Case
1
You’re a Advisor for the skilled service agency, BUSI 2083 LLP.
Your agency makes a speciality of offering a
vast number of inner enterprise options for various shoppers. It’s
your first day on the job and a Supervisor asks you for some assist with a consumer in
the Know-how & Leisure sector. Wanting to please in your first day,
you begin studying the background data supplied by the Supervisor.
4D Leisure, a division of Wave of the Future Company,
manufactures two large-screen tv fashions: the Zenith, which has been
produced since 2008 and sells for $1,700, and the Pinnacle, a brand new mannequin launched
in early 2008, which sells for $2,200. Primarily based on the next revenue assertion
for the yr ended November 30, 2014, senior administration at Wave of the Future
have determined to pay attention 4D Entertainmentâs advertising assets on the
Pinnacle mannequin and start to section out the Zenith mannequin.
Further Info:
4D Leisure
Earnings Assertion
For the Yr Ended November 30, 2014
Zenith
Pinnacle
Complete
Gross sales
$30,600,000
$four,400,000
$35,000,000
COGS
19,890,000
three,zero80,000
22,970,000
Gross
Margin
10,710,000
1,320,000
12,zero30,000
Promoting
and Admin Expense
eight,032,500
925,000
eight,957,500
Working
Earnings
$2,677,500
$395,000
$three,zero72,500
Items
Bought
18,000
2,000
Working
Earnings per Unit Bought
$148.75
$197.50
Unit prices for Zenith and Pinnacle are as follows:
Zenith
Pinnacle
Direct
Materials
$540.00
$1,089.00
Direct
Labor
Zenith
(2.5 hours x $18 per hr)
45.00
Pinnacle
(7.zero hours x $18 per hr)
126.00
Machine
prices*
Zenith
(eight hours x $25 per hr)
200.00
Pinnacle
(5 hours x $25 per hr)
125.00
Different
Manufacturing Overhead**
320.00
200.00
Complete
$1,105.00
$1,540.00
*Machine prices embody leasing of the machine, repairs, and upkeep.
** Different manufacturing overhead is allotted on the idea of machine
hours at a charge of $40 per machine hour.
4Dâs controller, Tina Wesley, is advocating the usage of activity-based
costing (ABC) and exercise primarily based administration (ABM), and has gathered the
following details about the companyâs manufacturing overhead prices for the
yr ended November 30, 2014.
Items
of Price Driver
Complete
Exercise Prices
Zenith
Pinnacle
Soldering
$1,872,400
1,296,000
214,000
Shipments
1,480,000
1,500
500
High quality
Management
1,749,600
54,000
18,000
Buy
Orders
582,400
16,640
four,160
Machine
Energy
61,600
144,000
10,000
Machine
Set-up
414,000
360
100
Complete
Manufacturing Overhead
$6,160,000
Soldering is predicated on the variety of solder factors, shipments primarily based on
the variety of shipments, high quality management primarily based on the variety of inspections,
buy orders primarily based on the variety of POâs, machine energy primarily based on machine
hours, machine setups primarily based on the variety of setups.
After finishing her evaluation, Wesley confirmed the outcomes to Donald
Warden, the 4D Leisure Division President. Warden didn’t like what he
noticed. âShould you present headquarters this evaluation, they’ll ask us to section
out the Pinnacle line, which we’ve simply launched. This complete costing factor
has been a significant downside for us. First Zenith was not worthwhile and now
Pinnacle.
âTrying on the ABC evaluation, I see two issues. We do many extra
actions than those you have got listed. Should you had included all actions,
perhaps your conclusions would have been completely different. Second, you used variety of
setups and variety of inspections as allocation bases. The numbers would have
been completely different had you used setup hours and inspection hours as an alternative. I do know
that measurement issues precluded you from utilizing these different value allocation
bases, however at the very least you should make some changes to our present numbers
to compensate for these points. I do know you are able to do higher. We canât afford to
section out both product.â
Wesley knew her numbers had been pretty correct. On a restricted pattern, she
had calculated the profitability of Zenith and Pinnacle utilizing completely different
allocation bases. The set of actions and exercise charges she had chosen
resulted in numbers that approximated carefully these primarily based on extra detailed
analyses. She was assured that headquarters, understanding that Pinnacle was
launched solely not too long ago, wouldn’t ask 4D Leisure to section it out. She
was additionally conscious that a sizable portion of Wardenâs bonus was primarily based on division
gross sales. Phasing out both product would adversely have an effect on the bonus. Nonetheless, she
felt some strain from Warden to do one thing.
