I am currently working on the very first question.

I understand the difference between Variable, Fixed, Period Cost, Direct Labour, Direct Material ect.

I simply do not understand how to create the chart by using exhibit 1.

Do i use each heading as a selected cost which would look like this: Revenues Rentals $100.00/hr a rental ( Fixed Cost, Direct Material, Direct) .... and place $100.00 into each of these categories on the excel sheet?

Then...

Tours

$150 per tour (Fixed Cost, Period Cost, Direct Labour, Direct) and place $150.00 into each of these allocated spots?

then...

Labour

Management

Owner (Fixed, Period Cost,) and place $155 000.00 into each of these spots

Operations Manager (Fixed Cost, Manufacturing Overhead, Direct) and place 85 500.00 into each of those spots.

Maintenance Supervisor (Fixed, Manufacturing Overhead, Indirect) and place 7500.00 into each of those spots.

this is as much as i have done so far and am not sure if i am on the right track with what the first part of this assignment is asking.

SxS DUNE ADVENTURES Experience the Dunes and Sea, Side by Side Accounting 294 Comprehensive Assignment Part 1 Fall 2015 Background Welcome to the Summer 2016 version of the comprehensive assignment prepared specifically for Accounting 294. Made up of 2 parts this assignment is meant to fulfill a number of objectives for you. These include: 1) Test and apply your knowledge of the concepts of managerial accounting. 2) Increase your experience and abilities with respect to report writing. 3) Illustrate scenarios and issues you will face in the \"real world\" 4) Provide for an additional method of evaluation of your knowledge and skills rather than the traditional quizzes and tests. Please take all parts of this assignment seriously. This is an opportunity to actually apply your knowledge rather than just memorize a textbook. Please prepare the assignment using either Word or Excel rather than by hand. The finished product will look more professional as well as create some consistency between submissions. In order to make this assignment easier and your result more successful I suggest that you do not leave this assignment to the last day or even week. The assignment parts are constructed to coincide with the topics that have been or will be covered in class. If you begin working on the assignment immediately then as your lectures/seminars progress you will be immediately reinforcing the course content that you are being exposed to and it will make application of that content easier as well. The 2 parts of the assignment are worth a total of 14 % of your final grade and therefore each part will have a significant effect on your final letter grade. Making a submission on time even if incomplete, will be more to your benefit than giving up and not making any submission at all. 2 Important Notes Regarding Student Conduct Each part of this assignment is an individual assignment. All submissions are required to be your own words and calculations. While it is recognized that students may discuss concepts and ideas each student is required to construct their own response. In the event that the responses prepared by individual students appear to be the same or highly similar the instructor will consider referring the students to the Faculty of Management Academic Integrity Committee for consideration. Plagiarism Plagiarism refers to the practice of presenting the words of another author (it may be a text writer or another student) as your own. This is not permitted. At times you will be asked to learn about and discuss the views or theories of others. This should be done with appropriate acknowledgement of source materials. In other words, you must reference your work. Acknowledge your sources - both direct and indirect quotes - with in-text citations. Refer to the Referencing section contained below for further information. Academic Conduct Violations Any violation of the rules of Academic Conduct as described above will result in the immediate confiscation of all related materials of all parties involved. In addition, all parties will be immediately reported to the Faculty of Management Academic Misconduct Committee for consideration of further actions including (but not limited to) receiving a zero for the submission, a failure in the course and the possibility of suspension or expulsion. Referencing Faculty of Management (Business) requires the APA style of referencing for academic papers. Resources for using APA are available from the VIU Writing Centre (Library, Room 474). You can find their hours of operation and access to online student resources (including tutorials and a printable Quick Guide) at: http://sites.viu.ca/writingcentre/." For further information please discuss with your instructor and/or refer to the following Student Academic Code of Conduct