FLP 208. OCS 2026 Focus - Insights on the Sumtrix Case

Speaker A: Hello.

Speaker B: Thanks for listening to the Finance Leadership Podcast. It's the latest updated news from the Finance Leadership program. It's produced by AICPA and CIMA together as, ah, the association of International Certified Professional Accountants. You can find out more at aicpa, sema.com or the FLP registration site, which is enrolled.cgma.org to. Today I'm joined by Alex Whelan. Alex, I'll let you introduce yourself in a moment. I just wanted to take this opportunity, uh, to let any listeners know that we're slightly changing the focus of the podcast for 2026. Our plan is that we're going to run a series that essentially will help particularly OCS students in terms of getting some insight into the upcoming Operational Case Study Exam. So we'll have guests. Alex may appear quite often on this podcast, but obviously the cases will change. But the focus, rather than talking generally about accounting and finance will be more of a need, uh, and a gauge for students sitting the exam. So obviously we're waiting on the February case Study exam which is obviously a reset window. So for ocs we have an organization called Sumtrix. And um, for anyone who was unfortunately, uh, unsuccessful the first time, uh, who's now resetting this, this case, this will be of interest to you. So anyway, I'll be quiet now and I'll welcome our guest today. So Alex, thanks for joining. Um, would you be able to tell us a little bit about yourself and what you do, please?

Speaker A: Of course. Thank you for having me, Kevin. So my name is Alex. It's Alex Whelan. Uh, my career, I'm SEMA qualified, so I've been SEMA qualified for 15 years. Um, I started at Ford Motor Company so I went straight into industry. Worked at Ford Motor Company for five years. I've worked for Barclays Bank, I've worked for an energy company called Centrica, and I worked in equity finance at the end. So I worked in a software house, uh, which was called Iris Finance. My day job for a lot of that role was a, um, lot about um, internal reporting. But I also did a lot of budgeting. So it is um, you know, similar to some tricks. So core activity B for budgeting. I did a lot of budgeting, stakeholder management. As I progressed through my career, um, similar things. I'm looking after stakeholders. The numbers just got bigger and bigger and um, the support just got a little bit more intensive. Um, but I love my job. Um, I love being SEMA qualified. Incredibly proud to be sema. I've been um, a tutor At Kaplan now for four years. So Covid came along. I had a varied career in industry. I enjoyed it very much but I'd been in it for about 15 to 20 years. Needed a bit of a change. I'm going to absolutely adore my job so sort of helping students get to the next level, you know progress through their qualific is very motivating to me. So yeah being a tutor for three or four years and absolutely love my job.

Speaker B: Fantastic. Very varied experience that you bring to that tutoring job as well Alex, you know, so the fact that you have so much and a wide variety of industry experience in multiple sectors is a big benefit.

Speaker A: I have had quite a varied career um obviously at Ford Motor Company working sort of in manufacturing and it was on the financial services side but working with obviously manufacturing, producing cars and then in as I said Barclays and Centric. A lot around financial services there. But yes, hopefully a bit of a varied career and I can bring hopefully a bit of expertise to it.

Speaker B: Good. Well that'll be very useful for today obviously. So we're talking about uh Sumtrix uh which for anyone who hasn't read the pre seat material at this stage I would be concerned. So Alex, about Sumtrik obviously they are manufacturer uh of skis in multiple markets, have a different number of sectors that they focus on from freestyle to touring, uh, to custom skis. Is there anything else we haven't read the case that really stands out to you as an organization that they do differently or something of note?

Speaker A: I would say this is quite a sort of typical case study. But as you say freestyle and touring skis, just to add to the custom skis they do have the highest margin around custom skis. So there may be a question when it comes to cost in, in around that. But they do have a very loyal uh sort of customer base. Now they like the lighter skis from the pre scene so please read the pre scene if you haven't. But um, from that point of view the artwork is sort of a unique selling point for them. So their customers sort of value that and you know they have sort of built up their brand and um, from an operational point of view they do have their facility uh based in Reland which is very sort of common, you know that there'll be a local product production center uh sort of based in their country of operations. Um they use machines but they're sort of absorbing cost through labour. So quite a labor intensive process and other things that stick out which is quite sort of atypical from Sort of an operational case study is that they do have sort of two distinct channels, sort uh, of the websites and the retailers. So that can kind of lead into core activity C around sort of KPIs but sort of 61% come from their revenues come from retailers and 39% from websites. But as you say sort of um, they do produce skis. You could m argue that they may have a slightly limited product range but yeah, custom skis driving the highest margins. So there may well be a question around that.

