Dynamadics Inc, is large, locally owned company operating in several regions within western Canada. Each region manufacture and sell apparel and accessories for both business and casual wear. The products lines include shoes, boots, sandals, purses, backpacks and computer bags. The company has an extensive distribution channel allowing for sales throughout the world. Operational information - Part 1 Dynamadics uses a job-order costing system in all of its operations. Manufacturing overhead costs (MOH) are applied to the manufacturing costs for all product lines using predetermined overhead rates. The following estimates were established at the beginning of the year for one specific product line - specialized purses. A recent order was started on August 1 and completed on August 10th. This order was assigned job order number 220 and included 50 specialized purses made from high quality leather requiring hand-crafted detailing which is unique to each purse. The company's cost records are presented below for this job order. At the end of the year, Dynamadics recorded the following actual costs and operating data for all jobs that were completed in each of these two divisions during the year. Requirement #1 (14 marks) You have been asked to provide the following: 1. Total cost for Job 220. ( 6 marks) 2. Cost per unit. (1 mark) 3. The journal entry to close out the overhead account in each division at the end of the year. (7 marks) Operational information Part 2 The owners of Dynamadics were reviewing the financial information for one of its product lines produced and sold from its Penticton region. The revenues and expenses for the last four months for this product line in the Penticton Region is presented below. Requirement #2 (19 marks) The owners are concerned about the profit levels for the Penticton region. They would like to understand more about the cost behaviours and have asked you to prepare some analysis based on the information presented in Operational information Part 2. Specifically, they would like to know the following: 1. Of the costs incurred, which are variable, fixed or a combination of variable and fixed (mixed)? (1.5 marks) 2. What is the cost equation for each of the mixed costs? (tip: use the high-low method) (7.5 marks) 3. Sales demand in the August is expected to be 6,300 units. Prepare a contribution margin income statement (in good form) for the month of August. ( 10 marks) Operational information Part 3 The owners continued their review of operations, focusing next on the Calgary Region which was organized similarly to the Penticton Region and produced and sold the same product line as the Penticton Region. The revenues and expenses for the last four months for this product line in the Calgary Region are presented below. The manager of operations at the Calgary region provided the following cost information for each of the mixed costs: Requirement #3 (17 marks) The owners are grateful for the information provided by the Calgary region respecting the cost behaviours for this product line. Their focus now is on understanding the impact of a change in any of the factors that impact profits. They would like you to complete some cost-volume-profit (CVP) analysis. Note: Use 2 decimal places for contribution margin (CM) and CM ratios. 1. What is the annual total fixed cost based on the information provided? ( 1 mark) 2. What is the annual break-even sales in units (assume that fixed costs are incurred uniformly throughout the year). ( 2 marks) 3. What Sales Revenues are required annually to break-even? (2 marks) 4. How many units need to be sold to achieve a target monthly profit of $85,000 ? ( 1 mark) 5. What profit will be realized if 75,000 units are sold during the year? ( 2 marks) 6. Create a CM income statement at 75,000 units annually including both total and per unit data. ( 3 marks) 7. The owners asked the Calgary Region to consider options to improve profitability based on the calculations from 45 above (at 75,000 units annually). Two proposals were submitted to the owner. They would like you to analyze each option and provide a recommendation with an explanation on which (if any) option should be implemented to improve profitability. Based on your calculations in #5 above, prepare a comparative CM income statement to demonstrate the change and impact to profits for both of the options. a) The operations manager has proposed that a reduction of $8.50 in the selling price per unit would increase sales by 6,800 units. ( 3 marks) b) The sales manager has also considered options to improve profitability. She has proposed that an increase in advertising of $109,000 annually would increase sales by 6,800 units. (3 marks) Dynamadics Inc, is large, locally owned company operating in several regions within western Canada. Each region manufacture and sell apparel and accessories for both business and casual wear. The products lines include shoes, boots, sandals, purses, backpacks and computer bags. The company has an extensive distribution channel allowing for sales throughout the world. Operational information - Part 1 Dynamadics uses a job-order costing system in all of its operations. Manufacturing overhead costs (MOH) are applied to the manufacturing costs for all product lines using predetermined overhead rates. The following estimates were established at the beginning of the year for one specific product line - specialized purses. A recent order was started on August 1 and completed on August 10th. This order was assigned job order number 220 and included 50 specialized purses made from high quality leather requiring hand-crafted detailing which is unique to each purse. The company's cost records are presented below for this job order. At the end of the year, Dynamadics recorded the following actual costs and operating data for all jobs that were completed in each of these two divisions during the year. Requirement #1 (14 marks) You have been asked to provide the following: 1. Total cost for Job 220. ( 6 marks) 2. Cost per unit. (1 mark) 3. The journal entry to close out the overhead account in each division at the end of the year. (7 marks) Operational information Part 2 The owners of Dynamadics were reviewing the financial information for one of its product lines produced and sold from its Penticton region. The revenues and expenses for the last four months for this product line in the Penticton Region is presented below. Requirement #2 (19 marks) The owners are concerned about the profit levels for the Penticton region. They would like to understand more about the cost behaviours and have asked you to prepare some analysis based on the information presented in Operational information Part 2. Specifically, they would like to know the following: 1. Of the costs incurred, which are variable, fixed or a combination of variable and fixed (mixed)? (1.5 marks) 2. What is the cost equation for each of the mixed costs? (tip: use the high-low method) (7.5 marks) 3. Sales demand in the August is expected to be 6,300 units. Prepare a contribution margin income statement (in good form) for the month of August. ( 10 marks) Operational information Part 3 The owners continued their review of operations, focusing next on the Calgary Region which was organized similarly to the Penticton Region and produced and sold the same product line as the Penticton Region. The revenues and expenses for the last four months for this product line in the Calgary Region are presented below. The manager of operations at the Calgary region provided the following cost information for each of the mixed costs: Requirement #3 (17 marks) The owners are grateful for the information provided by the Calgary region respecting the cost behaviours for this product line. Their focus now is on understanding the impact of a change in any of the factors that impact profits. They would like you to complete some cost-volume-profit (CVP) analysis. Note: Use 2 decimal places for contribution margin (CM) and CM ratios. 1. What is the annual total fixed cost based on the information provided? ( 1 mark) 2. What is the annual break-even sales in units (assume that fixed costs are incurred uniformly throughout the year). ( 2 marks) 3. What Sales Revenues are required annually to break-even? (2 marks) 4. How many units need to be sold to achieve a target monthly profit of $85,000 ? ( 1 mark) 5. What profit will be realized if 75,000 units are sold during the year? ( 2 marks) 6. Create a CM income statement at 75,000 units annually including both total and per unit data. ( 3 marks) 7. The owners asked the Calgary Region to consider options to improve profitability based on the calculations from 45 above (at 75,000 units annually). Two proposals were submitted to the owner. They would like you to analyze each option and provide a recommendation with an explanation on which (if any) option should be implemented to improve profitability. Based on your calculations in #5 above, prepare a comparative CM income statement to demonstrate the change and impact to profits for both of the options. a) The operations manager has proposed that a reduction of $8.50 in the selling price per unit would increase sales by 6,800 units. ( 3 marks) b) The sales manager has also considered options to improve profitability. She has proposed that an increase in advertising of $109,000 annually would increase sales by 6,800 units