4D Leisure is not sure of the methods to correctly replicate
data for his or her guardian firm. The supervisor would really like the next
questions addressed as quickly as doable:
REQUIRED
1.
Utilizing activity-based costing (ABC),
calculate the profitability of the Zenith and Pinnacle fashions.
2.
Clarify briefly why these numbers
differ from the profitability of the Zenith and Pinnacle fashions calculated
utilizing 4D Entertainmentâs present costing system.
three.
Touch upon Wardenâs issues about
the accuracy and limitations of ABC.
four.
How may 4D Leisure discover the
ABC data useful in managing its enterprise?
5.
What ought to Tiny Wesley do?
Case 2
You’re a Advisor for the skilled service agency, BUSI 2083 LLP.
Your agency makes a speciality of offering all kinds of inner enterprise
options for various shoppers. A shopper enterprise companion throughout the agency
notices your availability at three:00pm on a Friday afternoon and pulls you right into a
assembly with one among his excessive profile shoppers.
Background
Darkish and Daring Inc. manufactures a line of single-cup brewing machines
for dwelling and workplace use that brew a cup of espresso, tea, or scorching chocolate in
lower than a minute. The machines use specifically packaged parts of espresso,
tea, or scorching chocolate that may be bought on-line instantly from Darkish and Daring
or at Second Cup espresso retailers who’re licensed to distribute the companyâs
merchandise. The attraction of the brewing machines is twofold. First, they provide a
excessive stage of comfort. Using prepackaged espresso servings means no
grinding of espresso beans and no mess. Additionally, the brewing machines have a water
reservoir that for some fashions is giant sufficient to make as much as 20 cups of espresso.
Second, the style of
every cup of espresso, tea, and scorching chocolate could be very constant. The
brewersâ pressurized system makes use of the identical quantity of water for every cup and the
hermetic seal used within the particular person parts retains the
product contemporary.
Further Info
The corporate has three fashions of brewers that supply completely different options,
reminiscent of the dimensions of the water reservoir, the variety of brewing sizes, and the
varieties of filtering gadgets used within the machine. Information from the latest
fiscal yr for the three fashions is proven under.
Mannequin
House
Brewer
Workplace
Brewer
European
Deluxe
Gross sales
quantity (items)
12,000
30,000
6,000
Unit
promoting worth
$150
$200
$300
Variable
value per unit
120
140
180
Contribution
margin per unit
$30
$60
$120
Mounted prices are $1,500,000 per yr. The corporate has no work in course of
or completed items inventories. The corporate is dealing with elevated ranges of
competitors from producers utilizing comparable brewing applied sciences and believes
there is no such thing as a room for any will increase in unit promoting costs.
Darkish and Daring Inc. is not sure of the methods to take in an effort to
improve profitability. The engagement companion would really like the next
questions on his desk by Monday morning:
Required:
1.
Calculate the companyâs total
break-even level in gross sales dollars.
2.
Calculate the gross sales dollars required
for every product on the total break-even stage of gross sales calculated in (1)
above.
three.
Calculate the companyâs total
break-even level in whole items.
four.
What influence would doubling the quantity
of Workplace Brewer items bought subsequent yr have on the general break-even level in
gross sales dollars? Assume that there will probably be no modifications to the House Brewer or
European Deluxe unit gross sales, that unit promoting costs and variable prices will
stay the identical for every mannequin, and that whole mounted prices will probably be unchanged.
5.
The corporate is contemplating a brand new
promoting marketing campaign to boost total shopper consciousness of the product
choices. The whole value of the year-long marketing campaign could be $150,000. By how
a lot would gross sales want to extend total for the corporate to have the ability to justify
the brand new marketing campaign? Assume no change to the present product combine.
6.
Suppose that as an alternative of being
designed to extend whole gross sales quantity, the brand new $150,000 promoting marketing campaign
will give attention to getting prospects who would have bought the Workplace Brewer
mannequin to purchase the European Deluxe mannequin as an alternative. To justify the price of the brand new
promoting, what number of prospects should buy the European Deluxe mannequin as an alternative
of the Workplace Fundamental mannequin? Assume that the brand new promoting marketing campaign may have
no influence on gross sales of the House Brewer mannequin.
7.
The corporate is contemplating including a
new product to its line of brewers focused on the workplace use market (each the
Workplace Brewer and European Deluxe are at present concentrating on workplace customers). The
new brewer, the Workplace Plus, would promote for $250 per unit and would have
variable unit prices of $160. Introducing the brand new mannequin would improve mounted
prices by $102,000 yearly and would scale back annual unit gross sales of the Workplace
Brewer and European Deluxe fashions by 10% every. Assuming no change to the gross sales of
the House Brewer mannequin, what number of items of the Workplace Plus would should be bought
to justify its addition to the product line subsequent yr?
