ACC 513 Managerial Accounting Assignment- William Howard Taft University
Course Learning Outcomes
Upon the successful completion of this course you should be able to:
a. Compare and contrast managerial accounting and financial accounting.
b. Demonstrate the importance of effective communication between accountants and users of managerial accounting information.
c. Explain the concepts of costing and how they relate to profitability analysis.
d. Distinguish between resources used and resources supplied and measure unused resource capacity.
e. Explain total quality management and demonstrate how traditional managerial accounting systems require modifications to support total quality management.
f. Compare the costs, benefits, and weaknesses of the various cost estimation methods.
g. Perform cost-volume-profit analysis and explain the use of financial modeling for profit- planning purposes.
h. Use differential analysis to measure customer profitability.
i. Describe the steps of the net present value method for making long-term decisions using discounted cash flows and explain the effect of income taxes on cash flows.
j. Demonstrate the use of a budget as a tool for planning and performance evaluation.
k. Describe the purpose of the return on investment calculation and identify its shortcomings.
l. Identify controls that can be instituted to prevent financial fraud.
Required Materials: Barsky, N. & Catanach, A. (2017). Management accounting: A business planning approach (2/E). San Diego, CA: Cognella Academic Publishing. ISBN - 978-1-5165-0628-6.
Part I: Strategy & Management Accounting and The Business Value Chain
Learning Objectives
a. Define and describe a business.
b. Identify and describe the stakeholders of a business.
c. Explain the relationship between strategy and profitability.
d. Describe the strategic planning process and its results.
e. Identify barriers to successful strategic planning.
f. Identify forces affecting business.
g. Define the elements of the customer value imperative.
h. Explain the value chain and its components.
i. Explain the importance of evaluating company performance.
Task
I. What are four/five characteristics of a good mission statement? Prepare a mission statement for a video rental store that has these characteristics.
II. What is the implication of strategic planning and analysis for information provided by management accounting systems?
III. List the four dimensions of performance measured on a balanced scorecard. Identify one critical success factor for each dimension for a small auto-repair shop.
IV. Describe three to five barriers to successful strategic planning.
V. List several types of economic data that managers of a computer repair shop that serves a particular geographic region might find useful to their strategic planning process.
VI. Describe the customer value imperative as it relates to a clothing store. Address all three consumer expectations of the customer value imperative.
VII. Consider the value chain for a restaurant. Identify one major business activity for each of the five-core business processes. For each activity, specify one important decision the restaurant will have to make.
Part II: Evaluating Financial Performance and Business Processes & Risk
Learning Objectives
a. Review the purpose of financial statements and their form.
b. Describe the use of pro forma financial statements.
c. Discuss and illustrate the use of financial ratio analysis.
d. Demonstrate the use of financial ratios in evaluating business strategy.
e. Define value drivers and explain their usefulness in understanding business processes.
f. Identify the resources necessary to support the value chain.
g. Define business risk and describe the uncertainties affecting value creation.
h. Discuss how companies identify and manage business risk.
I. The manager of Tacorama provided the following data from its financial statements for 20X1:
On December 31 20X1 Inventory $ 8,000 Current assets $24,000 Total assets $80,000 Current liabilities $4,000 Total liabilities $20,000
For the year ended December 31 Sales revenue $200,000
Net income $6,000
Compute the following ratios for 20X1:
Asset turnover Financial leverage Return on assets Return on equity Profit margin Current ratio Quick ratio
II. Bowler Makers Company reported $50,000 in net income last year. Some of its financial ratios for that year are as follows:
Return on assets 20% Return on equity 25% Asset turnover 2.0
Based on the data provided, compute the following:
Total assets Total equity Total liabilities Net sales Profit margin
Financial leverage
III. Black and Blue Inc. reported $60,000 in net income last year. Some of its financial ratios for that year are as follows:
Return on assets 15% Return on equity 24% Profit margin 8%
Based on the data provided, compute the following:
Total assets Total equity Total liabilities Net sales Asset turnover
Debt to equity ratio
IV. Kwiken-Kwiker Company had $70,000 in accounts receivable at the end of last year. Some of its financial ratios for that year are as follows:
Return on assets 15.0% Assets turnover 3.5
Receivables turnover 11.0
Financial leverage 2.0
Based on the data provided, compute the following:
Net sales Total assets Net income Total equity
Return on equity Debt to equity
V. Bowler Makers Company reported $75,000 in net income last year. Some of its financial ratios for that year are as follows:
Return on assets 12% Return on equity 15% Asset turnover 2.5
Based on the data provided, compute the following:
Total assets Total equity Total liabilities Net sales Profit margin
Financial leverage
VI. Black and Blue Inc. reported $45,000 in net income last year. Some of its financial ratios for that year are as follows:
Return on assets 12% Return on equity 36% Profit margin 3%
Based on the data provided, compute the following:
Total assets Total equity Total liabilities Net sales Asset turnover
Debt to equity ratio
VII. Kwiken-Kwiker Company had $900,000 in sales last year. Some of its financial ratios for that year are as follows:
Assets turnover 1.5
Profit margin 7.0%
Financial leverage 1.2
Based on the data provided, compute the following:
Net income Total assets Return on assets Total equity Return on equity Debt to equity
Part III: Planning Profitable Operations and Forecasting Tools & Techniques
Learning Objectives
a. Describe the primary types of cost behaviors.
