Part A:

Zoe's Fresh Flowers is new business ready to open a store in the Westfield shopping centrenearby. Westfield has a number of florist shops already, so Zoe is anxious about the demand forher flower arrangements. Westfield has two options available for rental contracts:

1. A standard fixed rent agreement of $10,000 per month; or
2. A commission contract based on 25% of sales revenue with $6,000 per month minimum rent.

Zoe estimates that a bouquet will sell for $100 and have a variable cost of $49 to make and a 15%sales commission for the shop attendant.

Required:

1. What is the break-even point in units under each rental agreement?

2. Zoe is uncertain if she will sell 200, 400, 600, 800 or 1000 arrangements per month.

Prepare a table that shows the expected profit at each sales level under each rental agreement.For what range of sales levels will Zoe prefer:

1. the fixed rent agreement or
2. the royalty agreement?

3. If Zoe signs a sales agreement with a local street vendor rather than Westfield, it will save her both rental contract options and sales commission. However, she could only sell the flowerarrangements for $60 to the vendor.

Explain how would this affect your answer in requirements 2?

Part B :

Xylia Ceramics makes and sells decorated vases for flower arrangements. As part of the master budget,following information is available for 2024:

	January	February	March	April	May	June
Estimated Sales	14.000	16.000	12.000	13.000	14.000	15.000
Sale Price	$69.00	$69.00	$71.00	$71.00	$73.00	$73.00
Direct Manufacturing Labour Hour	1.25	1.25	1.5	1.5	1.2	1.2
(DMLH) per unit
Wage per DMLH	$19.00	$19.00	$22.00	$22.00	$24.00	$24.00
Cost of Materials	$20.00	$20.00	$22.50	$22.50	$25.00	$25.00

XylixZa Ceramics expects to have 7,500 vases on hand at 31 December 2023, and it has a policy of carrying an end-of-month inventory of 50% of the following month's sales. July2024 sales are expectedto be 16,000 vases.

Required:

1. Prepare a sales budget, production budget and a direct manufacturing labour budget for XyliaCeramics month-by-month for the first 6 months of 2024. The direct manufacturing labour budget should include labour-hours and total cost.

2. Provide 3 recommendations to Xylia Ceramics to assist with improved profitability and explain how they will be successful.

***Subject: Management Accounting (ACCM4100)