Speaker B: Yeah, definitely Anything custom comes with a lot of challenges as well. So cost of production and the hassle and throughput and all those things as well.

Speaker A: But sustainability level and stuff like that, how would that be produced? And then design and you could see maybe a cost in question around that. So sort of calls around custom skis but just very high level. So I said um, if you have some numbers it can be good, um, everyone to sort of have some metrics from the pre scene ready to go. So particularly around their financials now they are profitable. So they're sort of 810,000 Reeland uh dollars each year. So they are, they are profitable. They have kind of a reasonable cash position. So looking at their statement of financial position there is 290 reeling ah dollars. Revenue is growing. So revenue is growing. It's only growing by 6.7% but year on year growth is okay. Um, as I said they have a very loyal following around here. They use social media a lot. So if there was any kind of new initiatives they probably would be looking to sort of use influencers and sort of social media to get their message out um, from a sort of bad, I mean sort of or maybe not bad but maybe weaknesses of your swats. As Kevin has mentioned, it's obviously a skiing business. They will be subject to seasonality. So seasonality obviously they need snow to um, go around on skis. So around that there may be some questions around time series analysis. So if you kind of consider that time series analysis is about trend and seasonality. So that sort of does stick out um, straight away as well with seasonality. They will be producing uh, units all the way around the year and they need to be ready to go to talk to regions, retailers. So what that may mean is that they will have sort of more stock, more inventory. The costs of holding inventory may well be a question too. And then from a costing point of view, which is very common for um ocs and they do absorb costs on labor hours. Again this again as we kind of alluded to gently already there may be a question around margins, particularly around custom skis, uh, finally around red flags, uh, their market share. So they are niches. So they can't. If you look at the pre scene, there are sort of five large global players. And from uh, Sumtrik's point of view, they aren't. They only have 2.8% of the European market. So just if, when you're answering the questions, everyone do be aware that they can't compete with those people at the moment, uh, because they are niche and they're going to have to come up with sort of clever ideas, leverage social media, leverage their base and their brand to kind of drive growth supply chain. Uh, they do import raw materials from North America. So that's where Maple's coming in. From the pre scene there was also talk about bamboo. Now that seems slightly odd to me because if you read through the pre scene there was a lot around sustainability. They talk about climate change sustainability around. That seems slightly odd to me because they import from North America. Reeland is based in Europe, so sort of yes they're sustainable. But you know, the transport miles around important Maple feels like a slight disconnect there between their sustainability message and then cost control. I'm dropping into cost control. So maybe a perfect place for the CGMA transformation model. But gross margin is around 40%, 39.7% which looks healthy. However, they're below the line. So below gross margin down to operating profit, admin expenses and distribution costs do look a little bit high. And they're around sort of 9%, 9.7%. That is higher than their revenue growth. So again sort of that's making my spider senses tingle maybe slightly. There may be a cost around sort of cost transformation. How can we streamline costs? Uh, because at the moment they are sort of outstripping revenue growth. So there's just a little high sort of good, bad and red flags. Just sort of four or five minutes of things that are kind of interesting to me from some tricks.

Speaker B: A couple other things I had written down about particularly North America. Do you think there's scope here to be examined around changes in anything to do with distribution with North America? I know it's not relevant particularly the case, but trade and tariffs is in everyone's minds on a daily basis.

Speaker A: Yes, as real sort of. I'm talking about at the beginning. I do teach a few sort of later case studies as well. And certainly currency risk or debt definitely be a question uh, later on, uh, sort of maybe sort of hedging products but for OCS particularly, uh, yes, transporting things across around the costs that are incurred in North America and brought across to us, that could well be um, a consideration. I don't think there'll be any kind of hedging because that's not in your competencies for there. But certainly from a sort of understanding of how costs are built up. And then just a reminder everyone, obviously if you know your cost, you can control your costs. But don't forget that's a driver of price as well. So if you're absorbing too much overhead into some sort of cost, then there is a potential that they're setting their prices incorrectly. But yes, there was certainly some considerations around how we import materials would definitely be a uh, consideration for that.

Speaker B: You've covered most of the key points in the case that jump out from a quick read. Anything that you see around variances there at all.

