Emerald-Vbe

User Manual

Part 3 THE MANAGEMENT REPORT

The Management Report

Your company

The first part of this report only deals with information about your company.

It describes each entry in the report and defines, wherever possible, the arithmetic derivation of each number. It consists of:

the decisions made by your company, last quarter
the availability and utilisation of your physical resources and personnel
product statistics
a set of financial accounts

(The final part of the report gives information about all the companies in your group, plus information about the economy in which you operate. If you wish to refer to an example of a Management Report, then right click this sample report in order to open it in a new window.)

The following description of the report assumes that you have just received it. Therefore, in this manual, its contents are always referred to as last quarter's data.

On receipt of the Report, check that -

the copy you have received is for you,
it has your group and company number on it,
it has your team leader's name and
it is for the correct quarter.

If not, please contact the simulation Controller immediately.

Decisions made

The first section of the Report reprints the decisions made for your company last quarter. Normally they will be the same as your own figures, but there are three ways in which they can differ. Symbols mark such changed decisions -

+ indicates: not entered (or illegible).
# indicates: not valid (i.e. outside the fixed limits allowed).
* indicates: not possible (because of the current state of your company).

If a number is different, and there is no error indicator, you must contact the Controller immediately so that the Decision Form which you sent in can be checked.

If the number has been wrongly entered, then the appropriate action can be taken.

The rest of the Report provides information about the state of your company, your competitors and the economy. It either tells you what happened last quarter, the state of some parameters of your company now, or says something about next quarter. It also gives you information about your competitors and the economic environment.

The remainder of this part of the Manual examines each of the headings of the Report in turn and explains how the corresponding figure is derived.

Availability and use of resources

Machines Available: 'Machines Available Next Quarter' from the quarter before last.
Machines Decommissioned: the number of machines you decided to sell last quarter and were taken out of service at the start of the quarter.
Machines In Use: the number of machines which were available for production last quarter. 'Machines Available', less 'Machines Decommissioned' last quarter.
Machines Installed: the number of machines ordered in the quarter before last, and installed during last quarter, but not available for production until next quarter.
Machines Available Next Quarter: the number of machines available for use (or decommissioning) next quarter. 'Machines In Use' plus 'Machines Installed' last quarter.

Assembly Hours, Available Last Quarter: the number of skilled workers you had available last quarter multiplied by 576 (the maximum number of hours that each can work), less 48 hours per worker for each strike week notified at the end of the quarter before last (see Tables 15, 16 and below).
Absenteeism: the number of skilled man-hours lost through sickness, or employees not turning up for work for other reasons.
Worked Last Quarter: the total number of paid hours worked by assembly workers last quarter. Defined as, the number of products you delivered last quarter, plus rejects, multiplied by the assembly time for each product, as shown in Table 3.
Notice of Strike Weeks Next Quarter: The number of weeks' work that will be lost by each skilled worker next quarter, due to intended industrial action. This is irrevocable and amounts to 48 hours per employee per week (see Table 16).

Machine Hours available Last Quarter: the number of 'Machines in Use' (i.e. available for production) last quarter, multiplied by the maximum number of hours that each could work under the shift system you decided, as shown in Table 5.
Breakdown Time: the total number of hours during which machines were out of production due to breakdown and repair.
Used Last Quarter: the total number of hours of machine time used to produce products last quarter. The number of units of each product which were produced, multiplied by the machining time appropriate to each, extended by the effect of declining machine efficiency.
Maintenance Hours: the total number of hours of preventive maintenance given to your machines, outside normal production time.
Machine Efficiency: the theoretical minimum number of machine hours required to manufacture your products last quarter (see Table 3), divided by the actual time 'Used Last Quarter', expressed as a percentage.

Materials

Used Last Quarter: The total number of units of material used last quarter. The number of each product made last quarter (including those rejected), multiplied by the material content of each (see Table 3).

