Analysis of Digby Capsim Decision

Matching Concept in CapSim Core

The company’s in the capsim core entitled finance show mainly the effect of the decision to use matching concept when doing business. Matching concept is an accounting concept where a firm recognizes each revenue with a related cost in the same accounting period even if the expense had been paid for at an earlier time. Every expense that brings up revenue is recorded at the same time.

Firms use this concept to avoid mistakes. Expenses, according to the matching principle, should be recognized as the revenue recognition principle recognizes income. Generally, there are two types of costs; period and product costs. Product costs are directly tied to products and in turn revenues. Period costs, on the other hand, cannot. Product costs should be recognized rationally and systematically, and this is the key behind depreciation of assets that are recognized over many periods.

Impact of Falling Share Price and Investor Attractiveness in the Organic Industry

Firms that are in the organic industry are suffering falling share price and reducing investor attractiveness. This has a great impact on the returns of the company (Reeve, Warren, & Duchac, 2011). Although this industry has been performing well, companies like Hains Celestial Group was performing well and were meeting their profit targets, leading to a decrease in their share price increase by 32% and later lost $1.3 billion as they did not meet their profit targets and had to postpone their result announce. From the company performances comparison, Digby has been performing relatively low compared to its competitors; lower than every other team except for Erie and Ferris.

Research and Development

Digby team has tried its best to maintain its customer set and maintain its product end in both high end and low-end segment. Daze is the least performing product and is rated at 6.3. Many customers from who prefer low-end tech food prefer to buy their products using the pricing criteria while those that use high tech criteria prefer that prefer the products that perform highly at size i.5 and size 10.5. Products that have low performance have high size (Reeve, Warren, & Duchac, 2011). The decision of the company to revise the product in 2021 is futile to the product as it has low performance.

Marketing

Digby performs best in the low-tech market segment compared to the rest of the companies. The market size is 6,708, and the firm has been able to sell 5,460 at a growth rate of 10%. The company has been unable to attain its sales target although they sold 95%. In the high-end market segment, the firm is ranked fourth as per the market volume in this segment. Many customers in the segment prefer to get products from high performing and large size companies.

Production

Every company has a different primary segment that gives them the most profit, and for Daze they rely on the low-tech segment as their primary segment. The low-tech segment has a profit margin of 12.98 compared to their cost. This contribution margin is ranked fourth to apple, able and baker and daze produce the highest number of units utilizing 163% of the firm. They have chosen to price their products low so that they can attract more consumers. This a strategy that is functional for a period as if it is prolonged the company will experience a financial crisis (Rajni, 2016). Once a stable clientele has been attracted, the price range can shift to normal.

Finance

The high tech financial statements show that Digby is not making good profits compared to the other companies. They stand at $9,489 only above three of its competitors out of six. The firm’s financials show that it is performing average compared to the other firms. The firm is using its cost well, and it seems to recognize them at the right time. They have a high net margin of $14,905. Production of daze is at a lower cost. Digby is not financed majorly by debts compared to its competitors and has the lowest total assets to total liability ratio, its capacity to finance its operation is functional, but compared to the major competitor and the firm with the highest profits Baldwin, Digby is performing low.

Digby’s Capsim Decision

The firm is trying to increase its market share by focusing primarily on the low-tech segment S that is the segment that has most of the consumers to the product daze. Prices have been set relatively low to attract more customers. But even the companies best segment and product that is well performing is not yielding enough profit for the company and is having relatively low sales; the period for product revisions should be reduced so that the low end and high-end segment can appreciate daze and purchase more (Reeve, Warren, &Duchac, 2011). The focus should be on the customer preferences by being keen on the factors that customers consider before tan hey can choose a product.

Apparently, the firm should match the revenue it gets with the costs that have been appropriately incurred and separate the costs from each segment in this way they will be able to improve the profit margin. They should concentrate on the selling points in the industry and different segment. The company’s pricing criteria for daze is reasonable, and it is within the margin where the customers agree to acquire products in the low-end segment. The higher the customer perception of the product has the lower its performance (Reeve, Warren, & Duchac, 2011). Every company in the industry does the cost-revenue matching concept. The firms that have not used the concept effectively are failing to achieve their set goals for the financial period.

Customer awareness about daze is third only to able and baker. This is a low considering the firm is spending the highest on promo budget compared all the competitors (Reeve, Warren, & Duchac, 2011). Customer awareness about the product is at high the firm should instead focus on improving the product and reducing the price for daze and improving the high-end product to match the demand of the customers. Digby has the highest production capacity and utilizes its capacity adequately compared to the other firms; for this reason, large sale portions to customers as possible.

Utilizing the capacity but not serving customers efficiently is one reason for low profits. They should try to ensure that their capacity is used to produce products that suit the demand of customers. The firm can also shift its products appropriately and serve the relevant segment before competitor reacts to increasing demand (Rajni, 2016). Every expense that they incur in the production of the low-end daze products should be matched by the revenue from the product to ensure that the profits are recognized as per the market segment to help in preventing any misstating of revenue. Reporting revenue without recognizing when they have been earned at other times can cause an overstatement of profits.

References

Rajni, S. (2016). Basic accounting. S.l.: Prentice-Hall of India

Reeve, J. M ., Warren, C. S., & Duchac, J. E. (2011).Principles of financial and managerial accounting using Excel for success. Mason, Ohio: South-Western.