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International Accounting Standard Mib Water For All

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MIBW4A incurred operational costs in paying salaries and wages for the technical team. Each technician received a monthly salary of USD 100. Annually, MIBW4A will incur USD 3600 within the first year of operation as it will hire three more technicians. With the need to install more filters, MIBW4A will incur more operational cost in salaries in the subsequent years. Other members of the local staff in the monthly payroll include subordinate staffs and operating officers whose salaries would total to USD 845,000. To increase their sales volume, the company plans to hire a sales team of 20 in the second and third year.

In the first year of operation, the company hired no team to sell their products, hence incurring no expenses on sales staff within the first twelve months. Each salesperson takes away USD 150 per month. In their annual budget, MIBW4A planned for a weekly testing expenditure on filters estimated to be USD 525,200 over the three year period. As outlined above, MIBW4A business faces a lot of challenges. The business incurred a lot of expense both in operation and fixed costs.

In total, the fixed costs and variable costs incurred by the company within the first three years of operation exceed the income generated over the same period. Besides, the company has to incur other informal costs in doing business in Peru because of lack of transparency in the business unit and the police sectors. To keep operating, MIBW4A has to spend s a lot of resources in corrupt deals (Salzman, 2012, p. 11). By deploying sales representatives and water vendors, MIBW4A stands a greater chance of increasing their market dominance and thus higher sales revenue.

The constant vendor auditing process conducted by the company for evaluating the sales data of each vendor was critical in reducing revenue underreporting. The profit-sharing agreement between MIBW4A and the vendors was a bigger threat to the success and profitability of the company as vendors created little financial incentive for the firm (Walton & Aerts, 2006, p. 79-80).

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