b. Define the relevant range and a firm's total cost function.
c. Describe cost-volume-profit (CVP) analysis and explain its usefulness.
d. Demonstrate the use of breakeven analysis.
e. Identify strategies that companies use to lower their breakeven points.
f. Demonstrate the importance of sales forecasting.
g. Describe the role of cost drivers in estimating costs.
h. Demonstrate the use of graphical and statistical forecasting techniques.
i. Demonstrate the use of cost estimates in cost-volume-profit (CVP) analysis.
j. Discuss qualitative factors that affect costs.
Task
I. Oingo Inc. sells its product for $60.00. Its variable cost per unit is $48.00. Fixed costs total $30,000.
How many units does the company need to sell to breakeven? What are the total sales in dollars at the breakeven point?
How many units does the company need to sell to earn a profit of $120,000?
II. Pimpton Plows sells its product for $50. Its variable cost per unit is $19.00. Fixed costs total $434,000.
How many units does the company need to sell to breakeven? What are the total sales in dollars at the breakeven point?
How many units does the company need to sell to earn a profit of $155,000?
III. Big City Orchestra, Inc. produces a five-concert series every year. Its concert hall has 3,300 seats, all of which sell for $40 per ticket per concert. Variable costs are estimated to be $2 per ticket, related to printing, promotions, and mailings. Fixed costs, including salaries and operating expenses, total $427,500 per year. The orchestra averages 70% attendance per concert.
What is the breakeven point in dollars of ticket sales?
What is the breakeven point in tickets per concert?
What is the expected total sales in dollars and units (tickets)? What is the projected net income at its expected sales level? What is the orchestra's safety margin in sales dollars and tickets?
How many tickets would need to be sold this year in order to earn enough profits to enable the orchestra to purchase a new pipe organ that costs $96,900? What would average attendance need to be to achieve this?
IV. Husky and Starch Books provided the following information: Average selling price per book $25 Average variable cost per book $13 Monthly fixed costs $6,000
Compute the following:
What is Husky and Starch's contribution margin per unit in dollars? What is Husky and Starch's contribution margin ratio?
How many books must Husky and Starch sell to breakeven?
How many books must Husky and Starch sell to earn $9,000 per month?
V. Last year, Leeky's Pizza Ovens sold its ovens at a price of $800 each. The variable expenses for each oven were $500 and the annual fixed expenses totaled $270,000. Leeky's Pizza Ovens had targeted a profit of $300,000 for the year but fell substantially short of that goal because product demand shifted resulting in sales of only 1,600 ovens. Leeky's president assigned a management committee to analyze the situation and develop alternative courses of action for the coming year. The following three alternatives were presented to the president, but only one can be selected:
Alternative A: Reduce the selling price by $70. The marketing department forecasts that with the lower price, 2,400 ovens could be sold during the year.
Alternative B: Lower variable expenses per unit by $25 through the use of less expensive materials. Because of the difference in materials, the selling price would have to be lowered by $50 and sales of 2,100 ovens for the year are forecast.
