Using a Microsoft Excel spreadsheet for the back page

Accounting 11 Name: Oral Group Presentation Case, Fall 2020 COMPANY: Just Be Healthy Corporation Kikin Your group constitutes top management of Just Be Healthy Corporation's Fitness Division, a manufacturer and seller of various types of exercise equipment. The CEO, Sharon Garvin, has requested a meeting with you to discuss various Division matters. One of your Division's popular products is the XLT Mountain Bike which sells for $720. Your Division has been selling 10,000 of these bikes each year. At the end of the current year, a new labor contract is being negotiated. The proposed contract calls for an increase of 10 percent in direct labor rates, and an increase of $15,000 per year in fixed manufacturing costs. Data about current operations are as follows: Per Unit Sales price $720 Variable costs: Materials $360 Direct Labor $100 Factory Overhead $ 90 Selling and Administrative Expenses $ 30 Fixed costs Factory Overhead (based on a volume of 10.000 per year) $ 72 Selling and Administrative Expenses (based on a volume of 10,000 per year) $ 47 Your group is considering the potential impact of this wage increase. What was breakeven in units and dollars for this last year? If prices are not changed and the wage increase takes effect, what amount of sales in units and dollars will be necessary to break even in the upcoming year? Your group is also evaluating several strategies to offset the effects of the wage increase. One option (assuming the wage increase) might be to increase advertising (in the fixed expense category) by $5,000 to maintain the 10,000 unit sales volume. The sales price per unit could then be increased to the amount necessary to maintain profits at the current level. What would that sales price be? A second option (assuming the wage increase) involves research showing that increasing the selling price by $8 per bike with no additional advertising would probably result in a decline of 2 percent in the number of units sold. What amount of profit would be generated by the firm then? REQUIRED: Create a spreadsheet to perform the computations described above and present it to the CEO while explaining your analysis and recommending one of the two options. Brainstorm and suggest other courses of action that might be pursued in the future to enable the firm to cut costs without sacrificing quality. Also indicate the importance of non-financial factors that need to be considered before adopting a long-term course of action (What would these be?) The CEO is disturbed because the actual costs for February were over the budgeted amounts The accountant's report showed the yearly and monthly budgeted amounts and the actual results Gross Profit Your Fitness Division also offers products in their "Home Gym line. Profitability analysis information follows. All fixed costs are direct costs that cannot be avoided in the short term. Weight Weight Exercise Totals Machine Amateur Machine Pro Bike Treadm Sales $626,000 $100,000 $180,000 $125,000 $220.000 Cost of Goods Sold 442 740 47.500 70.560 139.680 185.000 $183,260 $ 52,500 $109.440 ($13,680) $ 35,000 Operating Expenses 120 120 19.900 29.760 28 260 42.202 Net Income $ 63.140 $ 32.600 $ 79.680 (541.940) ($ 7.200) Units Sold 200 units 240 units 360 units 400 units $500.00 $750.00 Sales Price Per Unit $350.00 $550.00 Variable Cost of Goods Sold Per Unit $125.00 $150.00 $325.00 $330.00 Variable Operating Expenses Per Unit $ 58.50 $ 62.50 $ 50.00 $ 60.00 Your group has proposed several options about changing the product mix in order to reduce or eliminate the loss on the Exercise Bike and the Treadmill . Determine the effects on the Division's income for this part of the business for each of these options. (In each case, consider only the changes stated. The activity of other products remains unchanged.) Option #1: Discontinue Exercise Bikes Option #2: Discontinue Treadmills Option #3: Increase the sales price of Exercise Bikes to $400. This will probably result in a decrease in the number of units sold to 300 units. Option #4: Use the part of the plant in which Exercise Bikes are made to produce a new product. Petal the Metal (a fancy exercise bike). The total variable costs and expenses per unit of this product are $402.50. It is estimated that 320 units can be sold at $475 each REQUIRED: What is the format for the contribution margin income statement? Is it required for adherence to Generally Accepted Accounting Principles? Why is the contribution margin income statement format appropriate for this analysis? Create a spreadsheet to perform appropriate computations and present it to the CEO while explaining your analysis and recommending one of the options. Another plant in your Division manufactures sets of hand weights. A new budgeting system has just been implemented. The budget was based on carefully prepared sales forecast and manufactured, spread equally over each month and requiring 960,000 direct labor hours. The overhead budget was based on careful analysis of fixed and variable costs. for February : Yearly Yearly Yearly Monthly Actual for Cost Item Variable Fixed Total Budget February Indirect Materials $ 960,000 $ 48,000 $1,008,000 $ 84,000 $ 99,000 Indirect Labor 294,000 156.000 450,000 37,500 29,500 Labor Fringe Benefits 1,656,000 30,000 1,686,000 140,500 150,200 Utilities 96,000 60,000 156,000 13,000 15,200 Repairs and Maintenance 96.000 30.000 126.000 10,500 14,700 Miscellaneous 48,000 36,000 84,000 7,000 7.475 Depreciation 72.000 72,000 6,000 6,000 86,400 86 400 7 200 Property Taxes & Insurance 7.200 $3.150,000 $518,400 $3,668,400 $305.700 $325.075 Your group has discovered that production during the month was 11,200 units, requiring 89,600 direct labor hours. REQUIRED: Explain to the CEO how a flexible budget would be a better tool for evaluating the performance of this plant. Create a spreadsheet to perform appropriate computations and present variances? Which cost areas should be investigated (assume 5% or more off of the budget is considered significant)? Which personnel related to this plant should be called in to better determine the causes of significant deviations from the budget? Conclude your presentation by thanking the CEO for her time and asking if there are any questions or other matters