Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Urgent reply please with workings... Thanks. This assignment is centred on the topics C-V-P Analysis. This is an individual assessment and you are required to

image text in transcribed

image text in transcribed

Urgent reply please with workings... Thanks.

This assignment is centred on the topics "C-V-P Analysis". This is an individual assessment and you are required to apply the concepts learnt is solving the problem given. The assessment seeks to examine the following selected course objectives: Course Objectives: 1) Compute sales units given operating income, selling price and variable cost per unit. 2) Prepare a contribution margin income statement, clearly showing contribution 3) Use CVP analysis to compute breakeven point and margin of safety +) Analyze the impact which changes in sales volume and total fixed costs will have on the break- even point, margin of safety and operating income 5) Explain the impact of errors such as the omission of fixed on the decision making process. This submission will account for 10% of your overall mark. You are required show ALL Supporting workings where necessary and state any assumption(s) made. Darius Manufacturing Company manufactures and sells parts for various musical gadgets. The business earned Operating Income of $420,000 in 2018, when selling price per unit was $200 and the president of Darius is under pressure to increase operating income in 2019 and is therefore considering the implementation of strategies geared at increasing revenues. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $20 Direct Labour $50 Variable Manufacturing Overhead $10 Fixed Manufacturing Overhead $125,000 Fixed Selling Costs $75,000 Fixed Administrative Costs $100,000 Fixed expenses: You have just begun your internship at the company. The financial controller, Dave Miller, has indicated that the business is considering paying a commission to its sales team as part of the sales expansion effort, which should result in an increase in sales revenue. The head of the marketing department has indicated that the effort of the sales team should result in a 15% increase in sales volume. As a junior member of the team evaluating the proposal, you have been tasked to compute 1) the new break-even sales figure, 2) the new margin of safety and 3) the new operating profit, to determine whether the new sales commission plan is indeed viable. Your manager is confident that you can handle the task, because you learned C-V-P analysis in your accounting class. Upon examination of the information furnished by the Accounting Department, you realized that the sales unit for 2018 was not provided but you are confident that you will be able to determine this from the data set. After completing the calculations for the various scenarios, you performed your analysis and submitted a memo to your manager, who was very pleased with the work done. Your report indicated that the new sales commission plan would result in a significant increase in operating income but only a small increase in break- even sales. A few days after, you realized that you made an error in the CVP analysis, as the sales personnel's salaries amounting to $146,400 were inadvertently left out and you therefore did not include this fixed marketing cost in your computations. You are not sure what to do, as you are afraid that the company's management might not offer you permanent employment after the internship period. Required: a) Using the equation method, calculate the number of units sold in 2018? (4 marks) b) How would your error affect breakeven sales, margin of safety and operating income under the proposed sales commission plan? (Present ALL relevant scenarios) (18 marks) c) After considering all factors, should you inform your manager about the omission made or simply keep quiet

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Advanced Financial Accounting

Authors: Thomas H. Beechy

5th Edition

0131236997, 9780131236998

Students also viewed these Accounting questions