https://www2.viu.ca/policies/documents/Policy99.01.pdf 3 SxS Dune Adventures Experience the Dunes and Sea, Side by Side Your Role While you believe you are a student currently taking Accounting 294, for the purposes of this assignment you are in fact an employee of SxS Dune Adventures. SxS is a company located in Florence Oregon. The business has 2 focuses, rentals of Polaris Rzr's and tours of the Oregon dunes located between Florence, Oregon and North Bend, Oregon. While this employment will provide you with varied experience, you are about to be assigned work specifically related to the business. You have just been hired by the owner, Sam Lownie(SL) of SxS because of your recently acquired knowledge related to managerial accounting. He expects you to write memos, perform quantitative and qualitative analysis as well as providing conclusions or recommendations for the management and owners of SxS Dune Adventures. At all times, work submitted must be professional both in terms of content as well as presentation. This is not high school or university but rather the real world. Do the work as if your job depends on it, because it does!! SxS Dune Adventures SxS Dune Adventures is a privately owned company located in Florence, Oregon in the United States. Florence is located on the coast about 60 miles west of Eugene Oregon. Its locations is spectacular with the rugged Pacific Ocean and the start of the world famous Oregon sand dunes heading to the south. The sand dunes are what the company uses to generate its income. The company has two separate revenue streams: 1) Rental of Polaris Side By Side (SxS) Utility Terrain Vehicles (UTV) These are two seat vehicles meant to go off road through rough terrain and on the sand dunes 2) Dune Tours in a 4 seat UTV. 4 Guided by experienced SxS staff, these tours allow people unable or unwilling to rent and drive their own UTV to experience the thrill of driving over the sand dunes and also speed along the beaches on the edge of the Pacific. Due to its location as well as the variety of activities, SxS Dune Adventures has created a niche in the growing sand dune tourism market. The management of SxS believe that outstanding customer service is the way to differentiate their product from the competitors and by offering professional guides, well planned and presented guest activities and quality experiences SxS will continue to be recognized as the premier way to \"Experience the Dunes and Sea, Side by Side\". The rentals and tours operate from June to September each year. SxS Dune Adventures Ownership SxS Dune Adventures is owned by Sam Lownie who put in $500,000 in capital to start the company. While Sam has long time experience in the industry he is lacking in financial knowledge which is why he hired you. SxS Dune Adventures Management Brian Beech (BB) Brian is the operations manager of SxS. Brian's previous experience involved managing a variety of tour related businesses such as Klanawa Nature Adventures which is an adventure facility located in British Columbia. Adam Farmer (AF) Adam's expertise is in the mechanics of utv's and other all-terrain vehicles. A graduate of the Recreational Power sports Mechanics program at the Northern Alberta Institute of Technology (NAIT). Adam and his team of technicians keep the equipment at SxS running smoothly. Facilities 5 The company location consists of a 6,000 square foot building with approximately 1,500 square feet of office and administrative space, 3,000 square feet for the vehicle storage and maintenance and 1,500 square feet for the customer service and training space. Transcript of Meeting with Sam Lownie, Brian Beech, Adam Farmer and Student Student: Thank you very much for hiring me to assist you with your operations. I am sure that my analysis and advice will be of great benefit to your operations. I am very eager to get started. SL: You came highly recommended as to both your knowledge and problem solving skills. Our business has grown and I now realize that we need a more professional approach to things. We still want to ensure the quality of our services and our commitment to \"Safety First\" but we also obviously want to make money. I think you can help us understand how to do that. I would think that the first tasks we can get you to do will be to assist in the analysis of past operations so that Brian, Adam and I can work on improving things. As you know our fiscal year just ended on March 31, 2016. Talking to Brian the other day he thought it would be helpful to him if we took the financial results to the end of September and provided some classification of the amounts between types of costs. Specifically he wanted costs identified as product/period costs, Fixed/variable, direct/indirect costs and sunk costs. I understand what he means by each of these terms but to be honest, I have not had the time to do it. I would like to know the total of each of these categories as well as what makes each one up. I have printed out a copy of the results to March 31, 2016 and also provided a description of the costs (Exhibit 1). Would it be possible for you to look at these costs and provide the analysis Brian wants? Student- Definitely, in fact I have a format that I can follow in preparing this analysis. (Exhibit 2) 6 BB- You are quite a knowledgeable individual so let me add 2 more challenges. 