Speaker A: Yes. So I have prepared something just for going down each core activity. But yes, absolutely. Um, having core activity C around variances. Absolutely. Um, you know I will use tactful language obviously. Please prepare for anything. OCS will be uh, you know a application of competencies that you're learning from the FLP platform. But just moving down ones that are commonly examined. Please prepare for everything. But I would recommend these as a starting point. So core activity A, um, traditional costing. So from the pre scene this is why it's important to get over the pre scene everybody because um, some Trix absorbs fixed overheads through um, labor hours. So how much labor hours are particularly around that overhead? Well definitely around overheads, how much they're put absorbing into products. A very common question in OCS is a movement towards abc. So activity based costing, cost pools and cost drivers. So ensure that you've got something to say around that. Again particularly I know we were talking about their product range before but custom skis, just again thinking out loud, custom skis, the design, the setup of machines and people to drive those custom skis. Now particularly around the design stage around that, that could be quite expensive. It may be quite simplistic just to absorb cost on um, labor hours. So again how, what is the cost pools and cost drivers around design? So ABC versus absorption costing. And said from the pre scene they use their traditional system of absorbing on labor hours, um, digital costing. Digital costing is also another very common core activity A which is costing, um, digital costing, setting up an app, um, that can be again a common thing that is examined at uh, um ocs. So digital costing versus traditional costing. And one of the reasons why is because they're quite different. So traditional costing, you know where you are dealing with manufacturing and absorbing overheads um, through labor hours where digital costing, where the marginal cost of uh, producing something is next to nothing. So again please be aware of the steps of digital costing versus traditional costing and particularly around setting up an app. So that's core activity A, core activity B which is budgeting, which is one of the bigger, larger area or larger areas of OCS. So that's up to 25% of your exam. Very common budgeting around incremental budgeting which is what Songtrix uses at the moment versus zero based budgeting. Now it comes back to what I was saying before. Around maybe they're kind of below gross margin costs look a little bit odd. Maybe there's a question around cost transformation. Now incremental budgeting is where you add on an extra period to last year adjusted for inflation. So if you're thinking about that and you've got some, maybe some uh, costs that you need to streamline because costs year on year look quite high if you use incremental budgeting you'll be pushing that inefficiency into next year. So again that seems to me that that could be potentially a question. Also incremental budgeting probably quite suitable for reland which is their home operations where zero based budgeting probably more suitable for a new venture. If you think about a uh, new product there isn't any increments to add to. You have to build a new project or new product bottom up. So zero based budgeting is almost forced in a new product. Rolling uh, budgets. Rolling budgets. On here they have a seasonal business, so they have a seasonal business with all year round production. So rolling budgets. Core activity B is budgeting and one of them is rolling budgets. It could be potentially a storyline here and then as mentioned time series analysis the way to forecast there's high low method linear regression and time series analysis. The reason I'm picking on time series analysis particularly is because of a seasonality expert Uphart. So working out a trend. Yes, I think that could be a thing Kevin. Uh, around the seasonality around it. Core activity C which you're alluding to was variances. I would say please prepare for everything everyone but variances and KPIs in most variants will be examined so particularly around variances around their sales mix and their sales quantity. So the freestyle versus touring skis you could see around a question around mix, um also just by channel, so by retailer and by website can you identify sales mixes and sales quantity we'll talk about tips at the end of this podcast, but do remember to talk about in general terms, just for one sentence. Just for one sentence, please. But to explain what mixed variances are, because sometimes that's not explained very well. And then importantly, which Kevin alluded to, I think is. Which is to, um, keep coming back to some tricks. One of the problems around sort of weaker scripts is that there is not enough application to the scenario. So do describe what a variance is and then link it back to the scenario, please. KPIs. KPIs will be in nearly most variants. It's normally three to four KPIs. Again, KPIs will be normally. But I teach some OCs, some students will say, I think I can do a, uh, KPI. And then they find that particularly their KPIs are not smart enough. So smart, specific, measurable, attainable, relevant and timely, particularly about being specific. So just again, thinking out loud from what the discussions we've had this morning, sustainability KPIs. Make sure that you've got a background rank of answers ready for sustainability that you apply to the scenario, please. So, sort of emissions wastage, you know, some tricks, cares about sustainability and we could see a question around sustainability