Module 2 – Case

COST–VOLUME–PROFIT
ANALYSIS

Assignment Overview

The
Annie Smith Dance Center

The Director of Annie
Smith Dance Center is asking for assistance with the financial aspects of
running a professional group of performers. She wants financial information
presented in an easy to read format and a better understanding of the
profitability of the concerts and the organization as a whole.

The Annie Smith
professional group features three styles of dance concerts each year. Two of
the dance concerts showcase a different genre. The third performance is a
Christmas Spectacular, which is the most popular and is therefore scheduled
every year. The table below provides information about expected ticket sales
for the performances.

Ms. Smith has prepared
a tentative schedule for the coming season. The table below also shows the type
and number of performances and direct cost per type of concert.

*Examples of direct
fixed costs are costumes, rehearsals, royalties, guest artist fees,
choreography, and salaries of production staff, music, and wardrobe for each of
the concerts. This amount does not change with the number of performances.

Additional costs:

Variable costs
associated with each performance are shown below.

Annual general
administrative and operating costs for the dance center are:

Case Assignment

Required:

Computations
(use Excel)

·
Summarize key financial information in a table as shown below.

·
Use the information in the table you completed to compute the
number of performances required to break even for each concert. Do not include
general and administrative expenses. These are separate computations for each
dance concert.

·
Compute break even for the organization as a whole (include all
fixed expenses) and express the result in revenues instead of the number of
performances.

·
Ms. Smith wants the Dance Center to generate at least $200,000
in operating profit. What level of revenues does the performance group need to
achieve to meet this goal? Prepare an income statement in good format to
support the computations.

·
Give a recommendation about changes Ms. Smith can implement to
achieve the target profit. Support your idea with computations.

Memo
(use Word)

Write a 4- or
5-paragraph memo to the owner of the dance center to assist her in interpreting
the financial analysis. Start with an introduction and end with a
recommendation. Each of the four or five paragraphs should have a heading.

Short
Essay (use Word)

Start with an
introduction and end with a summary or conclusion. Use headings.

·
What are some shortcomings of multi-product even analysis?

·
How does demand and resource constraints affect this type of
analysis.

Assignment Expectations

Each submission should
include two files: (1) An Excel file and (2) a Word document. The Word document
shows the memo first and short essay last. Assume a knowledgeable business
audience and use required format and length. Individuals in business are busy
and want information presented in an organized and concise manner.

Module 3 – Case

TRANSFER PRICING AND RESPONSIBILITY
CENTERS

Assignment Overview

Coffee
Maker’s Incorporated (CMI)

Three divisions of a
CMI are involved in a dispute. Division A purchases Part 101 and Division B
purchases Part 201 from a third division, C. Both divisions need the parts for
products that they assemble. The intercompany transactions have remained
constant for several years.

Recently, outside
suppliers have lowered their prices, but Division C refuses to do so. In
addition, all division managers are feeling the pressure to increase profit.
Managers of divisions A and B would like the flexibility to purchase the parts
they need from external parties at a lower cost and increase profitability.

The current pattern is
that

·
Division A purchases 2,700 units of product part 101 from Division
C (the supplying division) and another 1,300 units from an external supplier.

·
Division B purchases 1,100 units of Part 201 from Division C and
another 700 units from an external supplier.

·
Note that both divisions A and B purchase the needed supplies from
both the internal source and an external source at the same time.

The managers for
divisions A and B are preparing a new proposal for consideration.

·
Division C will continue to produce Parts 101 and 201. All of
its production will be sold to Divisions A and B. No other customers are likely
to be found for these products in the short term, given that supply is greater
than demand in the market.

·
Division A will buy 2,000 units of Part 101 from Division C at
the existing transfer price; and

·
2,000 units from an external supplier at the market price of
$900 per unit.

·
Division B will buy 900 units of Part 201 from Division C at the
existing transfer price; and

·
900 units from an external supplier at $1,800 per unit.

Division
C Data Based on the Current Agreement

The fixed overhead for
Division C is $1,200,000.

Case Assignment

Required:

Computations
(use Excel)

·
Set up a table similar the one below to compute the difference
between the current situation and the proposal for Divisions A and B.

·
Compute the operating income for Division C under the current
agreement and the proposed agreement.

·
Is the revised agreement a good idea? Support your answer with
computations.

Memo
(use Word)

Write a 4- or
5-paragraph memo to the division manager explaining the analysis performed.
Start with an introduction and end with a recommendation. Each of the four or
five paragraphs should have a heading.

Short
Essay (use Word)

Start with an
introduction and end with a summary or conclusion. Use headings.

Evaluate and discuss
the implications of the following transfer pricing policies:

·
Transfer price = cost plus a mark-up for the selling division

·
Transfer price = fair market value

·
Transfer price = price negotiated by the managers

Why is transfer
pricing such a significant issue both from a financial and managerial
perspective?

Assignment Expectations

Each submission should
include two files: (1) An Excel file and (2) a Word document. The Word document
shows the memo first and short essay last. Assume a knowledgeable business
audience and use required format and length. Individuals in business are busy and
want information presented in an organized and concise manner.

Module 4 – Case

BUDGETING, VARIANCE
ANALYSIS, AND PERFORMANCE EVALUATIONS

Assignment Overview

T&P
Fashion Shops

T&P Fashion Shops
is a new chain that operates 10 stores in major malls throughout the United
States. Each store manager is responsible for preparing a flexible budget for
the store. T&P headquarters accumulates and analyzes the information for
each store and in the aggregate.

Below is the forecast
(budgeted income statement) for the Houston store showing the breakdown of
fixed and variable expenses in columns two through four. The last column shows
the actual results.

Additional Information

·
Variable expenses are based on revenues and we assume that the
percentage remains constant for flexible budgeting purposes.

·
Fixed costs are all within the relevant range.

·
Other expenses are all specific to this store. Headquarters pay
for marketing and corporate overhead expenses.

Case Assignment

Required:

Computations
(use Excel)

1.
Prepare a flexible budget and show variances for the year that
passed. Indicate whether the flexible budget variances are favorable or
unfavorable.

2.
Headquarters are contemplating charging each store a 5%
marketing expense based on sales. How will that affect the operating profit of
the store and the money available for managerial bonuses based on actual
results for the past year? Summarize the information in a table.

Memo
(use Word)

Write a 4- or
5-paragraph memo to the division manager explaining the flexible budget variances;
how to interpret the information and what action, if any to take. Comment on
the 5% marketing proposal too. Start with an introduction and end with a
recommendation. Each of the four or five paragraphs should have a heading.

Short
Essay (use Word)

Start with an
introduction and end with a summary or conclusion. Use headings.

·
Discuss how to interpret static and flexible budget variances.

·
What are the benefits of variance analysis? How can such
analysis be detrimental rather than beneficial to the organization?

Assignment Expectations

Each submission should
include two files: (1) An Excel file and (2) a Word document. The Word document
shows the memo first and short essay last. Assume a knowledgeable business
audience and use required format and length. Individuals in business are busy
and want information presented in an organized and concise manner.

ScholarMatic: Explanation & Answer

Your ready answer from a verified tutor is just a click away for as little as $14.99

---

  

Click Order Now to get 100% Original Answer Customized to your instructions!