1) In order to a proper analysis of the business I need to be able to prepare budgets. I cannot do that with the income statement in the format in Exhibit 1. I need an income statement in a \"Contribution Margin\" format. As you know in order to do this we need to separate all costs into either a variable or fixed category. Sam has already asked you to categorize the costs between fixed and variable. In addition we need to separate the product costs between the 2 products we offer to our customers. Please prepare an income statement for me in the contribution margin format? See sample format in Exhibit 3 2) I have received a request from the Costco in Eugene asking if we can host tours for the staff party coming up at Halloween, October 31. As our regular business shuts down at the end of September we know that we will have equipment available and I think the exposure that we can get from doing this for Costco would be good marketing on our part. I am not sure how much they are willing to pay but I would rather not lose money on the deal despite the marketing benefit. Using an incremental analysis approach, could you please tell me what the lowest selling price we can offer Costco on this without losing money on it is? I have provided additional information for you. (Exhibit 4). AF: Seeing how all of you are getting Student to do things I might as well put in my request. In preparing for next year I have had some discussions with both staff and some of our suppliers. Each of them is proposing a significant change in how they are paid but there is a similar theme to all of these requests. Could you please do a memo for me explaining the issue of 7 cost structure and also provide an example on how it would affect our operating income in the future? I have provided notes in Exhibit 5. Student: I can certainly prepare the reports that each of you require. Is there a deadline for all of this work? What date would you like it by? SL- If you have it for May 19, 2016 that would be great. Required 1) Prepare an analysis of costs identifying product (direct materials, direct labour, product overhead) /period costs, Fixed/variable, direct/indirect costs and sunk costs. Provide the classification of each cost as well as a total of each category. Cost information is provided in Exhibit 1. For the \"mixed\" costs please use the information provided to separate them into their variable and fixed components. See Exhibit 2 2) Prepare an income statement in the contribution margin format based on the sample provided in Exhibit 3. 3) Using an incremental analysis approach, calculate the lowest selling price on the Costco job which allows the company to break even on the job specifically. The details of the Costco proposal are in Exhibit 4 4) Prepare a memo to Adam explaining the issue of cost structure and provide relevant examples on how it would potentially affect the company's operating income in the future? Adam's notes are in Exhibit 5 8 SxS Dune Adventures Experience the Dunes and Sea, Side by Side Exhibit 1 SxS Dune Adventures Statement of Operating Income For the year ended March 31, 2016 Revenues SxS Rentals Tours Total Revenue $532,000 382,500 914,500 Expenses Labour Management Owner- Sam Operations Manager- Brian Maintenance Supervisor- Adam Total Management Labour Costs Support Staffing Guides Guest reception and rental desk Vehicle repairs and maintenance Total Support Staff Costs Total Labour Other Expenses Supplies Tour Food and Beverages Depreciation Buildings Equipment Insurance Vehicle parts and maintenance supplies Oregon state dune access fees Advertising Marketing agents Office and telephone costs 155,000 85,500 37,260 277,760 38,885 26,400 68,850 134,135 411,895 5,000 60,750 36,800 89,280 65,890 81,840 70,000 16,280 45,725 16,550 Total Other Expenses 488,115 Total Expenses 900,010 Operating Income $14,490 9 SxS Dune Adventures Experience the Dunes and Sea, Side by Side Exhibit 1(continued) Additional notes regarding the Statement of Operating Income: 1) Revenues The business has 2 revenue streams a) SxS Rentals The company charges $100/hour for each rental. The vehicles are limited to 2 riders. Each rental averages 2 hours in duration and typically there are 2 people on each unit. b) Tours Each rider pays $150 per hour for a tour. The average tour has 2 people on it and is 1 hour in length. 