Hi pundit, can you solve this mini case same way as previous one you did for me.

ENTR 3120 Mini case #2 - Smith Company Smith Company, a wholesale distributor, has been operating for only a few months. The company sells three products - sinks, mirrors, and vanities. Budgeted sales by product and in total for the coming month are shown below based on planned unit sales as follows: Units 1,000 500 500 2,000 Sinks Mirrors Vanities Total Percentage of total sales Sales Variable expenses Contribution margin Contribution margin per unit Fixed Expenses Operating income Percentage 50% 25% 25% 100% Sinks Mirrors Vanities Total 48% 20% 32% 100% $240,000 72,000 100% 30% $100,000 80,000 100% 80% $160,000 88,000 100% 55% $500,000 240,000 100% 48% 168,000 70% 20,000 20% 72,000 45% 260,000 52% $168 $40 $144 $223,600 $36,400 Break-even point in sales dollars: $223,600/.52= $430,000 Break-even point in unit sales: $223,600/ $130** = 1,720 units **Weighted average CM per unit ($168x.5) + ($40x.25) + ($144x.25) = $130 As shown by these data, operating income is budgeted at $36,400 for the month, break-even sales dollars at $430,000, and break-even unit sales at 1,720. Assume that actual sales for the month total $504,000 (2,100 units), with the CM ratio and per unit amounts the same as budgeted. Actual fixed expenses are the same as budgeted, $223,600. Actual sales by product are as follows: sinks, $126,000 (525 units); mirrors $210,000 (1,050 units); and vanities $168,000 (525 units). ENTR 3120 - Mini-case #2 Required: 1. Prepare a contribution format income statement for the month based on actual sales data. Present the income statement in the format shown above. 2. Compute the break-even point in sales dollars for the month, based on the actual data. 3. Calculate the break-even point in unit sales for the month, based on the actual data. 4. Considering the fact that the company exceeded its $500,000 sales budget for the month, the president is shocked at the results shown on your income statement in (1) above. Prepare a mini case report (including memo) for the president explaining why both the operating results and the break-even point in sales dollars are different from what was budgeted. ENTR 3120 - Mini-case #2 ENTR 3120 Mini case #1 - Baska Ltd. Baska Ltd. produces a lens used for webcams. Summary data from its year 2013 income statement are as follows: Revenues Variable costs Fixed costs Operating Income $8,000,000 4,320,000 3,900,000 $(220,000) The president of Baska, Rob Keen, is very concerned about the company's operations. He has discussed the situation with Operations Manager, Don Bell and controller, Clair Watson. After two weeks, Don returns with a proposal. After researching various component parts, he advises that he can reduce variable costs to 48% of revenues by changing both the direct materials and the production process. The downside of this proposal is that the new direct material (although cheaper) results in more waste and is more toxic to the environment. Currently, waste produced in the production process does not require any special treatment and is disposed of normally. Don points out that there are no current specific laws governing the disposal of this waste created by the use of the new material, and therefore production costs can be cut by using this material. Clair is concerned that this would expose the company to potential environmental liabilities. She believes that these potential future costs need to be estimated and included in the analysis. Don disagrees and reiterates that there are no laws being violated and replies, \"There is some possibility that we may have to incur costs in the future, but if we bring it up now, this proposal will not go through because our senior management always assumes these costs to be larger than they are. The market is very tough and we are in danger of shutting down the company. We don't want all our colleagues to lose their jobs. The only reason our competitors are making money is because they are doing exactly what I am proposing.\" Required: IN REPORT FORMAT, ANSWER EACH OF THE FOLLOWING QUESTIONS 1. Calculate Baska's breakeven revenues for 2013. 2. Calculate Baska's breakeven revenues if variable costs are 48% of revenues. 3. Calculate Baska's operating income in 2013 if variable costs had been 48% of sales. 4. What should Rob Keen do? Provide the analysis and recommendations. Mini Case #1 Baska Ltd. Student Name Student Number Course Number, Section Due Date Baska, Ltd Memo To: Rob Keen, President Baska, Ltd. From: Student Name, Consultant Date: December, 2013 Re: Recommendation for alternative raw materials to reduce variable costs I have prepared this report in response to your concern about the $220,000 loss incurred in 2013. I have analysed Don Bell's proposal to reduce variable costs by switching raw materials and changing the production process and showed how this will impact 2014 operating income. The quantitative analysis shows that it would be most profitable to make the raw material change. Profitability would increase $480,000 to an operating income of $260,000. However, the report also discusses some serious qualitative and ethical concerns that should be considered before finalizing this decision. It is my recommendation to make this change only if we can quantify and include the potential environmental costs in Don's analysis. I trust you will find this report helpful for making the decision about the raw materials and operations at Baska Ltd. If you have any questions about the information contained in the report, please contact me at 778-928-4739. Introduction The purpose of this report is to analyze Don Bell's alternative for improving profitability. The report outlines background information that is relevant to the analysis, identifies the issues and alternatives, qualitatively and quantitatively assesses each alternative and makes