Human resources employed

Personnel at Start of Quarter: the number of salespeople, assembly workers and machine operators available to you at the beginning of last quarter. This is the number of salespeople and skilled workers that worked for you throughout last quarter. For unskilled workers this is the number that were available to you at the start of last quarter.
Recruited: the number of each type of employee that you successfully recruited last quarter. Salespeople and assembly workers were recruited at the end of last quarter, and hence did not work during that period. Unskilled workers were recruited automatically at the beginning of the quarter, to make up the number required to operate your machines at the shift level decided (4 workers per machine, per shift).
Dismissed: the number of each type of employee that you decided to dismiss last quarter. Salespeople and assembly workers were dismissed at the end of last quarter, having worked for you during that period. Any unskilled machinists were dismissed at the beginning of last quarter, and only as a result of a reduction in the number of machines, or a lowering of shift level. As only half of any surplus machinists can be dismissed in one quarter, it is possible to have more unskilled workers than you need.
Leavers: the number of each type of employee who left because of retirement, or sickness, or to work for rival companies. All of these would have left at the end of last quarter.
Available for Next Quarter: the number of each type of employee who are available at the start of next quarter.
'Personnel at Start of Last Quarter' plus 'Recruited', less 'Dismissed' and 'Left'.
(Note that the number of machinists may change immediately at the beginning of next quarter due to changes in the number of machines and/or level of shift working).

Product data

Scheduled

the total number of each product requested in your delivery schedule last quarter, summed across all areas.

Produced

the number of products which were actually produced in your factory last quarter, including those which were rejected and those made again to replace rejects. This may be less than the number requested if you did not have sufficient production capacity.

Rejected

the number of substandard products rejected by quality control from those produced. They are sold at their scrap value, as shown in Table 6. If resources are sufficient, your operations department automatically makes extra units to replace them.

Serviced under Guarantee

The number of each product serviced by local servicing agents to correct defects, under the company's one year guarantee.

Delivered

the number of each product actually delivered to each marketing area. This may be less than the number requested if you did not have sufficient production capacity.

Orders

the number of orders received for each of your products in each area last quarter. These are new orders and do not include any previous backlog of orders.

Sales

the number of each product sold in each area last quarter. Calculated as the lesser of: new orders plus any backlog from the quarter before last; or, deliveries last quarter plus any product stock carried forward for sale from the quarter before last.

Backlog

the number of unsatisfied orders for each product in each market carried over from last quarter because of poor delivery. Note that these quantities are roughly half of the actual number of dissatisfied orders. The rest have been cancelled. Even if they have not gone directly to your competitors, they are likely to do so if deliveries remain poor. Your backlog of orders may fall still further at the beginning of next quarter if you decide to raise your price in the meantime. (See next paragraph for method of calculation.).

Stocks

the number of each product warehoused in each area and available for sale next quarter. Redundant stocks of any product may be sold at the beginning of next quarter if you decide in the meantime to take up a reported major product improvement for that product. 'Product Stocks' or 'Backlog' for each product in each area, is calculated as:
Product Stocks from the quarter before last, plus Deliveries last quarter, less Backlog from the quarter before last, less Orders received last quarter.

Product Improvements

three words can appear here, for each product, either:

None indicating that no product improvement suggestions have come out of your product development last quarter.
Minor indicating that your product development has made a relatively minor improvement to your product, which has already been incorporated into the product last quarter. No further action is needed.
Major indicating that your product development department has come up with an improvement of major significance which now awaits your decision to be implemented when you are ready to do so.

A product improvement is only listed once, at the time it is reported though it remains available until you decide to take it up. Indeed further major improvements may be notified before an earlier one has been implemented. When you do decide to take up a major improvement, all available improvements are introduced at the same time, .

Accounts

The final part of the Management Report shows your company accounts under the headings Overheads, Profit and Loss, Balance Sheet and Cash Flow (see details below).

Overhead cost analysis

The following items are for costs incurred last quarter.