2) Labour a. Management Sam is paid a fixed salary of $155,000 annually The operations manager, Brian is paid a fixed annually salary of $85,500 The maintenance supervisor, Adam is paid $7,500 in total for the last of May and the first half of October. For the period June to September Adam is paid $6.00 per machine operating hour. b. Support Staffing Guides are paid a rate of $11.00 per person guided per hour Guest Reception/Rental Desk These employees are paid hourly at a rate of $12.00 per hour that the Reception/Rental desk is open. The desk is open for 8 hours a day from June to September each year. Vehicle Repairs and Maintenance staff 10 R & M staffing cost is $15.00 per equipment operating hour. 3) Other expenses a) The following expenses are dependant on the number of customers. Tour Food and Beverages- customers on tours only Oregon State Dune Access Fees- The state charges the business a business access charge of $8,000 per year plus a dune access fee of $8.00 per customer. b) The marketing agent is paid a commission of 5% of all revenues c) Equipment depreciation is based on a rate of $18.00 per equipment operating hour. d) Insurance is comprised of a base rate for equipment and general insurance plus a charge of $9.00 per equipment operating hour. e) Vehicle parts and maintenance supplies is approximately $16.50 per equipment operating hour. f) The following expenses do not change with the number of customers or operating hours. Supplies Advertising Building depreciation Office and telephone costs 11 SxS Dune Adventures Experience the Dunes and Sea, Side by Side Exhibit 2 Suggested format Prepare a worksheet identifying the costs of the business as either product (direct materials, direct labour, and product overhead)/period costs, Fixed/variable costs, direct/indirect costs and sunk costs. Use a format similar to that on page 46 of the textbook. Modify it to include amounts rather than \"x\"s. Ensure that your columns for each categories are totalled as well. Note that you have not been asked to identify opportunity costs and that each amount may appear in more than 1 column. Column titles Product costs Direct Materials Direct Labour Product overhead Period costs Fixed costs Variable Costs Direct Product Costs Indirect Product Costs Sunk Costs 12 SxS Dune Adventures Experience the Dunes and Sea, Side by Side Exhibit 3 Sample Contribution Margin Format For Companies with multiple products Year ended XXXX Product 1 Product 2 Total XX XX XX XX XX Revenue Product 1 Product 2 XX Total Revenue XX Variable Costs (in detail) Product 1 XX Product 2 XX XX XX Total Variable Costs XX XX XX Contribution Margin (Revenue- Variable Costs) XX XX XX Product Specific Fixed Costs (if applicable) Product 1 XX Product 2 Total Product Specific Fixed Costs XX XX XX XX XX XX Shared Fixed Costs XX Total Fixed Costs XX Operating Income XX 13 SxS Dune Adventures Experience the Dunes and Sea, Side by Side Exhibit 4 Costco Halloween Staff Party Proposal Per Brian's discussion with Costco representative 1. # of people expected to attend Costco staff party = 30 2. # of people expected to ride in each tour vehicle (excluding driver) =3 3. Expected length of tour 2 hours 14 SxS Dune Adventures Experience the Dunes and Sea, Side by Side Exhibit 5 Adam Farmer's notes regarding staff and suppliers for 2016 season. 1) I am currently paid a flat salary of $7,500 for 1 month each year. (1/2 month May and month October). In addition I am paid a rate of $6.00 per operating hour for the equipment during the period of June-September. I would like to propose that I be placed on a salary of $8,000 per month for the operating period of the year as I have no part in the marketing of the business yet my compensation is essentially based on the results of the company's marketing efforts. 2) Insurance The insurance company is proposing a fixed rate of $ 75,000 for the companies insurance in 2017 regardless of the number of customers or operating hours we have. 3) Advertising Currently our advertising dollars are used with the placement of ads in tourist magazines. We have been considering changing our focus to online advertising where our ads will be placed on appropriate industry websites and we will pay on a click-through order basis. For example if someone clicks on our ad and makes an online reservation we will pay an amount to the website that the customer originated at. If someone clicks on our ad but does not make an online reservation we will not pay anything. 15 Period (Selling and Administrative) Cost Variable Fixed Cost Cost Selected Cost Revenues Rentals $100/hr a rental Tours $150 per tour Labour Management Owner-SL Oper Manag-BB Maintenance-AF 6.00x $100.00 $150.00 $155,000.00 $85,500.00 $7,500.00 Direct Materials $100.00 Product Cost Direct Manufacturing Labour Overhead To Units of Product Direct Indirect Sunk Cost