Bmac5203 Accounting For Decision Making Assessment Answer


Answers:

Statement Showing Calculation of Contribution per unit

Particulars

% on SP

Amount

Amount

Sales Price

 

 

$800.00

Less: Variable Cost

 

 

 

Sales Person

9%

$72.00

 

Advertising

11%

$88.00

 

Supplies and postage

4%

$32.00

 

Usage fees

6%

$48.00

 

Total variable cost

 

 

$240.00

Contribution per unit

 

 

$560.00

Contribution Margin ratio

 

 

70%

  

Statement showing calculation of Breakeven Point

Particulars

Amount

Office Rent

8000

Depreciation on office furniture

1700

Utilities

2400

Special Telephone Line

1500

Computerized Services

2500

Salary of Sales person

11900

Fixed Costs

$28,000.00

Contribution per unit

$560.00

Breakeven Units

50.00

 

Statement showing calculation of Revenue for targeted profit

Particulars

Amount

Fixed Costs (A)

$28,000.00

Targeted Profit (B)

$11,200.00

Contribution (A+B)

$39,200.00

Required Revenue

$56,000.00

The graph above indicates the cost volume price relationship. The sales price is $800 units so as provided earlier in order to earn a profit of $11200 70 units is needed to be sold.

Statement Showing Calculation of Contribution per unit

Particulars

% on SP

Amount

Amount

Sales Price

 

 

$2,000.00

Less: Variable Cost

 

 

 

Sales Person

9%

$180.00

 

Advertising

11%

$220.00

 

Supplies and postage

4%

$80.00

 

Usage fees

6%

$120.00

 

Total variable cost

 

 

$600.00

Contribution per unit

 

 

$1,400.00

Contribution Margin ratio

 

 

70%

It is provided that if the selling price per unit of the product increases then based on the above calculation the increase in selling price has resulted in increase in contribution per unit. The fixed cost remaining the same as a result, the breakeven point has decreased. That means the company has to sell less units to recover the fixed costs. As provided earlier in the current selling price the breakeven point is 50 units. On increase in selling price, the revised breakeven calculation is provided below:

Calculation of breakeven Point

Particulars

Amount

Fixed Costs

$28,000.00

Contribution per unit

$1,400.00

Breakeven Units

20.00

Breakeven Sales

$40,000.00

Calculation of Revised Profit after dropping product C

Particulars

Product A

Product B

Total

Sales

$120,000.00

$150,000.00

$270,000.00

Less:

 

 

 

Variable Costs

$70,000.00

$80,000.00

$150,000.00

Contribution (sales –VC)

$50,000.00

$70,000.00

$120,000.00

Less:

 

 

 

Fixed Costs

$45,000.00

$45,000.00

$90,000.00

Net Income (Contribution- Fixed costs)

$5,000.00

$25,000.00

$30,000.00

The table above indicates the profit of the company if it decides to drop the product C. It can be seen that on dropping the product C the overall profit of the Alpha company has declined from $60000 to $30000. The main reason for the decline in profit is that dropping of product C will not reduce fixed costs and it will be distributed between product A and product B. This will result in decline in the profit of product A and Product B hence the overall profit will decline. Therefore, it can be said that the Product C should be continued because though it was not profitable but the contribution from Product C helped top recover certain portion of the fixed costs hence increasing the overall profit of the company.

Safeco Sales Budget

Particulars

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Units

1000

1100

1200

1500

Sales Price Per unit

$65.00

$65.00

$65.00

$65.00

Sales

$65,000.00

$71,500.00

$78,000.00

$97,500.00


Safeco Production Budget

Particulars

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Sales Unit

1000

1100

1200

1500

Closing  Inventory (Unit) (10% of next month sales as provided in the question)

110

120

150

160

Less

 

 

 

 

Opening Inventory (units)

0

110

120

150

Production Units (Sales unit+ Closing inventory –Opening inventory)

1110

1110

1230

1510

Safeco Production Cost Budget

Particulars

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Direct material

$17,760.00

$17,760.00

$19,680.00

$24,160.00

Direct Labor

$22,200.00

$22,200.00

$24,600.00

$30,200.00

Production Over head

$5,000.00

$5,000.00

$5,000.00

$5,000.00

Total Production Cost

$44,960.00

$44,960.00

$49,280.00

$59,360.00

The above product cost budget is calculated based on the information provided in the question. The per unit cost provided in the question is multiplied with the production unit provided in the previous table to get the answers.

Bibliography

Chintrakarn, P., Jiraporn, P., & Kim, Y. S. (2017). Did Firms Manage Earnings more Aggressively during the Financial Crisis?. International Review of Finance.

Giroux, D., Robichaud, L., Tétreault, S., & Langlois, L. (2013). Competency of Seniors with Dementia to Live Independently and Manage Finance: Synthesis of the Legislation in Quebec. Canadian Review of Social Policy/Revue canadienne de politique sociale, 2(68-69).

Gitman, L. J., Juchau, R., & Flanagan, J. (2015). Principles of managerial finance. Pearson Higher Education AU.

Kasuma, J., Said, S. S., Yacob, Y., Kassim, S. A., Sarkawi, I. M., & Shahrinaz, I. (2017). Managing Risk, Networking and Managing Finance and the Successful of Sarawak Bumiputera Entrepreneur. Advanced Science Letters, 23(8), 7557-7561.


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