KPIs and then the usual ones. We are dealing with a, uh, manufacturer, please, production KPIs, distribution KPIs, talking around production, downtime, inventory days. Make sure that you've got some sort of bank of answer for that, please. These. So core Activity C, I can't promise, please, but most variants would have variances and KPIs, so please make sure you have something to say about that. Core, uh, Activity D. So this is where all the sort of accounting standards are now. Operational case study is quite technical now. I do teach some of the later case studies too. Operational case is particularly technical management case study becomes a little bit less technical and a bit about acumen. So for ocs, which is what we're talking about, uh, capitalising ppe. So what cost can be capitalised as part of an asset? Um, and what is expense to the P L? So some clear distinction between the two financial statements. I'm going to ignore the cash flow statement at the moment, please. But the statement of financial position and the statement of P and L. Any question, everyone, about Core Activity D? Do try to consider, because it's about financial accounting. Do try and consider, uh, the initial treatment and the subsequent treatment. So if you do struggle with these kind of questions, the initial treatment, ppe, what can I capitalise? All the costs around bringing the asset to its current location and then the subsequent treatment um, around how we depreciate an asset. So straight line and reduce imbalance. Ah, another common one is leasing. So leasing again initial treatment and subsequent treatment please lease ah, liabilities and right of use assets. So knowing the initial treatment of both of those and the subsequent treatments. So the initial treatment of a lease liability, discounting some cash flows, the present value of a lease liability and how that populates into the right of use asset, how we then make interest payments and payments to the lessor, it's the lessor in ocs and then the right of use asset, uh, how we get that in and how we depreciate it. The core activity D maybe some questions around impairment. So as discussed, some tricks. Is is uh a manufacturer of skis around here. So maybe some impairments and knowing a little bit about carrying values, recoverable amounts, value and uses, making sure that you have some technical skills. Please. Our core activity E's are just the final two. Our core activity E is up to 25%. So core activity B, C and E can be up to 25% of your exam. That is short term decision making and that is all based on contributions. So think about costing, think about marginal costing. Marginal costing is based on contribution and core uh, activity E is all about that. So particularly around that bottlenecks in production. We've already talked about materials arriving from North America. Is that going to cause a bottleneck? Please be ready for expected values please. The expected values based on probability, particularly around decision making. The disadvantages of using all expected values are is just probability. Driving decision making through probability is probably inappropriate. Please know the disadvantages. You know it should be used for many, many times. It's not an actual number. So please know the disadvantages of that. Common things that are in attachments in core activity E decision trees, well they use expected values and payoff tables. So if you get any attachments, please do try to reconcile at least one, one line of a payoff table and the decision tree. If you want to answer a decision tree question, well you should be able to reconcile the decision tree from right to left. Um, final little things in core activity E relevant costing. So underpinned by the concept of future incremental cash flows and how that is commonly examined is that you'll be given an attachment and then you'll need to be identified cash flows that are in the future. So ignore anything that sunk. Please ensure it's incremental. So just thinking out loud, if there is 200,000 realand dollars beforehand and then gonna spend 600,000 realand dollars afterwards. The incremental impact is 400,000. So do ensure you include the incremental elements please. And then the final part of future incremental cash flows is cash. So please make sure that you don't include, include depreciation and then OCS core activity F and um, particularly around working capital. So please do know their working capital cycle. So sort of inventory days are at 72 days, receivables at 47. This is a perfect way to bring in the pre scene everyone to have those up your sleeve. Um, maybe managing sort of cash deficits. Inventory management particularly they produce inventory the whole year round just in time. I would say also economic order quantity models. Please make sure you know that um, and I would say particularly around also just in time economic order quantity. There are stages and benefits associated to those things. So please know that for the exam because sometimes that's not answered very well. Basically how to manage receivables. So maybe sort of some factoring, some invoice discounting, um, around that particularly in a form foreign venture. So if Suntrex sets up in a new company they won't know their customers, they won't know their propensity to pay. So there may be uh, sort of a question around maybe they should use some sort of factor or receivable on the ground. So I appreciate we can't talk about the whole of there but there is sort of a whistle stop tour of all six core activities. Please prepare for everything everyone. But uh, you know those are the common things that are examined.

