managerial economic assignment

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For this assignment, develop a 5-page response containing written narrative, figures, and charts.

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Provide general discussion on predetermined variable overhead criterion and its possible dependence on the activity for which it is used. Provide a variable costing income statement in which variable overhead is divided among different activities, and that each activity has its own predetermined variable overhead criterion.

The following is a partially completed lower section of a departmental expense allocation for Cozy Bookstore. It reports the total amounts of direct and indirect expenses allocated to its five (5) departments. Allocate the expenses of the two service departments (advertising and purchasing) to the three operating departments and provide the complete income statement.

Advertising and purchasing department expenses are allocated to operating departments on the basis of dollar sales and purchase orders, respectively. Information about the allocation bases for the three operating departments follows.

Phoenix Company’s 20

1

9 master budget included the following fixed budget report. It is based on an expected production and sales volume of 15,000 units.

· Classify all items listed in the fixed budget as variable or fixed.
· Also determine their amounts per unit or their amounts for the year, as appropriate.
· Identify the unit variable costs in the format of variable costing, according to your findings in part a
· Organize a template for variable costing income statements in which the sales volume is a variable.
· Test your template for 15,000 units sales volume to see if you get the same income as stated above
· Find the breakeven point and provide the income statement at break even
· Provide income statement at sales volume 12,000, 14,000, 16,000, and 18,000

Grading rubric:

Criteria

Performance Indicators 

(Observation descriptors indicating extent to which criterion is met.)

Level 4

Exemplary

Level 3

Proficient

Level 2

Needs Improvement

Level 1

Unsatisfactory

No Submission

Points

4

3

2

1

0

Depth

30% of overall grade

Content indicates synthesis of ideas, in depth analysis, and evidence of original thought and support for the topic. 

30 points

Content indicates  original thinking and develops ideas with sufficient and firm evidence. 

22.5 points

Content indicates thinking and reasoning applied with original thought on a few ideas.

15 points

Content indicates some thinking and reasoning but most ideas are unoriginal or underdeveloped. 

7.5 points

0 points

Resources

25% of overall grade

All evidence supports arguments and is relevant to the topic. The student uses the required number and type of resources identified in the syllabus to support his/her argument. 

25 points

Most evidence supports arguments and is relevant to the topic. The student uses 75% of the required number and type of resources identified in the syllabus to support his/her argument. 

18.75 points

Some evidence supports arguments and is relevant to the topic. The student uses 50% of the required number of sources.

12.5 points

Limited evidence to support arguments, with few sources relevant to the topic. The student uses less than 50% of the required number of sources.

6.25 points

0 points

Organization

15% of overall grade

Paper has a high degree of attention to logic and reasoning of points. Paper clearly leads the reader to the conclusion and stirs thought regarding the topic. 

15 points

Paper is coherent and logically organized with transitions used between ideas and paragraphs to create coherence. Overall unity of ideas is present. 

11.25 points

Paper is somewhat structured and logically organized. Some points remain misplaced and stray from the topic. Transitions evident but not used throughout. 

7.5 points

Paper is limited in logical organization with major errors. 

3.75 points

0 points

Mechanics

15% of overall grade

Paper is free of distracting spelling, punctuation, and grammatical errors. 

15 points

Paper has few spelling, punctuation, and grammatical errors allowing the reader to follow ideas clearly. 

11.25 points

Most spelling, punctuation, and grammar are correct, which allows the reader to progress through the paper. Some errors remain. 

7.5 points

Spelling, punctuation, and grammatical errors create distraction, making reading difficult. Errors are frequent. 

3.75 points

0 points

Formatting

15% of overall grade

Paper meets all formatting guidelines and assignment requirements, including page-length and APA formatting requirements.  Paper is correctly assembled with a professional look. 

15 points

The paper follows most formatting guidelines, including page-length and APA formatting requirements.Paper is correctly assembled.  

11.25 points

Paper generally follows formatting guidelines and assignment requirements, including page-length and APA formatting requirements. Paper has some assembly errors

7.5 points

Paper does not follow formatting guidelines and assignment requirements, including page -length and APA format requirements. Paper has major assembly errors

3.75 points

0 points

1

Cozy

Book

s

tore Case Study CLA2

Variable upward can be depicted as those overheads that typically change straightforwardly corresponding and like the varieties in the particular creation exercises, cost drivers, some remarkable volume measures or deals movement (Schiff,

1

98

7

). The ramifications is that an increment or reduction in the expense causes a corresponding increment or abatement in the expense or volume driver. On a similar note, the variable expense change proportionately and comparatively to the results or the association’s movement levels (Hasan, 2

0

1

5

). In such manner, variable expenses are commonly founded on the exercises given that an organization normally brings about them because of the action, work done or yield. This suggests that in the event that the association’s result significantly increases, costs will likewise significantly increase (Largay, 197

3

). Also, shutting down an organization for quite a while, no factor costs will be caused.