recommendations. All relevant calculations and tables can be found in the Appendices. Background Information Baska manufactures lenses for webcams in a competitive environment. It had an operating loss of $220,000 in fiscal 2013 and breakeven revenues of $8,478,261 (see Exhibit 1). Employees are concerned about their job security and competitors have already made the switch to the environmentally damaging raw material. Alternatives Don Bell has suggested that Baska switch raw materials and alter the production process to reduce variable costs to 48% of revenues. However, Clair Watson, Controller, believes a key piece of information is missing from Don's proposal; potential environmental liabilities caused by the toxic raw material. The company has three alternatives: 1. Accept Don's current proposal 2. Accept Don's proposal only after including the potential environmental liabilities in the report 3. Reject Don't proposal and find an alternative solution to the profitability problems Assessment of Alternatives Alternative #1 - Accept Don's current proposal Qualitative Analysis The advantages of accepting Don's current proposal are as follows: Employee jobs could be saved Competition is surviving by using this material The disadvantages of accepting Don's current proposal are as follows: It violates competence standards; it is unethical to exclude environmental costs to make the proposal look better It shows a lack of integrity to ignore the environmental impact of this change It violates objectivity standards; all information that is relevant should be disclosed Quantitative Analysis If variable costs can be reduced to 48% of revenues, Baska's breakeven revenue will decrease to $7,500,000 and will generate a $260,000 operating income (see Exhibit 2). This is a significant increase of $480,000 over 2013's operating loss. Alternative #2 - Accept Don's proposal but include potential environmental costs Advantages The company would be transparent with all stakeholders about the negative impact that the change in raw materials would have on costs and the environment The financial benefits of the change could still be achieved if the impact on the above are acceptable to senior management Disadvantages Might increase costs to the point that the proposal is rejected If the proposal is rejected the company may not survive Quantitative Analysis Cannot quantify the potential environmental costs until additional research is done. Alternative #3 - Reject Don's proposal and find an alternative solution to the profitability problems Advantages Could use the information discovered about competitors to market Baska as an environmentally conscious company Avoids potential backlash from customers, environmental groups, etc. Disadvantages Might not have another alternative that produces such a drastic increase to profitability Quantitative Analysis Cannot quantify until additional research is done. Recommendations Of the three alternatives considered, only alternative #2 has a positive impact on profitability and is ethically sound. Don Bell's proposal should only be considered if additional research about the environmental liabilities is performed and included in the analysis. Action Plan Ask Don to revise the proposal with Clair's help and give them one more week to finalize it. Begin contacting suppliers of the new material. Solicit ideas from employees about alternative ways to cut costs or increase revenues or sales volumes. Exhibit 1 - Current breakeven Contribution margin percentage Breakeven revenues = Revenues - Variable costs Revenues = ($8,000,000 - $4,320,000) $8,000,000 = $3,680,000 $8,000,000 = 46% = Fixed Costs/CM Percentage = $3,900,000 .46 = $8,478,261 (rounded) Exhibit 2 - Revised breakeven and operating income (with RM change) If variable costs are 48% of revenues, CM percentage equals 52% (100% - 48%). Breakeven revenues Revenues Variable costs (0.48 $8,000,000) Fixed costs Operating income = Fixed costs Contribution margin percentage = $3,900,000 .52 = $7,500,000 $8,000,000 3,840,000 3,900,000 $ 260,000 ENTR 3120 Mini case #1 - Baska Ltd. Baska Ltd. produces a lens used for webcams. Summary data from its year 2013 income statement are as follows: Revenues Variable costs Fixed costs Operating Income $8,000,000 4,320,000 3,900,000 $(220,000) The president of Baska, Rob Keen, is very concerned about the company's operations. He has discussed the situation with Operations Manager, Don Bell and controller, Clair Watson. After two weeks, Don returns with a proposal. After researching various component parts, he advises that he can reduce variable costs to 48% of revenues by changing both the direct materials and the production process. The downside of this proposal is that the new direct material (although cheaper) results in more waste and is more toxic to the environment. Currently, waste produced in the production process does not require any special treatment and is disposed of normally. Don points out that there are no current specific laws governing the disposal of this waste created by the use of the new material, and therefore production costs can be cut by using this material. Clair is concerned that this would expose the company to potential environmental liabilities. She believes that these potential future costs need to be estimated and included in the analysis. Don disagrees and reiterates that there are no laws being violated and replies, \"There is some possibility that we may have to incur costs in the future, but if we bring it up now, this proposal will not go through because our senior management always assumes these costs to be larger than they are. The market is very tough and we are in danger of shutting down the company. We don't want all our colleagues to lose their jobs. The only reason our competitors are making money is because they are doing exactly what I am proposing.