepared the new budget based on the previous year’s data, updated for known changes in volumes, prices, wages rates and overhead costs. Standards for time and usage of ingredients have not been updated for two years. This is justified by the finance team on the grounds that the production process and the recipes used have not changed in that period. Each month a variance report is produced by the finance team which has typically been distributed to all key managers and then discussed in management meetings. ©CIMA 2015. No reproduction without prior consent

Page 19

Operational case study exam – February 2016
Pre-seen materials – Students’ copy

The Industry
The market
Beeland is a developed economy with a population of 35 million. Demand for pre-packaged cakes and desserts saw significant growth from the early 1970’s through until 1995. This growth in pre-packaged cakes and desserts coincided with the growth in supermarkets and consumers’ demand for convenience foods.
Since 1995, as the population became more health conscious, there has been a small but steady decline in demand. Indeed, in the past few years, with the increasing popularity of home baking, this decline in demand has speeded up.
In 2014 the retail value of pre-packaged cakes and desserts sold In Beeland was B$1,680 million compared to an equivalent value (based on 2014 prices) of B$2,016 million in 1994.
In 2015 this retail value has fallen further to B$1,650 million.
The market for pre-packaged cakes and desserts has two elements to it: branded products and food retailer own-label products. Branded products account for approximately 65% of all sales and food retailer own-label for 35%.
The branded market is dominated by three brands, which collectively account for 80% of the branded market. The other 20% of this market is made up of over 100 separate brands.
The manufacturers
There are 150 facilities manufacturing pre-packaged cakes and desserts in Beeland. Over half of these are owned by large corporations, either directly or as a subsidiary. The rest operate as independent companies, many of them family run.
Five years ago there were 175 such facilities and ten years ago there were 250.
There are three large corporations which dominate much of the packaged food production in
Beeland. These are Universal Foods, Southern Foods and Hallett Foods. Each of these corporations operate as a large group with a number of subsidiaries which manufacture a range of pre-packaged foods either as a branded product or a food retailer own-label product. Universal Foods is the largest of these groups and manufactures 20% of all pre-packaged food in Beeland. Universal Foods owns a number of well-known brands.

©CIMA 2015. No reproduction without prior consent

Page 20

Operational case study exam – February 2016
Pre-seen materials – Students’ copy

Daily News
16 December 2015 | No. 7823

| B$1.00

The rise of
Gluten Free
Ahmed Shah Lifestyle Correspondent
It used to be the case not that long ago, that the mere mention of the words “gluten free”, would conjure up an image of dry and uninspiring bread and pasta substitutes. To be diagnosed as gluten intolerant meant a life time of uninteresting alternatives and little in the way of sweet treats.
Not anymore!
The past five years has seen a relative explosion in the numbers of people in Beeland being diagnosed as gluten intolerant, with a reported
600 new people a month joining the GFSB
(Gluten Free Society of Beeland). Indeed the chairperson of the society Claire Higgins, said that eating a gluten free diet is no longer just about having to. Many people are now choosing to do so for health and lifestyle reasons.

The bread industry was the first to really grasp the issue and it is now common place to find specialist gluten free bread on our supermarket shelves.
The cake and bakery manufacturers are finally starting to catch up. Just last week Mr Smarty cakes launched two new gluten free cakes, which not only look great, but taste great as well. We’re told that an expansion of the range will come in the next six months.

This growth in demand for gluten free products Being gluten intolerant myself – I can finally say such as bread, pasta and bakery items has pushed that I can have my cake and eat it! manufacturers to look at ways to make gluten free versions of their products.

©CIMA 2015. No reproduction without prior consent

Page 21

Operational case study exam – February 2016
Pre-seen materials – Students’ copy

Environmental
Business Weekly
[16 May 2015] |

| B$2.50

Pollution from food processing plants and environmental protection
Mark Lewis, Business Correspondent

The food industry is now facing increasing pressure to ensure that its activities are environmentally sensitive, but there is also increased internal pressure to maintain or increase profitability in the face of fierce competition. The food-processing industry has special concerns about the health and safety of the consumer.
Key resources used by the food processing industry include water, raw materials and energy. Traditionally water is used as an ingredient, an initial and intermediate cleaning source, an efficient transportation conveyor of raw materials and the principal agent used in sanitising plant, machinery and plant areas.

A spokesman for the Foods R Us Manufacturing
Group told me that procedures are now in place which should ensure that such failures will not occur in the future. The Environaware pressure group has also raised concerns about heavy-duty trucks being a source of environmental pollution and are now lobbying the government to pass legislation that would impose stricter controls over vehicle emissions.

The Environaware pressure group has recently voiced its concerns regarding the If the government passes legislation then this will have need to take all possible steps to ensure the a widespread cost implications for a large number of health and safety of consumers. businesses within Beeland.
A number of organisations have incurred fines for non-compliance with legislation aimed at ensuring the health and safety of consumers. At Arminster crown court the Foods R Us
Manufacturing Group was recently fined
B$250,000 for failing to comply with legislation concerning
Advanced
Wastewater Practices. It is known that they immediately lost contracts with two of their major customers when this became public knowledge. ©CIMA 2015. No reproduction without prior consent

Page 22

Operational case study exam – February 2016
Pre-seen materials – Students’ copy

Tax regime in Beeland:
Corporate Profits:








The corporate tax to be applied to taxable profits is 30%.
Unless otherwise stated below accounting rules on recognition and measurement are follows for tax purposes.
The following expenses are not allowable for tax purposes: o accounting depreciation; o amortisation; o entertaining expenditure; o donations to political parties; and o taxes paid to other public bodies.
Tax depreciation allowances are available on items of plant and machinery (including vehicles used for business purposes) at a rate of 25% per year on a reducing balance basis.
Tax losses can be carried forward to offset against future taxable profits from the same business.

©CIMA 2015. No reproduction without prior consent

Page 23