Scenario -
Prepare a financial report on the proposed Android01, as well as the MiniX and MiniYfor the company called IPS (a factious company).
$2M has already been spent on market research, and IPS wishes to determine if the new Android01 component be produced in a way that will yield a profit.
Determine different ways of allocating fixed overhead costs and a choice that will affect the cost-per-unit of Android01. Understand the different choices and how they'll impact the business.
Examining an alternative method of assigning costs would also be prudent since Android01 shares component assembly with a related product - Processor01.
A 30 percent markup is standard at IPS. Provide information on the variable costs per unit for different levels of production to provide a recommendation on what level of output will maximize profit.
The new MiniY product has been so successful that IPS would like to increase production. Develop a budget projection. Also, the shared production costs for the Mini line have affected the value of the premiere product, the MiniX - Provide a profit or loss figure for the MiniX product.
Provide a report summarizing the findings and projections.
This project requires analyzing operations costs for the organization using managerial finance techniques. Determine the level of production and prices that maximize the firm's profit. Finally, prepare a financial budget for the firm and present recommendations.
Begin by going to Step 1: Allocation of Costs.
The project will be evaluated using the competencies listed below. They are: Identify numerical or mathematical information that is relevant in a problem or situation. Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution. Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data. Employ software applications and analytic tools to analyze, visualize, and present data to inform decision-making. Develop operating forecasts and budgets and apply managerial accounting techniques to support strategic decisions. These competencies will apply to every assignment.
ASSIGNMENT 1 -
Step 1: Allocate Cost
Look at production options for the Android01 since production methods and allocation of costs have implications for cost-per-unit. There are two alternative methods of production being considered. Begin by gathering data (using financial information in decision making- attached), then answer various questions to determine the suitability of the project.
Production A -
Costs are as follows:
- $4.5 million per year in rent for factory and machinery
- components and labor in the amount of $12 million will produce 300 units per year
Production B -
In an alternative production method, the production of Android01 will share some production facilities and service divisions with Processor01. Fixed costs are $5 million per year, and are to be assigned at the rate of 30 percent to Android01 and 70 percent to Processor01.
The variable cost of the production facilities and service divisions is $20 million per year. The square footage of factory space and labor needed for the production of 500 units of Processor01 and 300 units of Android01 are listed below.
Sq. Ft. Labor
Processor01 (500 Units) 70,000 120
Andriod01 (300 Units) 30,000 80
The remaining cost for the production of Android01 is for components, at $25,000 per unit.
Question 1: In Method B, what would be the cost-per-unit of producing Android01 using factory space as the allocation basis? What would be the cost-per-unit using labor as the allocation basis?
Submit assignment using the calculations in Excel and provide a narrative analysis in PowerPoint. The narrative analysis should summarize the results of the analysis and recommend the benefit of this for the company.
Incorporate the competencies below.
Identify numerical or mathematical information that is relevant in a problem or situation. Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution. Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data. Employ software applications and analytic tools to analyze, visualize, and present data to inform decision-making. Develop operating forecasts and budgets and apply managerial accounting techniques to support strategic decisions.
Assignment 2 - Step 2 Activity-Based Costing
The alternate method of assigning costs is activity-based costing. The major activity for the production of both Processor01 and Android01 is component assembly. There will be a total of 125,000 assemblies per year for the production of 500 units of Processor01 and 300 units of Android01 at a total cost of $25 million. Each unit of Android01 will require 180 assemblies. The remaining cost for the production of Android01 is for components, at $25,000 per unit.
Question 2: What would be the cost per unit of producing Android01 using activity-based costing?
Identify numerical or mathematical information that is relevant in a problem or situation. Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution. Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data. Employ software applications and analytic tools to analyze, visualize, and present data to inform decision-making. Develop operating forecasts and budgets and apply managerial accounting techniques to support strategic decisions.
Assignment 3 -
Step 3: Markup Pricing
Suppose IPS uses markup pricing for Android01. Fixed costs are $4.5 million, and for a level of production of 300 units, the variable cost-per-unit is $48,000.
Question 3: What is the price of the Android01 at 30 percent markup over full cost?
Submit the Markup Pricing Report and Calculations. Show the calculations in PowerPoint and in an Excel spreadsheet. Show the calculations in Excel and a narrative analysis in PowerPoint. The narrative analysis should summarize the results of the analysis and make recommendations for the benefit of company.