Advertising: the total cost of advertising all products in all areas, as decided.
Sales Force: the total salaries, commissions and expenses paid to salespeople who worked for you.
Sales Office: Administration costs of 1% of the total value of orders taken in all areas.
Guarantee Servicing: the total cost of repairing products returned, under the company's one year guarantee. The number serviced last quarter multiplied by their respective costs (see Table 7).
Hired Transport: The cost of hired transport to deliver your company's products to each market. The number of vehicle-days needed multiplied by the cost rate of £130 per day. In all cases mixed product loads can be carried (see Tables 9, 10 and 11).
Product Development: the total amount you decided to spend last quarter on product development.
Personnel: the total cost last quarter of trying to recruit, or dismiss, personnel. The number decided in each category multiplied by the relevant cost rate (see Table 14).
Maintenance: the cost of maintaining and repairing the company's machines. The number of machines in use, multiplied by the 12 contracted hours per machine, multiplied by the £40 hourly cost. If breakdowns exceed the contracted hours per machine, then the extra hours are charged at £75 (see Table 4)..
Warehousing and Purchasing: the £2500 cost of operating your own factory storage area, plus purchasing administration costs of £2400, plus £1 for each of the average number of product units warehoused in the sales areas (see Tables 12 and 13).
Business Intelligence: the £4500 cost of purchasing information (Table 2).
Management: the cost of your company's management.
Credit Control: the costs of collecting money from your company's debtors (see Table 19).
Other Costs: Other overheads not yet included. £6000 plus 0.25% of all costs included in Overheads so far, including the fixed cost (see Table 19).
Total Overheads: the total of all overhead items listed above.

Taxable Profit/Loss Accumulated: The amount of accumulated profit (or loss, if negative) up to the end of last quarter. This is calculated as taxable profit/loss from the quarter before last, plus gross profit and interest received; less interest paid, overheads and depreciation from last quarter.

More detail about company tax

If this value is positive when tax is assessed in the fourth quarter of the year, then tax is payable on that value, at the rate of 30% (Table 19). 'Taxable Profit/Loss Accumulated' is then carried forward to the next quarter as zero.

If it is negative when the tax assessment is made (i.e. you have made net losses since tax was last paid), no tax is due and the loss is carried forward to the next quarter.

Note: in the fourth quarter of each year the figure shown is its value immediately before tax is assessed.

Profit and Loss statement

The profit and loss account is set out in two parts. The first part calculates the gross profit, and the second part gives the net profit.

Sales Revenue: total revenue from all trading last quarter. The numbers of each product sold in the market areas multiplied by the appropriate prices; plus the number of each product sold off at their valuation price (see Table 20) after introducing a major product improvement; plus the sale of any product rejects at their scrap value (Table 6).
Opening Stock Value: the total value of product stocks held at the beginning of last quarter. (ie Closing Stock Value for the quarter before last).
Materials Purchased: The numbers of each product made multiplied by the material content and the price of material announced in the quarter before last.
Assembly Wages: the number of skilled hours used last quarter on basic working, plus Saturday overtime working and Sunday overtime working, all multiplied by the basic skilled wage rate, or increments of it, as appropriate. If this total, converted into the average wage per worker, per week, is less than a similar figure for unskilled workers, the unskilled rate of average weekly earnings is used instead, multiplied by the total number of weeks worked.
Machinists Wages: the number of machine hours used last quarter plus breakdown time, at the basic rate, Saturday overtime rate and Sunday overtime rate, for the shift level being worked, multiplied by the appropriate wage rate, all enhanced by the shift premium, and multiplied by four workers per machine. If the number of unskilled workers employed was greater than the number needed to operate your company's machines at the shift level being worked, these surplus workers are paid at the same average rate as those manning the machines. Unskilled workers are paid for a minimum of 400 hours each (see Table 16).
Machine Running: the costs of running your machines last quarter (see Table 8). The number of machines available multiplied by the cost of machine overheads, plus the cost per shift for supervision, plus the number of machine hours used multiplied by the machine rate, plus a charge for each unit of product requested for production planning charges.
Closing Stock Value: the total value of product stocks.
Cost of Sales: the cost of producing the products sold last quarter. The total of Opening Stock Value, Materials Bought, Assembly Wages, Machinists' Wages, Machine Running Costs, less Closing Stock Value.
Gross Profit/Loss: Sales Revenue, less Cost of Sales.

