ACC00724 Accounting for Managers

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:

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.
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.
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.
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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ACC00724 Accounting for Managers

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