All answers must be in Excel:
1. State University's School offers several degree, including Bachelor of Business Administration. The new dean believes in using cost accosting information to make decisions and is reviewing a staff -develop income statement broken down by the degree offered. The dean is considering closing down the BBA program because the analysis which follows shown a loss. Tuition increase is not possible. The dean has asked for your advice. If the BBA degree program us dropped, School adnimstration cost are not expected to change, but direct cost of the program such as operation cost, building maintenance, and class room cost would be saved. There will be no other changes in the operation or cost of other program
State University Business School, BBA Degree Income Statement for the Yr ended June 30
|
Revenue
|
6,000,000
|
|
Advertising
|
225,000
|
|
Faculty Salaries
|
3,060,000
|
|
Degree operation cost
|
390,000
|
|
Building and maintenance
|
555,000
|
|
Class room cost
|
1,275,000
|
|
Allocated school Admi cost
|
645,000
|
|
Total
|
6,150,000
|
|
Net loss
|
(150,000)
|
Requires:
What revenue and cost or property differentiated for the decision to drop the BBA program? What will be the net effect on the SUBS contribution (profit) If the BBA program is drooped? Is there any other information you would like to have before recommending whether or not to drop the BBA program?
2. Refer to the information in problem 1. The dean of the Business School is considering expanding the BBA program by offering an evening program. The new evening program would be the same size. The school CFO estimate that the combined BBA revenue (on-campus plus evening program) will be twice the amount revenue; as shown in problem 1. Because the evening program will be new, using expand for the evening session will be three times the current level. Faculty salaries will be double. Degree operation cost will increase by 50%. Building and Maintenance and class room cost will remain unchanged, but class room space will be rented at a cost of $300,000 per academic yr. School administration will be increase by $30,000 and allocated school administration cost (for both program) will be $78,000 per academic yr.
Require
a. What will the contribution of the combine BBA program be given theses estimated
b. Are there other factors the dean should consider before making a decision
Exhibit :
|
Food
|
Actual
|
Budget
|
Diff
|
|
Flour
|
2100
|
2200
|
(100)
|
|
Eggs
|
5200
|
4700
|
500
|
|
Chocolate
|
2000
|
1900
|
100
|
|
Nuts
|
2000
|
1900
|
100
|
|
other
|
2200
|
2200
|
0
|
|
total
|
13,500
|
12,900
|
600
|
|
Labor
|
|
|
|
|
Manager
|
3000
|
3000
|
0
|
|
other
|
1500
|
1500
|
0
|
|
Total
|
4500
|
4500
|
0
|
|
utility
|
1800
|
1800
|
0
|
|
Rent
|
5000
|
5000
|
0
|
|
Total Cookies cost
|
24,800
|
24,200
|
600
|
|
Number of Cookies
|
32,000
|
32,000
|
0
|
3. KC services provided landscaping services in Edison. Kate Chen, the owners is concerned about the recent loses the company has incurred and is considering dropped it lawn services, which she feel and marginal to the company business. She estimated that doing so will result in lost revenue of $150,000 per yr. The present manager will continue to supervise the tree services with no reduction in salary. Without the lawn business, Kate estimates that the company will save 15% of the equipment lease, labor, and other cost. She also expects to save 20% on rent and utilities
Require
a. Prepare a report of the differential cost and revenue if the lawn service is discontinued?
KC SERVICES
Annual Income Statement
|
Sales revenue
|
912,000
|
|
Equp lease
|
|
|
Equipment lease
|
360,000
|
|
Labor
|
288,000
|
|
Utilties
|
48,000
|
|
Rent
|
96,000
|
|
Other cost
|
48,000
|
|
Manager salaries
|
120,000
|
|
Total
|
960,00
|
|
Operating Profit(loss)
|
(48,000)
|
b. Should Kate discontinue the lawn services?
c. Are there factors other than the differential cost and revenue the Kate should considered?
4. Tom Tax Services is a small accounting firm that offers tax services to small business and individual. A local store owner has approached Tam about doing her taxes but is concerned about the fees Tom normally charge. The cost and revenue at Toms Tax service follow. If gets stores business, he will increase an additional $60,000 in labor cost. Tom alos estimated that he will have to increase equipment leases by about 10%, supplies by 5% and other cost by 15%
Tom Tax Annual income Statement
|
Sales revenue
|
720,000
|
|
|
|
|
Labor
|
477,000
|
|
Equipmnet
|
50,400
|
|
Rent
|
43,200
|
|
Suppkues
|
32,400
|
|
Tom Salaries
|
75,000
|
|
Other cost
|
22,80
|
|
Total
|
700,800
|
|
Operating profit(loss)
|
19,200
|
a. What ere the differential cost that would be increase as a result of adding this new client?
b. Tom would normally charge $75,000 in fee for the service the store will require. How much could offer to change and still not lose money on this client?
c. What considering, other than cost are necessary before making decision?
5. Refer to Exhibit Assumes that Carualmen Cookies is preparing a budget for the month ending September 30. Management prepares the budget by starting with the actual cost results for April that appears in Exhibit . Then management considers what the difference is cost between April and September.
Managements expect Cookies sales to be 20% greater in September than April, and it expects to find cost to be 20% higher in September than in April. Mgt expects "other" labor cost to be 20% higher in September than in April, partly because more labor will be required in September and partly because employees will get a pay rise. The manager will get a pay rise that will increase the salary from $3,000in April to $3,500 in September. Utility will be 5% higher in September than in April the rent will be the same in September as in April. The following actual result occurred in September
CARRMEN COKIES
Actual for the mouth ending September 30
|
Food
|
|
|
Flour
|
2,700
|
|
Eggs
|
6,500
|
|
Chocolate
|
2,100
|
|
Nuts
|
2,300
|
|
Other
|
2,700
|
|
Total
|
16,300
|
|
Labor
|
|
|
Manager
|
3,500
|
|
Other
|
1,850
|
|
Total
|
5,350
|
|
Utility
|
2,200
|
|
Rent
|
5,000
|
|
Total Cookies Cost
|
28,850
|
|
Number of Cookies sold
|
38,400
|
a. Prepare a statement like the one in Exhibit that compare the budget and actual cost for September
b. Suppose that you have limited time to determine why actual cost are not the same as budget cost which three cost items would you investigate to see why actual & budget cost are differentiated why would you choose the 3 cost?