Question
I'm a management accountant at Emerald Office Supply, Inc., which manages and sells office supplies to various companies nationwide. Your manager is interested in lowering
I'm a management accountant at Emerald Office Supply, Inc., which manages and sells office supplies to various companies nationwide. Your manager is interested in lowering the company's carbon footprint. To better understand the resources used, your manager has asked you to build an executive report about the organization's budgeting process. You will use the completed client profile to analyze all the findings and prepare recommendations for future strategies for a leadership panel.
An executive report that outlines and analyzes your findings for a break-even analysis and a master budget. Would you suggest putting these recommendations in an executive summary?
Part One: Analysis of Cost Report
Based on the client profile listed below for Emerald Office Supply, Inc., how do I analyze the cost report using the break-even and cost-volume-profit (CVP) analyses while addressing the following?
- Compare the differenttypes of costsused to develop a cost report in the organization.
- Analyze the benefits ofjob order costingversus process costing in the organization.
- Differentiate thepreparationof a break-even analysis from that of a master budget. Include differences between the following in your response:
- Target profit planning
- Sensitivity analysis
- Explain the relationship between theoperating cycleof an organization and the cost structure of an organization.
Part Two: Analysis of Master Budget
Using the client profile, what is required to analyze the financial and operational strengths and weaknesses of the organization by using the data from the cash budget and the master budget while addressing these topics?
- Assess the effectiveness of thesensitivity analysisin the master budget.
- Analyze theeffectivenessof various budgeting techniques for the organization.
- Explain how budgeting informsdecision-makingin the organization.
- Assess the importance ofactivity-based costingin the organization's cost structure.
- Explain the importance ofcomponentsof the master budget to the organization's financial stability.
Part Three: Executive Summary
What recommendations do I propose to the organization's leadership panel based on analyzing the cost report and the master budget while addressing these topics?
- Evaluate the effectiveness of thebudgeting processin reducing the total cost of future purchases in the organization.
- Createstrategiesfor financial and operational improvements for future profitability.
- Explain how using a balancedscorecardinforms the strategic analysis of the organization.
- Summarize how to presentthe balanced scorecard to the organization effectively.
- Determine theimpactof the cost data analysis and the master budget on future profitability. Consider the following in your response:
- Financial stability
- Connection to ESG initiatives
- Provide financialrecommendationsto a leadership panel based on the cost data analysis and the master budget.
Client Profile
Break-EvenAnalysisData
Emerald OfficeSupply, Inc. produces special reportbindersthatitsellstoitscorporatecustomers.The
Binders sellfor$50perbox.The variableand fixed costsfora box ofbindersareasfollows:
Variable CostsperBox
Category | Cost |
Manufacturing | |
Directmaterials | $15 |
Directlabor | $3 |
Manufacturingoverhead | $10 |
Sellingandadministrative | $2 |
Total | $30 |
FixedCosts perBox
Category | Cost |
Manufacturingoverheadcosts | $15,000 |
Sellingandadministrative | $10,000 |
Total | $25,000 |
Hereisthe break-even analysis:
Break-even pointsinunitsales volume:Fixed costs/unitcontribution margin= $25,000/($50-
30)= 25,000/20= 1,250units
Break-even pointindollarsales volume:Fixed costs/contribution marginratio= 25,000/(20/50)=
25,000/.4= $62,500
Profitplanning:Unitrequirementstoearn $1,000in profit
o$1,000=50x-(30x + 25,000)
o$1,000=50x-30x -25,000
o$26,000= 20x
o1,300units
CashBudget Data
Emerald OfficeSupply, Inc. prepares acash budgeteach quarter.Thefollowingis the cash budget for the second quarter (Aprilthrough June).
April | May | June | |
| Cash balance, beginning | $125,000 | $118,500 | $118,000 |
Cash receipts | |||
| 60%ofcurrent month'ssales | 156,000 | 144,000 | 162,000 |
| 30%ofprevious month'ssales | 67,500 | 78,000 | 72,000 |
April | May | June | |
| 10%ofsales, two monthsprior | 25,000 | 22,500 | 26,000 |
Total receipts | 248,500 | 244,500 | 260,000 |
Cash available | 373,500 | 363,000 | 378,000 |
| Cash disbursements | |||
Purchases | 160,000 | 150,000 | 153,000 |
Operatingcosts | 95,000 | 95,000 | 95,000 |
| Total disbursements | (255,000) | (245,000) | (248,000) |
Cash balance,end | 118,500 | 118,000 | 130,000 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial Reporting and Analysis
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon
6th edition
978-0078025679
