Required help on Management Accounting Topic due in 10 hours from now. Thanks in advance.

MBA 6203 Final Exam Version B Johnson Manufacturing Company Peter Johnson and Lily Brown own Johnson Manufacturing Company (Johnson). Johnson produced storage sheds in three primary models (A, B, and C). The industry was dominated by Coleman, Phoenix, and Meco, which made several of types of sheds. Johnson was a small player in the industry with a solid customer base and a profitable business over last few years. This year was a little different - their profit was significantly lower than the prior years. The company's 2017 financials are provided in Exhibit 1. The company produces 3 products - let's call them Shed A, B and C for simplicity. The standard costs for these three products are provided in Exhibit 2. The Selling, general, and administrative (SG&A), other costs, interest income, and interest expense are likely to remain the same no matter which product-line combinations the company produced. The company is thinking about the future and has provided a preliminary proforma 2018 sales budget in Exhibit 3. Favorable preliminary 2018 forecasts lead management to believe there will be excess cash flow in 2018. Management has requested that a consultant be hired to provide an analysis of several proposed 2018 investments. The details of the proposed investments are provided in Exhibit 4. The company hires your services as their consultant. They believe that they can improve their bottom-line (net profits) by changing the product mix, pricing and advertising decisions. Given that the plant currently runs at full capacity, examine the following independent scenarios: 1. Calculate the current contribution margins of each product. 2. What is the effect of discontinuing Shed A? 3. Calculate the net change in profits if the company focuses more on selling Shed C instead of Shed A. Such an action would result in a decrease of 10,000 unit sales of Shed A and an increase of 10,000 unit sales of Shed C. 4. What is the effect if Shed C is decreased by $5 and the volume of Shed C increases by 10%? 5. Prepare a purchases and cash receipts budget for September, October, and November using the 2018 sales budget provided in Exhibit 3. 6. Rank the proposed investments in Exhibit 4 using the net present value criteria and the accounting rate of return on initial investment. Assume the organization's cost of capital is 12%. Which investment would you recommend? MBA 6203 Final Exam Exhibit 1 Johnson Manufacturing Company Income Statement as of December 31, 2017 Sales $40,582,500.0 Less: costs of products sold $21,150,000.0 Gross margin $19,432,500.0 SG&A $9,350,000.0 Other costs $2,100,000.0 Operating income $7,982,500.0 Less: Interest expense $420,000.0 Plus: Interest income $150,000.0 Income before tax $7,712,500.0 Income taxes $2,699,375.0 Net income $5,013,125.0 Exhibit 2 Johnson Manufacturing Company Standard Costs as of December 31, 2017 Planned units Per unit Sales price Direct costs: Materials Labor Subtotal Indirect cost: Supplies Labor Energy Supervision Depreciation Accounting/Legal/IT su Other Fixed Costs Subtotal Total cost Profitability Shed A Shed B Shed C Notes 75,000 100,000 205,000 157.50 115.50 84.00 17.00 10.00 7.00 directly related to volume 21.00 16.00 4.00 directly related to volume 38.00 26.00 11.00 7.00 10.00 12.00 8.00 22.00 12.00 11.00 82.00 120.00 37.50 2.00 8.00 6.00 3.00 7.00 6.00 2.00 34.00 60.00 55.50 1.00 4.00 4.00 1.00 5.00 3.00 1.00 19.00 30.00 54.00 directly related to volume 50% variable, the rest is fixed 50% variable, the rest is fixed unrelated to volume unrelated to volume unrelated to volume unrelated to volume Version B MBA 6203 Final Exam Exhibit 3 Johnson Manufacturing Company Proforma Sales Budget 2018 Month January February March April May June July August September October November December Total Budgeted Cash Sales 945,000 945,000 945,000 945,000 945,000 945,000 945,000 976,500 1,008,000 913,500 1,197,000 1,134,000 11,844,000 Budgeted Credit Sales 2,205,000 2,205,000 2,205,000 2,205,000 2,205,000 2,205,000 2,205,000 2,278,500 2,352,000 2,131,500 2,793,000 2,646,000 27,636,000 Total Budgeted Sales 3,150,000 3,150,000 3,150,000 3,150,000 3,150,000 3,150,000 3,150,000 3,255,000 3,360,000 3,045,000 3,990,000 3,780,000 39,480,000 The gross profit rate is 55% and the desired inventory level is 30% of next month's cost of sales. Management estimates that 5% of credit sales are not collectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Cost of purchases of inventory each month is 70% of the next month's projected total sales. All purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder is paid in the month following the purchase. Exhibit 4 Johnson Manufacturing Company Proposed Investments for 2018 Initial investment Cash flow from operations Year 1 Year 2 Year 3 Disinvestment Life (years) Proposal A 57,000 Proposal B 57,000 Proposal C 57,000 50,000 30,000 6,000 30,000 29,000 25,000 3 years 3 years 57,000 1 year Version B