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ACC00724 Accounting for Managers

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Question 1:

 

 

 

Amounts

A

Sales (Units)

           12,000

 

B

Selling price ($ per unit )

460

 

C

Sales

 

       55,20,000

D

Variable manufacturing cost ($ per unit )

184

       22,08,000

E

Variable selling and administrative costs ($ per unit )

36

          4,32,000

F

Contribution (C-D-E)

 

       28,80,000

G

Fixed manufacturing costs ($)

       3,60,000

          3,60,000

H

Fixed selling and administrative costs ($)

       6,00,000

          6,00,000

I

National advertising compaign ($)

 

 

J

Profit (F-G-H-I)

 

       19,20,000

 

 

 

Production Manager

 

 

Per unit

Amounts

A

Sales (Units)

                           15,600

 

B

Selling price ($ per unit )

460

 

C

Sales

 

       71,76,000

D

Variable manufacturing cost ($ per unit )

220

       34,32,000

E

Variable selling and administrative costs ($ per unit )

36

          5,61,600

F

Contribution (C-D-E)

 

       31,82,400

G

Fixed manufacturing costs ($)

                       3,60,000

          3,60,000

H

Fixed selling and administrative costs ($)

                       6,00,000

          6,00,000

I

National advertising compaign ($)

60000

             60,000

J

Profit (F-G-H-I)

 

       22,22,400

 

 

 

Sales manager

 

 

Per unit

Amounts

A

Sales (Units)

     10,560

 

B

Selling price ($ per unit )

520

 

C

Sales

 

       54,91,200

D

Variable manufacturing cost ($ per unit )

184

       19,43,040

E

Variable selling and administrative costs ($ per unit )

36

          3,80,160

F

Contribution (C-D-E)

 

       31,68,000

G

Fixed manufacturing costs ($)

  3,60,000

          3,60,000

H

Fixed selling and administrative costs ($)

  7,20,000

          7,20,000

I

National advertising compaign ($)

 

 

J

Profit (F-G-H-I)

 

       20,88,000

 

 

 

Marketing director

 

 

Per unit

Amounts

A

Sales (Units)

     14,000

 

B

Selling price ($ per unit )

     452.86

 

C

Sales

 

6340000

D

Variable manufacturing cost ($ per unit )

184

 25,76,000

E

Variable selling and administrative costs ($ per unit )

36

    5,04,000

F

Contribution (C-D-E)

 

 32,60,000

G

Fixed manufacturing costs ($)

  3,60,000

    3,60,000

H

Fixed selling and administrative costs ($)

  6,50,000

    6,50,000

I

National advertising compaign ($)

 

 

J

Profit (F-G-H-I)

 

 22,50,000

 Comparison of managers in different contexts

Break-even point (units):-

 

Present

Production Manager

Sales Manager

Marketing director

Better performing suggestion

Break-even point (units)

          4,000.00

5000

3600

4337.4233

Sales Manager and marketing director

Break-even point (Amount):-

 

Present

Production Manager

Sales Manager

Marketing director

Better performing suggestion

Break-even point (amount)

       18,40,000

       23,00,000

       18,72,000

 19,64,233

Sales Manager and marketing director

Margin of safety:-

 

Present

Production Manager

Sales Manager

Marketing director

Better performing suggestion

Margin of safety

       36,80,000

       48,76,000

       36,19,200

 43,75,767

Production manager & marketing director

Net profit:-

 

Present

Production Manager

Sales Manager

Marketing director

Better performing suggestion

Profitability

       19,20,000

 

       21,62,400

 

       20,88,000

 

22,50,000

 

Marketing director

It is to be noted that marketing director and sales director’s suggestion is better in terms of break-even point as compared to the existing figures. Further, in terms of margin of safety also, marketing director’s suggestion is showing better results in comparison to present margin of safety. Further, in profitability, marketing director’s suggestion is giving the 22,50,000 that is higher than present profits i.e. 19,20,000. Therefore, marketing director suggestion is preferable.   