Alternative C: Cut fixed expenses by $50,000 and lower the selling price by 5 percent. Sales of 2,000 ovens would be expected for the year. If no changes are made to the selling price and cost behavior is unchanged, estimate the number of ovens that must be sold during the year to break even. If no changes are made to the selling price and cost behavior is unchanged, estimate the number of ovens that must be sold during the year to attain the target profit of $300,000.
Determine which of the alternatives Leeky's Pizza Ovens' president should select to maximize profit.
VI. David's DVD Repair Company wants to open a repair shop in a suburb of a major metropolitan area. The industry association estimates that 30% of DVD players are repaired by similar service companies and that the average owner spends $80 per DVD player on repairs each year. The available commerce data indicates that there are 50,000 DVD players in the metropolitan service area. Three other competitors exist within a 25 mile radius of the proposed business location. Based on a consumer survey, the owner believes that he can capture 20% of the market in the first year of operation.
Based on this data, address the following requirements:
What is the potential number of DVD players likely to be commercially repaired during one year? How much revenue can David's DVD Repair Company expect to generate in its first year of operations?
VII. The Party Place Company wants to open a dining hall for group meetings and banquets. A survey of businesses and organizations within a 30 mile radius indicates that the Party Place can expect to provide meeting facilities to 0.75 groups per day for 360 days of the year. On average during the year, 50% of all groups would be expected to want basic food service and 30% are expected to want premium food service. Groups pay a facility rental fee of $80 per meeting. If the group requests basic food service, the facilities fee is reduced by one-half. No facilities fee is charged for groups that request premium food service. Basic food service is provided at a cost of $10 per plate and premium food service is provided at $25 per plate. Groups that request basic food service are expected to average 50 people per group. Groups that request premium food service are expected to average 30 people per group.
Based on this data, address the following requirements:
What is the number of groups that are expected to want premium food service, basic food service, and no food service during one year?
How much revenue can the Party Place expect to generate during its first year of operations?
VIII. Mr. Fixits wants to open a lawn mower repair shop in a suburb of a major metropolitan area. The industry association estimates that 40% of mowers are repaired by similar service companies and that the average owner spends $150 per mower on maintenance each year. The census and local chamber of commerce data indicate that there are 35,000 mowers in the county. Seven other competitors exist within a 25 mile radius of the proposed business location. Based on a consumer survey, Mr. Fixit's owners believe that they can capture 8% of the market in the first year of operation.
Based on this data, address the following requirements:
What is the potential number of lawn mowers likely to be repaired in one year?
What is the total potential mower repair revenue available in the market in one year? How much revenue can Mr. Fixit expect to generate during its first year of operation?
IX. The Beejue Theatre has 12 screens on which first-run movies are presented 365 days out of the year. Each movie is shown an average of 5 times per day. The number of seats for each screen varies, with an average of 400 seats per screen. Ticket prices average $9 per seat. The overall average occupancy rate per movie is 15%.
Compute the total possible tickets that could be sold assuming 100% occupancy. Compute the estimated total customer demand (number of movie seats sold) for each year.
Compute the estimated total revenues for one fiscal year.
If management wanted to generate $18,000,000 in annual revenues, what would the average occupancy percentage rate need to be?
X. Acme Brick Company estimated its annual total cost function to be: Y = $320,000 + 2.56x
Assuming that Y represents total cost and x equals the number of units sold, use this equation to answer the following questions:
What is the firm's total fixed cost?
What is the firm's variable cost per unit? Compute total costs if the firm sells 10,000 units. Compute total costs if the firm sells 30,000 units.
Part IV: Budgeting Fundamentals and Analyzing & Using Budgets
Learning Objectives
a. Describe budgeting and its potential benefits.
b. Define the master budget and discuss its components.
c. Illustrate the development of the operating budget.
d. Demonstrate the creation of the cash flow and capital use budgets.
e. Discuss the preparation of pro forma financial statements.
f. Demonstrate how budget credibility can be assessed.
g. Illustrate the development of flexible budgets.
h. Discuss how financial statement variances are computed and interpreted.
i. Explain the use of revenue variance analysis.
j. Demonstrate the use of cost variance analysis.
I. Arnold's Purse Company expects sales in the fourth quarter of 20X1 as follows: October $ 350,000
November $ 520,000
December $ 440,000
Historical data shows that the company collects 75% of its sales in the month of sale and 25% in the month following the sale. On October 1, 20X2, accounts receivable related to third quarter sales totaled $70,000, which is expected to be collected in October.