that she wants to discuss. Accounting 11 Name: Oral Group Presentation Case, Fall 2020 COMPANY: Just Be Healthy Corporation Kikin Your group constitutes top management of Just Be Healthy Corporation's Fitness Division, a manufacturer and seller of various types of exercise equipment. The CEO, Sharon Garvin, has requested a meeting with you to discuss various Division matters. One of your Division's popular products is the XLT Mountain Bike which sells for $720. Your Division has been selling 10,000 of these bikes each year. At the end of the current year, a new labor contract is being negotiated. The proposed contract calls for an increase of 10 percent in direct labor rates, and an increase of $15,000 per year in fixed manufacturing costs. Data about current operations are as follows: Per Unit Sales price $720 Variable costs: Materials $360 Direct Labor $100 Factory Overhead $ 90 Selling and Administrative Expenses $ 30 Fixed costs Factory Overhead (based on a volume of 10.000 per year) $ 72 Selling and Administrative Expenses (based on a volume of 10,000 per year) $ 47 Your group is considering the potential impact of this wage increase. What was breakeven in units and dollars for this last year? If prices are not changed and the wage increase takes effect, what amount of sales in units and dollars will be necessary to break even in the upcoming year? Your group is also evaluating several strategies to offset the effects of the wage increase. One option (assuming the wage increase) might be to increase advertising (in the fixed expense category) by $5,000 to maintain the 10,000 unit sales volume. The sales price per unit could then be increased to the amount necessary to maintain profits at the current level. What would that sales price be? A second option (assuming the wage increase) involves research showing that increasing the selling price by $8 per bike with no additional advertising would probably result in a decline of 2 percent in the number of units sold. What amount of profit would be generated by the firm then? REQUIRED: Create a spreadsheet to perform the computations described above and present it to the CEO while explaining your analysis and recommending one of the two options. Brainstorm and suggest other courses of action that might be pursued in the future to enable the firm to cut costs without sacrificing quality. Also indicate the importance of non-financial factors that need to be considered before adopting a long-term course of action (What would these be?) The CEO is disturbed because the actual costs for February were over the budgeted amounts The accountant's report showed the yearly and monthly budgeted amounts and the actual results Gross Profit Your Fitness Division also offers products in their "Home Gym line. Profitability analysis information follows. All fixed costs are direct costs that cannot be avoided in the short term. Weight Weight Exercise Totals Machine Amateur Machine Pro Bike Treadm Sales $626,000 $100,000 $180,000 $125,000 $220.000 Cost of Goods Sold 442 740 47.500 70.560 139.680 185.000 $183,260 $ 52,500 $109.440 ($13,680) $ 35,000 Operating Expenses 120 120 19.900 29.760 28 260 42.202 Net Income $ 63.140 $ 32.600 $ 79.680 (541.940) ($ 7.200) Units Sold 200 units 240 units 360 units 400 units $500.00 $750.00 Sales Price Per Unit $350.00 $550.00 Variable Cost of Goods Sold Per Unit $125.00 $150.00 $325.00 $330.00 Variable Operating Expenses Per Unit $ 58.50 $ 62.50 $ 50.00 $ 60.00 Your group has proposed several options about changing the product mix in order to reduce or eliminate the loss on the Exercise Bike and the Treadmill . Determine the effects on the Division's income for this part of the business for each of these options. (In each case, consider only the changes stated. The activity of other products remains unchanged.) Option #1: Discontinue Exercise Bikes Option #2: Discontinue Treadmills Option #3: Increase the sales price of Exercise Bikes to $400. This will probably result in a decrease in the number of units sold to 300 units. Option #4: Use the part of the plant in which Exercise Bikes are made to produce a new product. Petal the Metal (a fancy exercise bike). The total variable costs and expenses per unit of this product are $402.50. It is estimated that 320 units can be sold at $475 each REQUIRED: What is the format for the contribution margin income statement? Is it required for adherence to Generally Accepted Accounting Principles? Why is the contribution margin income statement format appropriate for this analysis? Create a spreadsheet to perform appropriate computations and present it to the CEO while explaining your analysis and recommending one of the options. Another plant in your Division manufactures sets of hand weights. A new budgeting system has just been implemented. The budget was based on carefully prepared sales forecast and manufactured, spread equally over each month and requiring 960,000 direct labor hours. The overhead budget was based on careful analysis of fixed and variable costs. for February : Yearly Yearly Yearly Monthly Actual for Cost Item Variable Fixed Total Budget February Indirect Materials $ 960,000 $ 48,000 $1,008,000 $ 84,000 $ 99,000 Indirect Labor 294,000 156.000 450,000 37,500 29,500 Labor Fringe Benefits 1,656,000 30,000 1,686,000 140,500 150,200 Utilities 96,000 60,000 156,000 13,000 15,200 Repairs and Maintenance 96.000 30.000 126.000 10,500 14,700 Miscellaneous 48,000 36,000 84,000 7,000 7.475 Depreciation 72.000 72,000 6,000 6,000 86,400 86 400 7 200 Property Taxes & Insurance 7.200 $3.150,000 $518,400 $3,668,400 $305.700 $325.075 Your group has discovered that production during the month was 11,200 units, requiring 89,600 direct labor hours. REQUIRED: Explain to the CEO how a flexible budget would be a better tool for evaluating the performance of this plant. Create a spreadsheet to perform appropriate computations and present variances? Which cost areas should be investigated (assume 5% or more off of the budget is considered significant)? Which personnel related to this plant should be called in to better determine the causes of significant deviations from the budget? Conclude your presentation by thanking the CEO for her time and asking if there are any questions or other matters that she wants to discuss