Question 2:

Particulars

Measure

 

Current sales volume

Units

5000

Direct Material Cost

$ per unit

150

Direct Labour Cost

$ per unit

75

Variable Factory Overhead

$ per unit

35

Fixed Factory Overhead

$ per unit

40

Total Manufacturing Cost

$ per unit

300

Selling & Administrative Costs

 

 

Variable Selling and Administrative Cost

$ per unit

35

Fixed Selling and Administrative Cost

$ per unit

25

 

$ per unit

60

Total Cost Per Unit

$ per unit

360

 

 

 

Selling Price Per Unit

$ per unit

720

Profit

 

360

 

Part A

Total existing capacity

 

 

90000

 

Total units for existing customers for Go-goa

5000 units per month

12*5000

60000

 

Spare capacity

 

 

30000

 

Required for special order

 

 

20000

 

Bid price for special order

 

 

 

A

Direct Material Cost

$ per unit

150

 

B

Direct Labour Cost

$ per unit

75

 

C

Variable Factory Overhead

$ per unit

35

 

D

Variable Selling and Administrative Cost

$ per unit

35

 

E

Total cost (A+B+C+D)

 

295

 

F

Minimum bid price would be the variable cost incurred as fixed cost is sunk cost because of company having the spare capacity

295

 

 

Profits

60000 units * 360 profit per unit

 

         216,00,000

 

Part B

Total existing capacity

 

 

75000

 

Total units for existing customers for Go-goa

5000 units per month

12*5000

60000

 

Spare capacity

 

 

15000

 

Required for special order

 

 

20000

 

Note : Company will have to cut down the regular sales by 5000 and therefore, will bear loss over those 5000 units

 

Bid price for special order

 

 

For 20000 units

A

Direct Material Cost

$ per unit

150

3000000

B

Direct Labour Cost

$ per unit

75

1500000

C

Variable Factory Overhead

$ per unit

35

700000

D

Variable Selling and Administrative Cost

$ per unit

35

700000

E

Total cost

 

295

5900000

F

Profit loss over 5000 units

5000*360

 

1800000

G

Total cost incurred for special order

 

 

7700000

H

Units

 

 

20000

I

Per unit bid price

G/H

 

385

 

Profits

55000 units* 360 profit per unit + 20000 units*(385-295) profit per unit

 

         216,00,000

Profits in both the above cases are same and therefore, any of the cases can be chosen. However, if the special order will be giving the future opportunities, the special order should be preferred.

Question 3:

I have been working in the commerce background only. As a part of this curriculum, I can surely appreciate the use of tools in such a way that accounting and the financial management work can be done effectively with much convenience and ease.

The use of following tools has made it efficient for financial managers and accountant:

  1. Accounting software: The accounting entries have to be done by the accountants as and when the transaction is incurred. There may be various level of employees incurring the transaction. If there is only one accountant, it would be cumbersome for him to record all the transactions. Therefore, accounting software is easy to use and the transactions may be recorded in the integrated manner by the person incurring the transaction.  
  2. Payroll Management software: Payroll management software is the tool usd by the payroll staff to compute the salary of the employees. Calculation of deductions, perquisites, allowances are difficult to measure by the staff if the number of employees is numerous. This software has made it easy to record and compute by the payroll manager.   
  3. Aging bills: the aging of the bills and accordingly tracking the receipt of amounts from different vendors is easy with the help of this software. The reports may be generated at regular intervals which will keep a check on the employees and thereby, they will be more accountable to take care to receive the amounts as and when due. 
  4. Budgeting tool: The budgets set and the actual figures incurred may be different. It is therefore to be noted that the differences may be reconciled through the use of this software and the accountability may also be fixed for the employees performing their respective roles.

References:-

The college Investor. (2017, July 13). 5 Free Financial Tools Everyone Needs. Retrieved from https://thecollegeinvestor.com/19733/5-free-financial-tools-everyone-needs/

Kimberly Palmer. (2015, January 28). Access Denied. Retrieved from https://money.usnews.com/money/personal-finance/slideshows/9-financial-tools-you-should-be-using

Starr Darcy & starr. (n.d.). - Financial Tools. Retrieved from http://www.starrdarcystarr.com/financial_tools.html

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