Prepare a schedule of cash receipts for each month in the fourth quarter.
What amount of accounts receivable will be outstanding on December 31?
II. Fillmore Groceries expects to make inventory purchases in the first quarter of 20X2 as follows:
January $450,000
February $390,000
March $510,000
Historical data shows that the company pays for 65% of its purchases in the month of purchase and the remaining balance in the month following the purchase. On January 1, 20X2, the company owed $120,000 for 20X1 purchases.
Prepare a schedule of cash payments for January, February, and March. What amount of accounts payable will be outstanding on March 31?
III. Based on a recent market analysis, Baby's Clothing Palace expects the following quarterly demand (number of customers):
IV.
First quarter 1,100
Second quarter 1,500
Third quarter 2,200
Fourth quarter 3,800
The typical customer spends $60 per visit at the store. Management estimates that clothing accounts for 75% of each customer's bill. The other 25% results from toy sales. Clothing costs the company 60% of its selling price, while toys cost only 40% of their selling price.
Based on these data, prepare the following:
A quarterly sales forecast
A quarterly contribution margin forecast
V. Terry Simpson is considering investing in screen printing equipment and opening a retail business that specializes in customized T-shirts. The screen-printing equipment will cost $12,000 to purchase and set up. It is expected to have a useful life of six years and will need to be overhauled in year 4 at a cost of about $4,000. At the end of six years, it is expected to be worthless. T-shirts will sell for $19 each and the average cost of buying the T-shirts and printing them is expected to be $12 each. Terry estimates that customers will buy 50 T-shirts per day, 24 days per month for 12 months. Furthermore, monthly operating costs excluding Terry's salary are expected to total $5,000 per month. In order to do the work necessary to make this business succeed, Terry would have to leave a job that pays $36,000 per year.
What is the expected annual sales?
What is the expected annual net cash inflow from operations including Terry's salary and excluding equipment purchase and overhaul?
What is the net present value of the screen-printing equipment if Terry must earn a 15% return on the investment in the equipment?
VI. Arklahoma Bedding Company sells deluxe king size mattresses for $400 per set. The variable cost per set is $150. The company incurs $2,300,000 of fixed costs per year. The company expects to sell 20,000 sets of mattresses in the coming year.
Based on this data, prepare a static budget for the coming year. Holding all other factors constant, how would net income differ from the static budget if fixed costs were 10% higher than expected?
Holding all other factors constant, how would net income differ from the static budget if variable costs were 10% higher than expected?
VII. Ye Olde Recipe Shoppe sells recipe boxes. Management has prepared the following projections for its business for 20X5:
Budgeted average price per box $ 16 Budgeted variable costs per box $ 7 Budgeted annual fixed costs $ 360,000
Prepare a flexible budget for sales of 50,000 boxes and 60,000 boxes, respectively.
Part V: Performance Evaluation & Decision Making and Analyzing Costs at the Customer & Process Level
Learning Objectives
a. Explain the purpose and benefits of performance evaluation.
b. Define and explain the use of responsibility centers.
c. Demonstrate how firms evaluate responsibility center performance.
d. Illustrate the use of cost-benefit analysis for business decision making.
e. Describe and illustrate the use of the balanced scorecard for performance measurement and evaluation.
f. Identify the types of costs firms incur when producing goods or services.
g. Describe the flow of production costs in a manufacturing firm.
h. Explain the traditional method of overhead allocation.
i. Illustrate how activity-based costing is used in assigning overhead.
j. Discuss two systems used to measure the cost of products or services.
Task
I. Movie Magic typically sells DVDs for $15 each. The DVDs cost Movie Magic $7 each. Assume that Movie Magic is approached by a new regional day care company that would like to make a one- time purchase of 500 DVDs. Since the day care company provides entertainment for its client children, it requires a wide selection of movies. Suppose that the day care company offers to pay $12 per DVD.
Assuming that the sale of DVDs will not interfere with sales to other customers, should Movie Magic accept the offer even though the selling price is below its normal price? What will be the impact on net income if the offer is accepted?
