Bonanza Offer FLAT 20% off & $20 sign up bonus Order Now
Particulars | Year 1 | Year 2 | Year 3 |
Purchases order | 254100 | 266805 | 280145.3 |
government purchase orders to total purchase orders | 83853 | 88045.65 | 92447.93 |
The direct material in govt. contract | 2056150 | 2107553.75 | 2160243 |
Material handling costs | 0.117647 | 0.117647 | 0.117647 |
a. Smith has an ethical conflict because the material handling cost should be allocated to the per purchase order, but Jones want to allocate into government contracts because material handling cost can be more adjusted which will help Jones in earning a profit. But the strategy of Smith can decrease Jones per unit earning and cut his bonus for the year. So to gain more profit from the government contract Jones is telling Smith to adjust the price, which an unethical issue.
b. Steps that Smith should take to resolve the ethical conflict are as follows:
First of all, Smith should talk to the next supervisor excluding the case supervisor is to be involved, when there is a problem that should be reported to the higher level manager. If you see that the result is not satisfactory, and action is not taking place, then the issue should be conveyed to the next higher official. If the next immediate manager is CEO or equivalent, then the immediate official should be initially contacted, with an assumption that manager is not involved in the matter.
Then clarification of the ethical issue should be discussed with an objective advisor through a confidential way, to get a better understanding of the relevant course of action. Consultancy should be done with the attorney about a legal matter and rights related to the ethical conflict.
If there is still the existence of the ethical conflict after conveying the issue through all levels of the internal management, there are no other course of action is left to be done. The only thing can be done to resign from the company and to submit the descriptive memorandum to the concerned people of the organization
Statement of Projected Cost & Profit:- |
|
|
|
|
|
Period: 1st July to 31st December |
|
|
|
|
|
| Standard |
| Commercial |
|
|
| Unit | 100000 | Unit | 100000 |
|
Particulars | Total Amount | Cost Per Unit | Total Amount | Cost Per Unit |
|
|
|
|
|
|
|
Total Sales | 2000000 | 20 | 3000000 | 30 |
|
|
|
|
|
|
|
Direct Material | 700000 | 7 | 800000 | 8 |
|
Direct Labor | 400000 | 4 | 400000 | 4 |
|
Manufacturing Overhead: |
|
|
|
|
|
Variable | 100000 | 1 | 200000 | 2 |
|
Fixed | 400000 | 4 | 500000 | 5 |
|
Selling & Administrative Expenses: |
|
|
|
|
|
Variable | 400000 | 4 | 700000 | 7 |
|
Fixed | 240000 | 2.4 | 360000 | 3.6 |
|
|
|
|
|
|
|
Total Cost | 2240000 | 22.4 | 2960000 | 29.6 |
|
|
|
|
|
|
|
Net Profit | -240000 | -2.4 | 40000 | 0.4 |
|
a. The answers to this question are given in the below-mentioned calculation
Break Even Analysis of Standard Product:- |
|
|
|
|
|
Particulars | Option 1 | Option 2 | Option 3 | Option 4 | Option 5 |
Selling Unit | 120000 | 100000 | 90000 | 80000 | 50000 |
|
|
|
|
|
|
Selling Price p.u. | 18 | 20 | 21 | 22 | 23 |
Variable Costs p.u.: |
|
|
|
|
|
Direct Material | 7 | 7 | 7 | 7 | 7 |
Direct Labor | 4 | 4 | 4 | 4 | 4 |
Var. Manuf. O/H | 1 | 1 | 1 | 1 | 1 |
Var. Selling & Administrative Cost | 4 | 4 | 4 | 4 | 4 |
Contribution Per Unit | 2 | 4 | 5 | 6 | 7 |
Fixed Costs: |
|
|
|
|
|
Manufacturing Overhead | 400000 | 400000 | 400000 | 400000 | 400000 |
Selling & Administration Expenses | 240000 | 240000 | 240000 | 240000 | 240000 |
Total Fixed Costs | 640000 | 640000 | 640000 | 640000 | 640000 |
Break Even Point in Unit | 320000 | 160000 | 128000 | 106666.7 | 91428.57 |
Break Point in Dollars | 5760000 | 3200000 | 2688000 | 2346667 | 2102857 |
