1. What is meant by an activity base when dealing with variable costs? Give several examples of activity bases. What are the arguments in favor of treating fixed manufacturing overhead costs as period costs? (22.5=5 marks ) 2. La Mode established itself as a trusted source of unique ladies footwear in Bangladesh and they proudly announce their products as "Made in Bangladesh". They are based in Dhaka, Bangladesh. La Mode is renowned for its fashion authority, unique design \& craftsmanship with the best quality. La Mode dedicates itself to quality, unique design, and exceptional value for the price. They invite customers the spirit of ultimate fashion footwear to indulge with uniqueness \& sophistication which is constructed with high-quality craftsmanship. The following worksheet contains cost and revenue data for Banani Showroom of La Mode BD: Mr. Fahim Shafiul Alam, Managing Director of La Mode BD, is planning to open another showroom in Dhaka city by next year. To do so he is interested to know required business preparation, possible investment, risk factors, logistic supports, and other necessary stuffs. As you are doing Management Accounting (ACT202) as part of BBA program at Brac University he believes you can work as his business analyst, and you can advise him for the upcoming project. Mr. Alam believes that the Banani branch can be a great example and its data are sufficiently enough to forecast for the next project. Later he sent me an email and requested you to answer his following questions using the concept of Cost-Volume-Profit (CVP) analysis. a. Calculate the annual break-even point in unit sales and in dollar sales for Banani Showroom. (1 mark) b. If 15,000 pairs of shoes are sold in a year, what would be net operating income or loss for La Mode? (1 mark) c. Mr. Alam is considering paying the branch manager of Banani Showroom an incentive commission of 75 cents per pair of shoes (in addition to the salesperson's commission). If this change is made, what will be the new break-even point in unit sales and in dollar sales? (1 mark) d. If you use original data. As an alternative to (III) above, the La Mode BD is considering paying the store manager 50 cents commission on each pair of shoes sold in excess of the break-even point. If this change is made, what will be the Banani Showroom's net operating income or loss if 18,000 pairs of shoes are sold? (1 mark) e. Refer to the original data. La Mode is considering eliminating sales commissions entirely for Banani Showroom and increasing fixed staff salaries by $40,000 annually. If this change is made, what will be the new break-even point in unit sales and in dollar sales for Banani Showroom? Mr. Alam is seeking your advice. Do you recommend Mr Alam to make the change or not? Advice based on your understanding with supporting calculations. (2 marks) f. Mr. Alam is interested to know how many pairs of shoes need to be sold to achieve a target profit of $180,000. (2 marks) g. Mr. got to know some tools of management accounting when he was searching for an appropriate analyst, and he is excited to know these tools from you. For instance, Mr. Alam wants to know his margin of safety in his business (Banani Showroom) with the original data. Later, he shows his desire to know the uses of operating leverage which has been widely used in management accounting research. Could you please calculate degree of operating leverage for his Banani Showroom and explain its uses? ( 2 marks)