II. Cyclorama makes and sells Power-Speed bicycles for $400 each. The cost of making bicycles includes variable costs of $150 per bicycle and fixed costs of $300,000 per year. Cyclorama has been approached by the state police agency about making a one-time purchase of 200 bicycles and has offered to pay Cyclorama $280 apiece for them.
Assuming that the company has time to make the bicycles without incurring any additional costs, should Cyclorama accept the offer even though the selling price is below its normal price? What will be the impact on net income if the offer is accepted?
III. In addition to flowers and plants, Fannie's Florist sells candy bouquets. Fannie currently buys candy bouquets from a local distributor for $8 each and sells the bouquets for $10 each. She sells 300 candy bouquets per month for eight months of the year, 500 bouquets per month for three months, and about 1,000 bouquets during February around Valentine's Day. Her daughter has suggested that they could produce their own candy bouquets. After investigating the costs, they discovered that candy will cost them an average of $1 per candy bouquet. In addition, it will cost about $3 per candy bouquet to pay people to assemble the candy bouquet. Also, it will cost $2,000 per month to rent a building to store and produce the candy bouquets.
What is the annual net cost of buying candy bouquets from the distributor? What is the annual net cost of making the candy bouquets themselves?
Should Fannie's Florist produce or buy the candy bouquets?
Are the selling price and total revenue received from customers relevant to this decision?
IV. Purple Cow Company has three business segments: Jersey, Angus, and Brahma.
Each segment had the following assets and generated the following margins last year:
|
|
Jersey
|
Angus
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Brahma
|
|
Segment assets
|
$100,000
|
$150,000
|
$300,000
|
|
Segment margin
|
$ 45,000
|
$ 60,000
|
$102,000
|
Compute ROI for each segment
If the interest rate used to determine the segment financing charge is 20%, what is the residual income for each segment?
Which segment performed the best; the worst?
V. The president of Sheffield's Shoes forecasts the company will incur $1,560,000 of manufacturing overhead in the coming year. The company also expects the following results for its operations in the coming year:
Direct labor hours 192,000 Direct labor cost $ 2,400,000 Machine hours 60,000
Compute overhead allocation rates based on the following bases: Direct labor hours
Direct labor dollars Machine hours
If the company decides to use direct labor hours as its basis for overhead allocation, how much overhead would be allocated to a product that requires 5,000 hours of direct labor?
VI. Sydney Corp. reported the following data about its production process for the current month: Cost of beginning work in process $ 90,000
Total manufacturing cost $ 560,000 Units completed 36,000
Units in process (20%) complete 20,000
Compute the equivalent units of production for the month. Compute the average cost per equivalent unit.
VII. Boxcar Electronics uses the same machinery to produce multiple products. Total overhead cost for the company is $1,800,000. 72,000 direct labor hours were used during the year. The following additional information was found in the company's records:
|
|
Product A
|
All Other Products
|
Total
|
|
Units produced
|
3,500
|
659,000
|
662,500
|
|
Direct material cost
|
$ 50,000
|
$ 4,450,000
|
$
|
|
4,500,000
|
|
|
|
|
Direct labor cost
|
$ 12,000
|
$ 488,000
|
$
|
|
500,000
|
|
|
|
|
Machine hours
|
16,500
|
733,500
|
750,000
|
|
Direct labor hours
|
2,200
|
69,800
|
72,000
|
|
Engineering changes per year
|
5
|
295
|
300
|
|
Production set-ups
|
30
|
2,470
|
2,500
|
Given the technological nature of these products, the company periodically modifies the products to meet customer-specific needs. Engineering overhead costs incurred to make these product changes total $480,000 per year. Each production run also requires a unique set-up for each product. Total set-up charges of $420,000 are included in manufacturing overhead. Other major activities, their total overhead costs, and related cost drivers are purchasing $315,000, material costs; production, $585,000, direct labor hours.
Calculate the cost of Product A using the traditional method of overhead allocation.
Estimate the product's overhead cost per unit using each of the following four possible allocation bases:
Direct material cost Direct labor cost Machine hours Direct labor hours
Calculate the total cost and unit cost of Product A using activity-based costing.
Format your assignment according to the give formatting requirements:
a. The answer must be double spaced, typed, using Times New Roman font (size 12), with one-inch margins on all sides.
b. The response also includes a cover page containing the title of the assignment, the course title, the student's name, and the date. The cover page is not included in the required page length.
c. Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.