Particulars | Option 1 | Option 2 | Option 3 | Option 4 | Option 5 |
Selling Unit | 175000 | 140000 | 100000 | 55000 | 35000 |
Selling Price p.u. | 25 | 27 | 30 | 32 | 35 |
Variable Costs p.u.: |
|
|
|
|
|
Direct Material | 8 | 8 | 8 | 8 | 8 |
Direct Labor | 4 | 4 | 4 | 4 | 4 |
Variable Manufacturing O/H | 2 | 2 | 2 | 2 | 2 |
Variable Selling & Administrative Expenses | 7 | 7 | 7 | 7 | 7 |
Contribution P. U. | 4 | 6 | 9 | 11 | 14 |
Fixed Costs: |
|
|
|
|
|
Manufacturing Overhead | 500000 | 500000 | 500000 | 500000 | 500000 |
Selling & Administration Expenses | 360000 | 360000 | 360000 | 360000 | 360000 |
Total Fixed Costs | 860000 | 860000 | 860000 | 860000 | 860000 |
Break Even Point in Unit | 215000 | 143333 | 95556 | 78182 | 61429 |
Break Point in Dollars | 5375000 | 3870000 | 2866667 | 2501818 | 2150000 |
The factors, which could lead to closure of business of Clean and Bright Compounds Fremantle plant, are as follows
Low profits: Clean and Bright Compounds Fremantle incapability to yield a high amount of profit is one of the common reasons, which leads to the closure of business. It is evident from the case study that the owners of business spend a huge amount of money on inventory, productions, and general administration expenses at the time of operating the company activities.
High competitions: The organization may face tough competitions from a different number of companies in the economic markets. A business like Fremantle may face competitions while attempting to preserve the adequate amount of market share. However, the owners of the company may close the business if the competitors produce goods constantly by lowering some products.
Hawthorn Leisure Works will earn its revenue from annual membership fees and hourly court fees. Earning from hourly court fee is not fixed by varies. Under new cash receipt plan, membership fees will be collected before, and there is no separate cost for hourly court fee. HLW should utilize the new cash receipt which will increase the cash planning.
Total yearly revenue is from the planned changed in fee structure is 38188. No assumptions have been made, as stated in the question difference in the number of projected member, and a current member is 600 which will be filled up in October.
key factors are as follows:
The annual membership fee will be charged, ignoring membership fees plus hourly court fees.
There are two categories of membership.
The annual fee will be collected during the application of the membership
HLW should follow horizontal and vertical analysis method in evaluating his financial statement.
During the peak season, total hourly court fees was which are referred as prime time and non-prime time is calculated as 147696 whereas after the peak time it is 52992 so the difference arise which is increased. So cash receipts get fully affected as the results shows.
Activity-based costing 2016, , 6th edn, Oxford University Press.
Browning, M., and Heinen, E., 2012. Effect of job loss due to plant closure on mortality and hospitalization. Journal of health economics, 31(4), pp.599-616.
Costing, Capital Investments, and the Integration of Sustainability Risks 2014.
DRURY, C.M., 2013. Management and cost accounting. Springer.
Gómez Valdés, J., 2015. Costes basados en el tiempo invertido por actividad (TDABC): una aplicación práctica= Time-driven activity-based costing (TDABC): a practical application.
Hope, J. and Fraser, R., 2013. Beyond budgeting: how managers can break free from the annual performance trap. Harvard Business Press.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
Kelly, J.M., 2015. Performance budgeting for state and local government. shape.
Upload your Assignment and improve Your Grade
Boost Grades