Overheads: Total Overheads (as shown above).
EBIDT: 'Earnings before interest, depreciation and tax' = Gross Profit - Overheads.
Interest Received: interest earned on (surplus cash) deposits during the quarter. The interest calculation assumes an initial re-organisation of cash and borrowings from the balance sheet position at the end of the quarter before last, due to decisions made at the beginning of last quarter.
Interest Paid: interest paid by the company on bank overdraft and unsecured loans (see method of interest calculation)
Depreciation: the total amount by which your machines depreciated last quarter (see Table 17). Calculated as 2.5% of:- the value of machines shown in the balance sheet for the quarter before last, plus the second payment on any machines installed last quarter, less the value of any machines sold last quarter.
Tax Assessed: the amount of tax on profits which your company must pay is assessed at the end of the fourth quarter each year. Tax assessed is immediately deducted from the profit and loss account, and carried forward as a liability in the balance sheet until it is paid in the second quarter of the next year. It is calculated as shown above.
Net Profit/Loss: gross profit, plus interest received; less interest paid, overheads, depreciation and tax assessed.
Dividends: dividends paid, as decided, at the beginning of last quarter.
Retained Profit: Net Profit less Dividends Paid. This is transferred to Reserves.

Balance sheet

This is in three parts -

Assets
Liabilities
a reconciliation of Net Assets with Shareholders' Funds (Net Worth).

Property: the fixed value of the company's land, factory building and other fixtures.
Machines: the current depreciated value of your company's machines.
Fixed Assets: The total value of Property and Machines.
Product Stocks: the value of product stocks held in all sales areas at the end of last quarter. The numbers of each product in stock multiplied by the appropriate valuations (Table 20).
Debtors: the value of money owed to your company by its customers. Debtors in the balance sheet for the quarter before last, plus sales last quarter, less Trading Receipts.
Cash Invested: The balance of your bank account, if positive. This is automatically invested.
Total Assets: the sum of the above fixed assets, stocks, debtors, cash and deposits.

Tax Due: the amount of tax assessed in the fourth quarter of the year, and due for payment in the following second quarter. If due, a figure only appears here in the fourth and first quarter of each year.
Creditors: the amount owed for goods and services purchased last quarter (see Table 21).
Overdraft: the amount of money loaned by the bank on variable interest and secured against the company's assets. It includes the interest charged. Consequently, it can be slightly higher than your previous stated limit, after the interest has been added.
Unsecured Loans: the amount of money loaned to your company for a short term, without security, to fund its operations over, and above, any funding by overdraft. It includes the interest charged on the loan.
Current Liabilities: the sum of the above tax assessed, creditors and short term loans.
Net Assets: the above total assets, less current liabilities.

Share Capital: the original shareholders' funds, in the form of £1 shares, used to provide starting capital for the company.
Reserves: undistributed profits (or losses) accumulated during the lifetime of the company. Reserves are equal to reserves from the quarter before last plus Retained Profit transferred to reserves last quarter.
Net Worth: Also known as shareholders' funds: issued share capital plus reserves.

Cash Flow statement

The final part of the accounts shows how the company's funds flowed into and out of its operation during the last quarter.

Trading Receipts: payments made to the company by its debtors last quarter. A proportion of the total of Debtors from the quarter before last and Sales Revenue last quarter. The receipt of sales revenue from the various areas last quarter is subject to a target credit period of 30 days. This target is never met in full, and outstanding debts are carried forward to next quarter as debtors on the balance sheet.
Trading Payments: payments for salaries and wages, plus goods and services supplied to the company.
Creditors from the quarter before last, plus Total Overheads, Materials Purchased, Assembly and Machinists' Wages and Machine Running Costs, less Creditors from last quarter.
Tax Paid: in the second quarter only, Tax Assessed from the balance sheet for the quarter before last.
Cash flow from operations: trading receipts, less trading payments and tax paid.