Accepting that Green Valley produces noodle, the organization will require unrefined components like sugar, different flavors, salt, flour, sodium bicarbonate, vegetable oils, and starch (Fu, 2008). On a similar note, the organization will without a doubt enlist work and concentrated machines to settle the item. In this way, the item should be bundled in very much planned bundles (Hyun et al., 2011). In this case, variable costing includes direct costs, work and unrefined substances. The presumption here is that Green Valley should buy material per bundle at Rs 2. It additionally needs to cater for the work in view of the piece rate framework where they offer five rupees for every parcel. Also, the organization needs to cause different backhanded costs incorporate 10,000 rupees for the creation site’s lease. Creation gear is supposed to deteriorate (Del Giudice et al., 2016) with 20,000 rupees. In addition, the publicizing costs are 20,000 rupees, with sales rep commission costing three rupees for every bundle. Then again, Green Valley intends to deliver 10,000 bundles and charges 25 rupees for every parcel.

Based on the above information;

Total

variable costs of manufacturing each packet = Direct

Expenses

+ Labor + Materials= 2 + 5 + 2= 9 rupees for each packet.

The Total variable cost for distribution and selling costs for each packet = Labelling and packaging + Commission paid to the salesmen.= 5 + 2 = 5 Rupees for every packet.

Total variable cost for the noodles = 1

4

Rupees each packet

Total fixed manufacturing cost = compensation +

Depreciation

+ Rent=

20, 000

+ 20, 000 +

10, 000

=

50, 000

Rupees.

Total fixed distribution as well as selling cost = Warehouse rent +

Advertising

= 20, 000 + 10, 000 =

30, 000

Rupees.

Total fixed cost = 80, 000 Rupees.

Green Valley Corporation

Variable costing based income statement

Amount

10, 000

20, 000

30, 000

10, 000

10, 000

20, 000

Particulars

Amount

Sales

Revenue (10, 000 * 25)

250, 000

Less: Variable

Cost

Material for 2

10, 000

Labor for 5

50, 000

Sales commission for 3

30, 000

Direct expense for 2

Labeling and packaging for 2

20, 000

(120, 000)

Contribution Margin

130, 000

Less: Fixed Cost

Depreciation
Advertising

Factory Rent

Warehouse Rent

Material staff compensation

(

90, 000

)

Income form production

40, 000

In the given situation there are two assistance divisions and three working offices inside an organization. Make a departmental cost portion bookkeeping sheet for the organization.

The promoting office assigns their costs to the working divisions based on the deals. The publicizing division has S24, 000 in costs to designate. Every office has a specific measure of deals. The deal for that division is partitioned by the absolute deals of the organization to decide the rate to apportion to every office. This rate is then duplicated by the publicizing division’s costs to decide the assignment sum.

Advertising

 

Department

Sales

24000

Department

Cost

Allocation

Basis

 

24000

Sales

% of Total

Allocation
Books

495000

0.55

13200

Magazine

198000

0.22

5280

Newspaper

207000

0.23

5520

Total

90000

0

1

The buying division allots their costs to the working offices based on the quantity of procurement orders by every division. The buying office has

$3

4;000 in costs to apportion. Every office has a specific amount of procurement orders. The amount of procurement orders for that division is partitioned by the all-out amount of procurement orders for the whole to decide the rate to allot to every office. The buying office’s costs to decide the designation sum then duplicate this rate.

Department

Cost

Allocation Basis

 

Sales

 

Department

% of Total

Allocation

Books

Magazine

Newspaper

Total

1

34000

Purchase

34000

Purchase order

516

0.43

14620

360

0.3

10200

324

0.27

9180

1200

The resulting departmental expenses allocation speared sheet for the company.