Case three
Background
You’re a Advisor for the skilled service agency, BUSI 2083 LLP.
Your agency makes a speciality of offering all kinds of inner enterprise
options for various shoppers. One of many companions in your follow would
like to offer again to the neighborhood by serving to a non-for-profit firm,
Guardian Angel, put together a grasp finances with out charging them service charges. She
asks you to take the lead on this engagement with the hope that a profitable
consequence could result in your promotion to Senior Advisor. You’re taking the
background information from the companion and get began.
Guardian Angel is a non-for-profit group that helps give avenue
youth a second probability by offering them with enterprise clothes and educating
them work associated abilities. The corporate is preparing for a fundraiser by
promoting crystal angle wing key chains. The data under about Guardian
Angelâs operations has been assembled to help finances preparation. The corporate
is getting ready its grasp finances for the primary quarter of 2014. The finances will
element every monthâs exercise and the exercise
for the quarter in whole. The grasp finances will probably be primarily based on the
following data:
Further Info
a. Promoting worth is $60 per unit in 2013 and won’t change for the
first two quarters of 2014. Precise and estimated gross sales are as follows:
Precise
2013
Estimated
2014
November:
10,000 items
January:
11,000 items
December:
12,000 items
February:
10,000 items
March:
13,000 items
April:
11,000 items
Could:
10,000 items
b. The corporate produces sufficient items every month to fulfill that monthâs
gross sales plus a desired stock stage equal to 20% of subsequent monthâs estimated
gross sales. Completed Items stock on the finish of 2011 consisted of two,200 items at
a variable value of $33 every.
c. The corporate purchases sufficient uncooked supplies every month for the present
monthâs manufacturing requirement and 25% of subsequent monthâs manufacturing necessities.
Every unit of product requires 5 kilograms of uncooked materials at $zero.60 per
kilogram. There have been 13,500 kilograms of uncooked supplies in stock on the finish
of 2013. Guardian Angel pays 40% of uncooked materials purchases within the month of
buy and pays the remaining 60% within the following month.
d. Every unit of completed product requires 1.25 labor-hours. The common
wage charge is $16 per hour. e. Variable manufacturing overhead is 50% of the
direct labor value.
f. Credit score gross sales are 60% of whole gross sales. The corporate collects 50% of the
credit score gross sales throughout the first month following the month of sale and 50% throughout
the second month.
g. Mounted overhead value (per thirty days):
Manufacturing facility
supervisorâs wage
$75,000
Manufacturing facility
insurance coverage
1,400
Manufacturing facility
hire
eight,000
Depreciation
of manufacturing unit gear
1,200
h. Complete mounted promoting and administrative bills are as follows:
Promoting
$300
Depreciation
9,000
Insurance coverage
250
Salaries
four,000
Different
14,550
i. Variable promoting and administrative bills encompass $four for
delivery and gross sales commissions of 10% of gross sales.
j. The corporate goes to accumulate property to be used within the gross sales workplace at
a price of $300,000, which will probably be paid on the finish of January 2014. The month-to-month
depreciation expense on the extra capital property will probably be $6,000.
ok. The stability sheet as of December 31, 2013, is as follows:
Belongings
Money
$80,000
Accounts
receivable
612,000
Stock:
uncooked supplies
$eight,100
Completed
items
72,600
80,700
Plant
and gear
1,000,000
Much less:
gathered depreciation
(100,000)
900,000
Complete
Belongings
$1,672,700
Liabilities and Fairness
Accounts
payable
$24,000
6% lengthy
time period notes payable
900,000
Widespread
shares
735,000
Retained
earnings
13,700
Complete liabilities
and fairness
$1,672,700
Further data:
o
All money funds besides purchases of
uncooked supplies are made month-to-month as incurred.
o
All mortgage repayments and borrowings,
when applicable, happen on the finish of every month.
o
All curiosity on borrowed funds is
paid on the finish of every month on the charge of 6% per yr.
o
Mortgage repayments and borrowings, when
applicable, could also be made in any quantity.
o
A minimal money stability of $30,000 is
required on the finish of every month.
Having a greater grasp of the consumer and data required in an effort to
put together a grasp finances, you get to work on fixing the clientâs wants:
Required:
1.