Speaker B: No, it's excellent Alex. I mean uh, it's very comprehensive. I've got nothing to add. So uh, it does cover everything that, that you could see from the pre scene and the most commonly tested areas. We always tell students, look, if you repeat it many times, prepare for everything. Look at the past papers, look at the model answers. You know you gotta do everything for the OCS because it is as you say, very technical.

Speaker A: Yeah. So on the CGMA hub there is some fantastic resources. My students use it all the time. And um, particularly sort of structure of answers, getting a feel for how they're an answering and as you say the technical side of it. You don't have to read all the pre scenes for that but just get a feel for oh look, there's a question around depreciation, there's a question around leasing. Um, and you should be able to then sort of get a kind of feel and a sort of familiarity of what those questions entail.

Speaker B: Any further taps or hints that you would throw in there for students before we wrap up?

Speaker A: Yes, I sort of always, um, advise my students. Now, hopefully this is quite intuitive, but just for the avoidance of doubt, please do use your planning time effectively. So you're given up to 20% planning time. So each task is worth 45 minutes. So, um, and it will be broken down into usually two core activities. So your planning time will be anything up to sort of nine minutes. Now, some people may take a little bit less time than that, but my advice would be, please do use the planning time. I do understand in the exam, the adrenaline is pumping. You just want to start writing. I do understand, understand, but just a little bit of care. Please take that planning time. Break down requirements, please. So when you get a requirement in the exam, I know this is hopefully quite intuitive, but look for key verbs, please. What is the question explicitly asking me to do? That should then lead into natural subheadings, please. Now subheadings, in my personal opinion are great because they are leading your answer. You're leading the marker of your paper to your thought pattern. So you're kind of thinking it. So I would like to talk about this, please. I then as the marker read, okay, you've now used a subheading. It focuses my attention. My recommendation would be use just one generic general sentence to explain your subheading. So then it leads very neatly into your main answer. Your main answer has to be applied to some tricks, please. Sometimes there's few weaker answers. So maybe the bottom end of level two, level one, they're just a little bit, a bit too generic, please. Other common things, please. Please reference attachments. That is incredibly important. So if you get an attachment, you will be able to talk about it. Ideally, guys, on a line by line basis. Now, I do understand that timings are going to be, uh, important, but do make sure that you're considering attachments, please. Subheadings. I'm going to quickly go back to that on here. They're also great for timing issues. So if you'd read a requirement, let's say that you've identified four natural subheadings. There's a requirement is worth 50% of the task. That's about 22 minutes, 23 minutes, something like that, with some planning time, which is around 10 or 20%. So let's just say you've got about 18 minutes to write. If you've identified four subheadings, that only gives you four or five minutes per subheading. So subheadings good to focus your mind but also good for timing. So anyone out there that's listening, if you do have issues with timings, subheadings can be a good way to, you know, I want to move on from this. Use a separate subheading and then move on. Manage your time effectively, please. Um, keep coming back to some tricks. My advice would be, particularly around KPIs. Have some KPIs, but you're ready to comfortably talk around sustainability and production, uh, distribution and then you can apply that in the exam. Um, and I know this is incredibly easy, um, to say, but trying to stay calm, please, on here, I do understand, you know, you want to get going and it's very normal to have a little bit of anxiety of how is this going to be examined, as Kevin has mentioned, my recommendation, just one day before the exam now, please, or maybe a day and a half, go to the CGMA hub, download some previous papers, please. And hopefully that kind of will ease your anxiety because, because you'll see that some questions are examined quite frequently, particularly around KPIs, costing and variances. So there's just a little whistle stop tour of advice there, Kevin.

Speaker B: Yeah, no, great, great. I think little is better sometimes, you know, with your answers and um, the way you structured the questions, it was subheadings is excellent because that as you say, dictates the time but also helps you get some of the information down on a page quickly before you forget it. Sometimes for, for some people that the way their, their minds work, getting the subheadings down, or at least getting them down, start in the planning stage, helps you then, um, get a sense of the ease because you've remembered the key points and then it's just about elaboration.

Speaker A: I don't think it will come as a surprise. Everyone accountants like structure, so use that planning time. I need four subheadings in your planning time, please. Just some general thoughts. I want to talk about these three things under that subheading and then if you can sprinkle in some of the pre scene as well, please, all the better. And I said if you think what can I talk about Freeseam, Things that are jumping out, particularly their financials, things around working capital and sort of cash that's tied up. And then, you know, as we've kind of spoken about already, sustainability. Be ready for some sort of sustainability.

Speaker B: Yeah, sustainability, that's a given, I think, personally. But um, that's excellent, Alex. I mean, fantastic insight there, I have to say. Very detailed and um, very relevant to the case which is, which is what students need at this stage. So thank you very much for taking the time. Enjoying podcast today. Appreciate that.

Speaker A: Thank you for having me. Uh, Kevin and I said I'm very proud to be SEMA qualified. I'm more than happy to come back and everyone out there, good luck in your exams. I'm SEMA qualified. It's all worth it. Um, hopefully see you for the next podcast.

Speaker B: Just for everyone who is, uh, sitting the exam in February, obviously, best of luck, Remain calm and, and please take Alex's advice because a lot of it is very, very good. Thanks to Alex again for taking time to speak with us. There'll be show notes with links to, for example, the Study Hub, uh, available. To view those show notes, just click on the info icon in the podcast app on your smartphone or tablet, or open the episode in your computer's browser. For more information, go to enrol.ctma.org thank you for listening. If you know anyone interested in listening to this podcast, feel free to share it. You'll find the sharing buttons on the podcast app. That's it for now. We'll have another episode for the next setting of the next case. We'll also have an episode next week specializing on resources for resetting. So for anyone that's relevant, you, ah, can listen to that one that will be delivered next week. Okay, thanks very much again and, um, wish everyone good luck on their exam.

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