Interest Received: interest earned from deposits last quarter.
Capital Receipts: the value of machines sold at the beginning of last quarter.
Capital Payments: part payments for machines ordered and/or installed last quarter (see Table 17).
Cash flow from investing activities: interest received, plus income from assets sold, less payments for assets acquired.

Interest Paid: the cost of borrowing last quarter, from any overdraft and unsecured loans.
Note that different interest rates apply (see Table 19 and Part 2)
Dividends paid: see Profit and Loss
Net Cash Flow: the sum of operating and investing cash flows, less interest and dividends paid.
This equals the change in the total balance of your bank accounts (cash and deposits, less overdraft and unsecured loans) compared with the quarter before last.

Overdraft Limit for Next Quarter: the maximum level of overdraft that your bank is prepared to lend you next quarter. It is calculated from your balance sheet at the end of last quarter, as shown in Table 18.

The Management Report - Your Group

The second part of the management report gives information about all the companies in your group, plus information about the economy in which you operate. It shows:

economic information
and business intelligence.

This description of the contents of the Management Report assumes that you have just received it. What follows, therefore, refers to the contents of the latest Report as being last quarter's data. This information should help you make decisions for next quarter.

Economic information

Various official statistics are given to you free of charge each quarter. These give an indication of the performance of the economy, and hence where market growth is likely.

Gross Domestic Product: This gives an indication of the underlying trend of economic growth, or decline, and of changes in that trend. It is adjusted to smooth out quarterly seasonality.
% Unemployed Rate: this is the percentage of unemployed people. It is also a guide to consumer spending, and the availabilty of labour in the South area. It is seasonally adjusted.
% Central Bank Rate Next Quarter: this gives the rate of annual interest, set by the Central Bank at the end of last quarter, which applies next quarter.
Material price: The price of material for next quarter (per unit).

Information about other companies

The final part of the Management Report is concerned with business intelligence which you purchased, or general information that is free.

Business Intelligence: this information incurs a fixed charge of £4500 (see Table 2).

total advertising expenditure
total product development expenditure
star ratings for the design quality of each product, as assessed by a consumer panel. (These range from one to five, where one is poor and five is excellent).
% Market Share. These are calculated on the number of sales (not orders) made for each product, in each market area.

Other information, relating to last quarter about each of the companies in your Group, and which you would tend to know in the normal course of events, is provided free of charge:

Prices: charged for each product in the three markets.
Total Employed: the total of salespeople, skilled assembly workers and unskilled workers employed.
Skilled Wage Rate: the basic hourly rate paid to assembly workers.

Also financial market information:

Share prices: (in pence) quoted on the Stock Exchange.
Dividend %: dividends paid, in pence per share.

From time to time, Financial Statements for all companies in your Group may be supplied free of charge.

The Decision Form

This sets out (see screen image) all the decisions that you can make to run your company.

It is important that you fill the form in correctly, and check it before sending it in. Once the Decision Form has been processed, an incorrect entry cannot be changed.

There are some simple, basic points to watch.

You must enter only whole numbers (no fractions, nor decimals).
Negative numbers are not allowed (except for Production Scheduling - Detail).
There is no need to enter 'leading zeroes'.
If you wish to make a nil decision, enter "0" (zero). Do not leave a blank.
If you omit any number (or it is unreadable) or fail to send in your Decision Form in time, each blank entry will be replaced by a 'default value' and indicated by a "+" in the Management Report. Most default values are the decisions that applied in the previous quarter, but decisions about resource levels are set to zero.
If you enter a number which is impossible in terms of the current simulation (for example, trying to sell two machines when you only own one) the nearest acceptable value is used instead. Also, some decisions you try to implement may not succeed, e.g. if you try to recruit five employees, but only get three. Errors or differences of this type are indicated by an asterisk (*)

At the top of the form, enter the Year and Quarter for these decisions. (Remember to use the quarters for the simulation, not the real-life ones! Note, also, that quarter 1 follows quarter 4).

Before the start of the simulation, you will have been allocated a group and company number, and a personal identification code number. If you do not have a Group Number, use "1".
You must enter these numbers on the Decision Form, just below the year and quarter.