Case Study Of Thunderphone Ltd - Management Assignment Help

Assignment Task

CASE STUDY OF THUNDERPHONE Ltd 

Six months ago, Miranda McNeill has been appointed as the management accountant of the mobile phone division of Thunderphone Ltd. Miranda was excited about this new appointment as it seems the company has a perfect future. The company’s vision and mission are to be the leading mobile phone company in the country. High product quality and innovation are the critical goals of the company. 
Miranda is pleased with the pay, and besides the salary, she will get division’s shared cash bonus. Also, she likes the working environment, and her co-workers make her feel part of a team that was making a difference in the Australian electronic industry.  
Recently, the division has been working on a project to develop a new mobile phone: TP 30s, which has very advanced technology. Besides everything was running well, there is one thing that makes her sleepless. Jo Daiko, her boss, had asked her to ‘refine’ the figures on the division’s latest project—TP 30s. The original estimates called for an investment of $21.5 million and projected annual profit of $1.56 million. TP-Products required an ROI of at least 12% for new project approval. So far, TP 30s rate of return was nowhere near that hurdle rate. Jo encouraged her to show increased sales and decreased expenses to get the projected profit above $2.58 million. Miranda asked for a meeting with 
Jo to express her concerns. 
MIRANDA: Jo, I’ve gone over the figures for the new project and can’t find any way to get the profit above $2.58 million. The prediction of sales and expenses and revenue figures and production are mostly accurate.  
JO: Miranda, those figures are just projections. Sales don’t know what the revenue will be. When I talked with Sarah Harris our sales manager, she said that sales could range from $1.5 million to $3.8 million. Use the higher figure. I’m sure this product will justify our confidence in it! 
MIRANDA: I know the range of sales was that broad, but Sarah felt with the current market competition the $3.8 million estimates were pretty unlikely. She thought that during the first three years or so that TP 30s sales would stay in the lower end of the range 
JO: Again, Sarah doesn’t know for sure. She’s just predicting. Let’s go with the higher estimate. We need to get the approval to produce this product to expand our product line and to give our division a chance to increase the bonus pool. If TP 30s sells at all our bonus pool will grow.  
MIRANDA: I am not sure Jo; I have little confidence in this project.  
JO: please prepare the report. I’ll back you up. 

You are required to write a report by answering the following questions: 
1. Please justify whether it is acceptable to revise the predictions of sales and expenses to meet the company’s required rate of return? Are there any acceptable ways that Jo could justify increasing or decreasing sales and expenses? 
2. Explain what Jo Daiko’s motivation in refining the projected sales and expenses? Is that because of meeting the hurdle rate or any other factor?