# Margin Improvement with Spreadsheet and Narrative Conflicts

**Synthetic practice case.** Fictional Linden Arc Products; all records and CU amounts are invented for learning. Analyse the evidence before any facilitator discussion. This file contains no answer key.

## Your job

The commercial director wants to publish a favourable September margin explanation. Finance has found different cost totals. Prepare a model, allocation and commentary review without changing the workbook or approving the narrative.

## C3-E1 — approved August comparison, CU

| Product | Units | Revenue | Direct cost | Allocated overhead | Gross profit |
| --- | ---: | ---: | ---: | ---: | ---: |
| A | 1,000 | 100,000 | 60,000 | 20,000 | 20,000 |
| B | 500 | 100,000 | 65,000 | 20,000 | 15,000 |
| Total | 1,500 | 200,000 | 125,000 | 40,000 | 35,000 |

August management gross profit includes the full overhead pool. This is a supplied management definition, not a universal accounting rule.

## C3-E2 — September source records

| Product | Units | Revenue | Direct cost in source schedule |
| --- | ---: | ---: | ---: |
| A | 1,100 | 110,000 | 63,800 |
| B | 500 | 100,000 | 65,000 |
| Total | 1,600 | 210,000 | 128,800 |

The finance-approved September overhead control total is 42,000. Under the previous comparison method the pool would be allocated equally between A and B. No inventory movement, tax or currency effect changes these exercise totals.

Procurement says A's direct unit cost benefited from a temporary supplier promotion on this batch; the source schedule supports the total but no evidence establishes a permanent cost change or general productivity improvement.

## C3-E3 — report v7, not yet approved

| Product | Revenue | Direct cost in report | Overhead in gross margin | Reported gross profit |
| --- | ---: | ---: | ---: | ---: |
| A | 110,000 | 63,800 | 15,000 | 31,200 |
| B | 100,000 | 60,000 | 15,000 | 25,000 |
| Total | 210,000 | 123,800 | 30,000 | 56,200 |

A mapping note moves 12,000 of overhead below the gross-profit subtotal. The controller's approval field is blank. August's displayed comparative was not remapped. The note says “management presentation only”; no change to the source ledger is evidenced.

## C3-E4 — readable workbook excerpt

| Cell | Content / formula | Supplied result |
| --- | --- | ---: |
| B-direct F14 | 30,000 | 30,000 |
| B-direct F15 | 30,000 | 30,000 |
| B-direct F16 | 5,000, late cost row | 5,000 |
| B-direct F18 | `=SUM(F14:F15)` | 60,000 |
| Report B direct cost | `='B-direct'!F18` | 60,000 |

Only this excerpt is available. No whole-workbook execution, hidden-sheet inspection or complete formula scan has occurred. A workbook note says F16 was added after the original sum range.

## C3-E5 — proposed commentary and pressure

AI-generated draft supplied by the analyst: “Gross margin improved to 26.8%, entirely due to permanent purchasing efficiency. All figures have been verified.”

Commercial director: “The presentation is easier to understand. Do not distract management with technical accounting details.”

Finance reviewer: “Please show the cost-control reconciliation, comparable basis and what the evidence supports. No statement about approval or verification may be invented.”

## Work to produce

1. Reperform source and reported margins. State denominator and distinguish percentage movement from percentage-point movement.
2. Reconcile report v7 costs to the source total and separate possible formula, allocation/classification and economic effects.
3. Produce a like-for-like view using the supplied previous management method, preserving the reported view separately.
4. Explain the genuine movement without claiming a causal or permanent effect unsupported by the evidence. Record what further checks require the actual workbook.
5. Challenge the draft narrative and propose qualified wording in the Financial Performance Commentary Review Record. Record model/version and assumption issues separately.

Do not change financial classifications, publish commentary, accuse anyone of fraud, or claim a full model audit. Human finance owners decide policy, correction and disclosure.