Spring 2022 25% OF COURSE GRADE Overview This case illustrates how managerial accounting concepts can be used to help management better understand their performance, prepare meaningful reports and provide meaningful recommendations to ensure management can make more information decisions for their company. Background Mountain Sports Ltd. is a small, fictional, Lethbridge-based company. This retail store operation is an Alberta Corporation with 20,000 outstanding common shares divided equally amongst five owners. Lisa Marconi, an owner, is the Company President while Jeff Peterson, another owner, holds the position of Marketing Manager. The other three owners are not actively involved in the day to day operations. The company was formed in 2012. Requirements There are numerous requirements to this case study. It is your job to complete the requirements, explain managerial accounting concepts and provide recommendations to the owners in a way that they can understand. One of the owner's children is working on completing an accounting diploma and has been hired as a junior accountant to complete the bookkeeping for the company. The junior accountant has tried preparing some analysis the owners requested but has struggled with it. You will see notes from the junior accountant in some of the questions. The owners need some help with understanding managerial accounting concepts so they can do a better job of planning in the future. The owners do not have an accounting background so you have to be careful when explaining accounting concepts and providing recommendations. Marks will not be awarded for textbook definitions. You must use case data in your explanations and ensure that you are explaining concepts in a way that both the owners and the junior accountant can understand. Calculations All calculations must be completed in Excel. You can use excel formulas or calculate results using a calculator. Round to the nearest 2 digits Check Figures Multiple check figures are provided in the case study to ensure you are on the right track. Please ensure that you can arrive at these check figures before moving on. Since check figures are provided, and this is worth 25% of your course grade, very minimal instructional help will be provided. Please refer back to the work you completed during the semester. The chapter coverage is shown below for each question for your convenience. Question Topic Chapter Covered Marks Available Marks Earned la Cost Classifications 2 5 lb CVP Income Statement 6 13 lc CVP Analysis 6 13 2a Segmented Income Statement 7 25 2b 2c Analysis of Segments & Recommendations to Management Memo to the Junior Accountant 7 18 7 10 3a Budgeted Income Statement for New Product Line 10 13 3b. New Product Line - Impact to Overall Income 6 8 3c 4a 4b Pricing of New Product Line Performance Measurement Calculations Analysis of Performance 9 12 11 4 11 6. TOTAL 127 Grade Earned Case Intro Q1 Q2 Q3 Q4 Question 4 - Performance Measurement (10 marks) The president feels very strongly that Mountain Sports should expand operations to a second location. She has even found a prime location in Canmore, Alberta, One of the great things about Canmore is its proximity to the mountains, and its only about 10 minutes away from this beautiful, vibrant and internationally known Banff tourist town. Research indicates that the Canmore market is well suited to both cross-country skis and bikes that competition is fairly limited. The investment in assets (cash, inventory, equipment) required for the new location is Minimum required return on investments Actual 2019 return on investment of the original location 206,000 18% 24% Management has provided the following income statement to the bank manager the expected net income in the next year. Sales in Units Sales Less: Variable Costs: Cost of Goods Sold Static Budget Amount 4,048 506,000 100% 216,000 43% 55,660 11% Sales Commissions Total Variable Costs Contribution Margin 271,660 54% 234,340 46% Less: Fixed Costs: Advertising Property Taxes Rent Salaries & Wages Total Fixed Costs Net Operating Income 21,000 9,000 42,000 108,000 180,000 54,340 Part A: (4 marks) Calculate the following performance measurements for the proposed Canmore expansion: Profit Margin Return on Investment Part B: Analysis (6 marks) Explain in your own words using case data. Marks will not be awarded for textbook definitions). a. If management is evaluated based on ROI, will the project be accepted (expansion into Canmore)? Why or why not? b. What is the major weakness of using return on investment as a performance measure? Is there anything you could recommend to the owners to mitigate this weakness of using ROI as a performance measure