 

Advertising

Purchase

Magazine

Newspaper

 

 

 

 

 

 

 

 

13200

5280

5520

 

 

9180

698,000

0

Expenses Book

Total departmental expenses

698,000

24,000

34,000

425,000

90,000

125,000

Service Department Expenses

Advertising Dep (Sales base)

-24,000

Purchasing Dep (Purchase order)

-34,000

14,280

10540

Total expenses allocate to operating department

0

452,480

105,820

139,700

($)

 

 

 

 

 

 

 

 

 

 

 

 

300, 000

 

 

 

 

Utilities

 

150, 000

 

200, 000

 

 

 

 

250, 000

 

250, 000

Advertising

 

125, 000

 

241, 000

 

90, 000

 

 

Particulars

Total amount

Variable Cost per

Fixed Cost per Year

 

($)

unit ($

Variable items:

Direct Materials

9

75, 000

65

Direct Labor

225, 000

15

Machinery Repairs

60, 000

4

Utilities

45, 000

3

Packaging

75, 000 5

Shipping

105, 000

7

Total Variable Cost

1, 485, 000

Fixed Items:

Depreciation – Plant

300, 000

Equipment

150, 000

Plant Management

200, 000

Salaries

Sales

Salaries

125, 000

Salaries

241, 000

Entertainment expense

90, 000

Total Fixed Cost

1, 356, 000

Particulars

1, 485, 000

Contribution Margin

1, 356, 000

$

Sales Revenue

3, 000, 000

Less: Variable Costs

1, 515, 000

Less:

Fixed Costs

Net Operating Income

159, 000

Fixed Costs

$ 1, 356, 000

Contribution Margin per Unit

$ 101

Break-Even Point

13, 426 units

Therefore, to break even, the company has to sell 13,426 items which will give total sales cost =

$2,685,200 (Wild & Shaw, 2019).

Particulars

 

Unit Sales

Unit Sales

Unit Sales

 

Sales Revenue

Direct Materials

Direct Labor

Utilities

$48,000

Packaging

Shipping

300000

300000

300000

300000

Utilities

150000

150000

150000

150000

Plant Management

200000

200000

200000

200000

Salaries

Sales Salaries

250000

250000

250000

250000

Advertising

125000

125000

125000

125000

Salaries

241000

241000

241000

241000

90000

90000

90000

90000

Total Fixed Costs

1356000

1356000

1356000

1356000

Income statement:

Flexible Budget

Flexible Budget for:

Variable Amount per Unit

Total Fixed Costs

Unit Sales

12000

14000

16000

18000

$200

$2,400,000

$2,800,000

$3,200,000

$3,600,000

Variable Manufacturing Costs

$65

$7

80,000

$910,000

$1,040,000

$1,170,000

$15

$180,000

$210,000

$240,000

$270,000

Machinery Materials

$4

$48,000

$5

6,000

$64,000

$72,000

$3

$36,000

$42,000

$54,000

$5

$60,000

$70,000

$80,000

$90,000

$7

$84,000

$98,000

$112,000

$126,000

Total Variable Costs

$99

$1,188,000

$1,386,000

$1,584,000

$1,782,000

Contribution Margin

$101

$1,212,000

$1,414,000

$1,616,000

$1,818,000

Fixed Costs:

Depreciation –Plant Equipment

300000

150000

200000

250000

125000

241000

Entertainment expense 90000

1356000

Net income

($144,000)

$58,000

$260,000

$462,000

References:

Davis, J. M. (1998). Project feasibility using breakeven point analysis. Appraisal Institute, 66(1), 41-45.

https://www.proquest.com/scholarly-journals/project-feasibility-using-

breakeven-point/docview/199944718/se-2?accountid=158986

Novin, A. M. (1992). Applying Overhead: How to Find the Right Bases and Rates. Institute of Management Accountants, 73(9), 40.

https://www.proquest.com/scholarly-

journals/applying-overhead-how-find-right-bases-rates/docview/229742735/se-2?

accountid=158986

Stapleton, D., Hanna, J. B., Yagla, S., Johnson, J., Markussen, D. (2002). Measuring logistics performance using the strategic profit model. Emerald Group Publishing Limited, 13(1), 89-107.

https://dx.doi.org/10.1108/09574090210806388

Tucker, M. W. (1982). Flexible Budgeting as a Management Tool. SAGE PUBLICATIONS, INC., 6(4), 10.

https://www.proquest.com/scholarly-journals/flexible-budgeting-as-

management-tool/docview/213812761/se-2?accountid=158986

Wild, J., & Shaw, K. (2019). Financial and managerial accounting: Information for decisions

(8th ed.). McGraw-Hill

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