Identify numerical or mathematical information that is relevant in a problem or situation. Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution. Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data. Employ software applications and analytic tools to analyze, visualize, and present data to inform decision-making. Develop operating forecasts and budgets and apply managerial accounting techniques to support strategic decisions.
Assignment 4 -
Step 4: Choose the Profit-Maximizing Output Level
What level of output would be required to maximize our profit on the Android01? Calculate the variable cost-per-unit for different levels of production. From market research, the information is summarized below:
Name of Units Variable Cost-per-Unit ($) Sale Price-per-Unit ($)
200 60,000 70,000
250 54,000 66,000
300 48,000 64,000
350 46,000 59,000
400 45,000 52,000
A recommendation on output could affect everyone in the company, from management to sales, to the floor manager and assembly line workers. Require accurate calculations.
Question 4: Based on profit-maximization analysis, what level of output should be recommended to the President of the company?
Before starting your calculations, review materials on profit maximization output.
Submit the Profit-Maximization Output Report and Calculations assignment. Show calculations in Excel and provide a narrative analysis in PowerPoint. The narrative analysis should summarize the results of the analysis and make recommendations for the benefit of the company.
Identify numerical or mathematical information that is relevant in a problem or situation. Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution. Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data. Employ software applications and analytic tools to analyze, visualize, and present data to inform decision-making. Develop operating forecasts and budgets and apply managerial accounting techniques to support strategic decisions.
Assignment 5 -
Step 5: Budget
Prepare a production cost budget for the MiniY for May 20X8. The actual costs in April 20X8 were:
MiniY: Production Cost Budget
April 20X8
Production-Units of MiniY 3,000
Components cost (variable) 24,000,000
Labor cost (variable) 13,500,000
Rent (fixed) 6,000,000
Depreciation (fixed) 6,000,000
Other (fixed) 2,000,000
Total $51,500,000
For the month of May, the number of MiniY produced will increase to 3,200, reflecting an anticipated sales increase related to a new marketing campaign.
Prior to the calculations, review procedures on integrating accounting and financial information.
Submit the Production Cost Budget Report and Calculations. Show the calculations in Excel and provide a narrative analysis in PowerPoint. The narrative analysis needs to summarize the results of the analysis and make recommendations for the benefit of company.
Identify numerical or mathematical information that is relevant in a problem or situation. Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution. Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data. Employ software applications and analytic tools to analyze, visualize, and present data to inform decision-making. Develop operating forecasts and budgets and apply managerial accounting techniques to support strategic decisions.
Assignment 6 -
Step 6: Profit or Loss
IPS operates a factory which produces the MiniY and the MiniX. During September 20X8, the factory produced 500 units of MiniY and 600 units of MiniX. The joint cost related to the operation was $3,000,000. MiniX sells for $3,500 per unit and MiniY sells for $3,800 per unit. Allocate the joint costs (production cost allocation) using the relative sales values of MiniY and MiniX. Prove that the MiniX is profitable.
Question 6: With the costs that you calculate, what is the profit or loss associated with MiniX?
Prior to the calculations, review the materials on integrating accounting and financial information.
Submit the Profit or Loss Report and Calculations. Show the calculations in Excel and provide a narrative analysis in PowerPoint. The narrative analysis needs to summarize the results of the analysis and make recommendations for the benefit of company.
Identify numerical or mathematical information that is relevant in a problem or situation. Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution. Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data. Employ software applications and analytic tools to analyze, visualize, and present data to inform decision-making. Develop operating forecasts and budgets and apply managerial accounting techniques to support strategic decisions.
Assignment 7 -
Step 7: Present Financial Projections
Provide an analysis using sound decision making (integrating accounting and financial information) and summary of financial projections for the Mini and Android lines, based on the information gathered in the previous steps.
In previous reports and spreadsheets identify meaningful trends and patterns.
Submit the Presentation of Financial Projections. The summary should be submitted as a PowerPoint presentation.
Identify numerical or mathematical information that is relevant in a problem or situation. Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution. Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data. Employ software applications and analytic tools to analyze, visualize, and present data to inform decision-making. Develop operating forecasts and budgets and apply managerial accounting techniques to support strategic decisions.
Attachment:- Assignment.rar