\" Required: IN REPORT FORMAT, ANSWER EACH OF THE FOLLOWING QUESTIONS 1. Calculate Baska's breakeven revenues for 2013. 2. Calculate Baska's breakeven revenues if variable costs are 48% of revenues. 3. Calculate Baska's operating income in 2013 if variable costs had been 48% of sales. 4. What should Rob Keen do? Provide the analysis and recommendations. Mini Case #1 Baska Ltd. Student Name Student Number Course Number, Section Due Date Baska, Ltd Memo To: Rob Keen, President Baska, Ltd. From: Student Name, Consultant Date: December, 2013 Re: Recommendation for alternative raw materials to reduce variable costs I have prepared this report in response to your concern about the $220,000 loss incurred in 2013. I have analysed Don Bell's proposal to reduce variable costs by switching raw materials and changing the production process and showed how this will impact 2014 operating income. The quantitative analysis shows that it would be most profitable to make the raw material change. Profitability would increase $480,000 to an operating income of $260,000. However, the report also discusses some serious qualitative and ethical concerns that should be considered before finalizing this decision. It is my recommendation to make this change only if we can quantify and include the potential environmental costs in Don's analysis. I trust you will find this report helpful for making the decision about the raw materials and operations at Baska Ltd. If you have any questions about the information contained in the report, please contact me at 778-928-4739. Introduction The purpose of this report is to analyze Don Bell's alternative for improving profitability. The report outlines background information that is relevant to the analysis, identifies the issues and alternatives, qualitatively and quantitatively assesses each alternative and makes recommendations. All relevant calculations and tables can be found in the Appendices. Background Information Baska manufactures lenses for webcams in a competitive environment. It had an operating loss of $220,000 in fiscal 2013 and breakeven revenues of $8,478,261 (see Exhibit 1). Employees are concerned about their job security and competitors have already made the switch to the environmentally damaging raw material. Alternatives Don Bell has suggested that Baska switch raw materials and alter the production process to reduce variable costs to 48% of revenues. However, Clair Watson, Controller, believes a key piece of information is missing from Don's proposal; potential environmental liabilities caused by the toxic raw material. The company has three alternatives: 1. Accept Don's current proposal 2. Accept Don's proposal only after including the potential environmental liabilities in the report 3. Reject Don't proposal and find an alternative solution to the profitability problems Assessment of Alternatives Alternative #1 - Accept Don's current proposal Qualitative Analysis The advantages of accepting Don's current proposal are as follows: Employee jobs could be saved Competition is surviving by using this material The disadvantages of accepting Don's current proposal are as follows: It violates competence standards; it is unethical to exclude environmental costs to make the proposal look better It shows a lack of integrity to ignore the environmental impact of this change It violates objectivity standards; all information that is relevant should be disclosed Quantitative Analysis If variable costs can be reduced to 48% of revenues, Baska's breakeven revenue will decrease to $7,500,000 and will generate a $260,000 operating income (see Exhibit 2). This is a significant increase of $480,000 over 2013's operating loss. Alternative #2 - Accept Don's proposal but include potential environmental costs Advantages The company would be transparent with all stakeholders about the negative impact that the change in raw materials would have on costs and the environment The financial benefits of the change could still be achieved if the impact on the above are acceptable to senior management Disadvantages Might increase costs to the point that the proposal is rejected If the proposal is rejected the company may not survive Quantitative Analysis Cannot quantify the potential environmental costs until additional research is done. Alternative #3 - Reject Don's proposal and find an alternative solution to the profitability problems Advantages Could use the information discovered about competitors to market Baska as an environmentally conscious company Avoids potential backlash from customers, environmental groups, etc. Disadvantages Might not have another alternative that produces such a drastic increase to profitability Quantitative Analysis Cannot quantify until additional research is done. Recommendations Of the three alternatives considered, only alternative #2 has a positive impact on profitability and is ethically sound. Don Bell's proposal should only be considered if additional research about the environmental liabilities is performed and included in the analysis. Action Plan Ask Don to revise the proposal with Clair's help and give them one more week to finalize it. Begin contacting suppliers of the new material. Solicit ideas from employees about alternative ways to cut costs or increase revenues or sales volumes. Exhibit 1 - Current breakeven Contribution margin percentage Breakeven revenues = Revenues - Variable costs Revenues = ($8,000,000 - $4,320,000) $8,000,000 = $3,680,000 $8,000,000 = 46% = Fixed Costs/CM Percentage = $3,900,000 .46 = $8,478,261 (rounded) Exhibit 2 - Revised breakeven and operating income (with RM change) If variable costs are 48% of revenues, CM percentage equals 52% (100% - 48%). Breakeven revenues Revenues Variable costs (0.48 $8,000,000) Fixed costs Operating income = Fixed costs Contribution margin percentage = $3,900,000 .52 = $7,500,000 $8,000,000 3,840,000 3,900,000 $ 260,000