Put together the next budgets for the
first three months of 2014:
a. Gross sales finances
b.Manufacturing finances
c. Uncooked supplies purchases finances
d.Direct labor and manufacturing overhead finances
e.Promoting and administrative finances
f. Budgeted revenue assertion (utilizing variable costing). Ignore revenue taxes.
g.Money finances
Case four
Background
You will have not too long ago been promoted to Senior Advisor for the skilled
service agency, BUSI 2083 LLP thanks partially to the laborious work in main the
engagement to your consumer Guardian Angel. Your agency makes a speciality of offering a
vast number of inner enterprise options for various shoppers. After a
weekend of celebrations out of your promotion, a Senior Supervisor calls you into
her workplace very first thing Monday morning to assist with a producing consumer who
is making a tricky choice about closing a plant:
Low Rider (LR) manufactures seats for vehicles, vans, vans, and
boats. The corporate has a lot of vegetation, together with the Waterloo Cowl Plant,
which makes seat covers.
Invoice Rice is the plant supervisor on the Waterloo Cowl Plant but in addition
serves because the regional manufacturing supervisor for the corporate. His finances because the regional
supervisor is charged to the Waterloo plant.
Further Info
Rice has simply heard that LR has acquired a bid from an outdoor vendor to
provide the equal of your complete annual output of the Waterloo Cowl Plant
for $42 million. Rice was astonished on the low outdoors bid as a result of the finances
for the plantâs working prices for the approaching yr was set at $48.6 million.
If this bid is accepted, the Waterloo operation will probably be closed down.
The finances for the Waterloo Cowl Plantâs working prices for the approaching
yr is offered under.
Supplies
$16,000,000
Labor:
Direct
$13,400,000
Supervisor
800,000
Oblique
plant
three,800,000
18,000,000
Overhead:
Depreciation
– gear
2,600,000
Depreciation
– constructing
four,200,000
Pension
expense
three,200,000
Plant
supervisor and workers*
1,200,000
Company
bills**
three,400,000
14,600,000
Complete
budgeted prices
$48,600,000
*Bills for Rice and his regional workers
** Mounted company bills allotted to vegetation and different working
items primarily based on whole budgeted wage and wage prices.
The next are further information concerning the plantâs operations:
a. As a result of plantâs dedication to make use of high-quality materials in all of
its merchandise, the Buying Division was instructed to put blanket
buy orders with main suppliers to make sure the receipt of adequate
supplies for the approaching yr. If these orders are cancelled as a consequence
of the plant closing, termination fees would quantity to 25% of the price of direct
supplies.
b. Roughly 350 staff will lose their jobs if the plant
is closed. This contains all the direct laborers and supervisors, administration
and workers, and the plumbers, electricians, and different expert employees categorized
as oblique plant employees. A few of these employees would have issue discovering
new jobs. Practically all of the manufacturing employees would have issue matching the
plantâs base pay of $12.50 per hour, which is the very best within the space. A clause
within the plantâs contract with the union could assist some staff; the corporate
should present employment help and job coaching to its former staff for
12 months after a plant closing. The estimated value to manage this service
could be $1.6 million.
c. Some staff would in all probability select early retirement as a result of LR has
a superb pension plan. In actual fact, $1.four million of the annual pension
expenditures would proceed whether or not the plant is open or not.
d. Rice and his regional workers wouldn’t be affected by the closing of
the Waterloo plant. They’d nonetheless be answerable for operating three different
space vegetation.
e. If the plant was closed, the corporate would understand about $four million
salvage worth for the gear within the plant. If the plant stays open, there
are not any plans to make any vital investments in new gear or buildings.
The outdated gear is enough for the job and may final indefinitely.
Required:
1.
With out regard to prices, establish the
benefits to LR of constant to acquire covers from its personal Waterloo Cowl Plant.
2.
LR plans to arrange a monetary
evaluation that will probably be utilized in deciding whether or not or to not shut the
three.
Waterloo Cowl Plant. Administration has
requested you to establish:
a.
The annual budgeted prices which are
related to the choice concerning closing the plant (present the greenback quantities).
b.
The annual budgeted prices which are
not related to the choice concerning closing the plant and clarify why they
are usually not related (once more present the greenback quantities).
c.
Any non-recurring prices that might
come up as a result of closing of the plant and clarify how they might have an effect on the
choice (once more present any greenback quantities).
four.
Trying on the knowledge you ready in
(2) above, ought to the plant be closed? Present computations and clarify your
reply.
5.
Determine any revenues or prices not
particularly talked about in the issue that AI ought to think about earlier than making a
choice.
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