200101 AIM Homework Solutions Week 14 - Aut 2012

7/28/2019 200101 AIM Homework Solutions Week 14 - Aut 2012

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200101Autumn 2012

Tutor Solutions Week 14

Copyright The University of Western Sydney, 2012

No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, includingphotocopying, recording, or by any information storage and retrieval system, without the prior written permission from the Head of

School, School of Accounting. Copyright for acknowledged materials reproduced herein is retained by the copyright holder.All readings in this publication are copied under licence in accordance with Part VB of the Copyright Act 1968.


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200101 Accounting Information for Managers Autumn 2012

Page 2 Accounting Program, School of Business

C ontac t Details

First point of contact for all enquiries and for students havingdifficulties with the unit:

Mrs Susan Green (Unit Administrator)

Building EQ Parramatta CampusPhone: 9685 9207 Fax: 9685 9593 Email: [email protected][Sue is normally in the office each week on Monday to Thursday inclusive]

Unit Coordinator

Graeme Mitchell: Vernon Bldg (ED), Room ED.G.212 Parramatta Campus; Email:

[email protected] ; Phone: 9685 9215 Mob: 0419 291 606

vUWS Coordinator

Simon Lenthen: Vernon Bldg (ED), Room: ED.G.11 Parramatta Campus; Email:[email protected]: 9685 9476 Mob: 0414 325 676
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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Autumn 2012 200101 Accounting Information for Managers

Accounting Program, School of Business Page 3

S c hedule of learning activities

Week No.Date

Text Reference / Lecture Topic/ LearningOutcomes (LO)

Tutorial Homework*

127 February-2March

Introduction to accounting (Chapter 1).Business structures (Chapter 2).

Read learning guide and unit outline.Complete handout in class for Week 1.

25-9 March

Ethics and corporate governance(Chapter 3).Business transactions (Chapter 4).

Study guide: Chapter 1 (C2, C3, C4) andChapter 2 (E1, E4, E5).Textbook: Chapter 1 (D1.7) and Chapter 2(E2.15, E2.16a, E2.17a, P2.7).

312-16 March

Business transactions (Chapter 4). Study guide: Chapter 3 (C3, E1, E4) andChapter 4 (C3).Textbook: Chapter 3 (D3.10, D3.12,D3.27) and Chapter 4 ( P4.3).

419-23 March

The balance sheet (Chapter 5, pp. 138-163).

Study guide: Chapter 4 (E1, E5 a-e).Textbook: Chapter 4 (E4.7, E4.8, P4.4,P4.12).

526-30 March

Note: No lectures or tutorials this week.Staff will be available for additionalconsultation see vUWS for details.

Due: Mid-semester examination onSaturday, 31 March 2012.Note: Check vUWS site closer to the datefor further details.

62-6 April

The balance sheet cont. (Chapter 5, pp.164-174).

Study guide: Chapter 5 (C1, E2a-c).Textbook: Chapter 5 (E5.10, E5.11,E5.13, E5.14).

79-13 April

Income statement and statement ofchanges in equity (Chapter 6).Time available in tutorial to work ongroup assignment.

Study guide: Chapter 5 (MC1-15, E4, E5).Textbook: Chapter 5 (D5.9, D5.10, P5.2,P5.5).

816-20 April INTRA SESSION BREAK INTRA SESSION BREAK

923-27 April

The cash flow statement (Chapter 7). Study guide: Chapter 6 (complete thesentence activity on p. 106, C2, E1).Textbook: Chapter 6 (D6.5, D6.8, E6.1,E6.2, E6.5, E6.11, P6.2).

1030 April-4 May

Financial statement analysis (Chapter 8,pp. 303-22)Due: Group assignment.

Study guide: Chapter 7 (MC1-15, C2).Textbook: Chapter 7 (D7.2, D7.6, E7.2,E7.3, E7.9, E7.20, P7.2).

117-11 May

Financial statement analysis (Chapter 8,pp. 322-42).

Study guide: Chapter 8 (C1, C2, E1).Textbook: Chapter 8 (D8.3, D8.10, E8.6,E8.10, P8.1).

1214-18 May

Budgeting (Chapter 9). Study guide: Chapter 8 (MC1-15, E3, E4,E5).Textbook: Chapter 8 (D8.8, E8.7, E8.14,P8.7).

1321-25 May

Cost-volume-profit analysis (Chapter10).

Study guide: Chapter 9 (C2, E1, E2).Textbook: Chapter 9 (D9.7, D9.8, E9.2,E9.9, P9.7).

1428 May-1 J une

Review lecture. Study guide: Chapter 10 (C2, C3, C4, E1).Textbook: Chapter 10 (D10.2, E10.2,E10.3, E10.7, E10.13, P10.5).

Refer to learning outcomes on page 3

* Ch = Chapter, MC= Multiple Choice, C = Classification questions, D = Discussion questions, E = Exercises, P = Problems


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Week 14 In-C las s S een S olutions

E10.2 Find the missing figure for each of the followingindependent cases:

E10.7 In the Whine Company, it costs $20 per unit ($15 variable

and $5 fixed) to make a product that normally sells for $45. A foreignwholesaler offers to buy 3000 units at $25 each. The Whine Companywill incur special shipping costs of $1 per unit.

RequiredAssuming that Whine has excess operating capacity, indicatethe net profit (or loss) it would realise by accepting the specialorder.

Unit Contribution Margin from Normal Sales

Sales Price per unit $45Variable costs 15Contribution margin $30

Selling

Price/unit

Variable

costs/unit

Units

sold

Contribution

Margin (total)

Fixed

costs

Profit

(Loss)$40 $20 60 000 $1 200 000 $900 000 $300 000$18 $12 10 000 $60 000 $48 000 $12 000$25 $20 50 000 $250 000 $250 000 0$8 $6 100 000 $200 000 $50 000 $150 000$5 $4 500 000 $500 000 $460 000 $40 000


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Unit Contribution Margin From Special OrderSales Price $25Variable costs 16 ( additional $1 shipping costs)Contribution margin $ 9

Profit would increase by $9 x 3 000 units = $27 000

Fixed costs are irrelevant, as the level of costs will not changewithin the relevant range.

E10.13 Chloe Enterprises operates a single-product entity. Datarelating to the product for 2011 were as follows:

a. Calculate the break-even units for 2011.

Selling price $60Less: variable manufacturing $28

variable marketing etc. 12 40Contribution Margin = $20

Break-even = $480 000/ ($20) = 24 000 units

b. Calculate the profit achieved in 2011.

Profit = (32 000 units *$20) $480 000 = $160 000


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c. Changes in marketing strategy are planned for 2012. Thiswould increase variable marketing and distribution costs by$4 per unit, and reduce fixed non-manufacturing costs by$80 000 per year. Calculate the units that would need to besold in 2012 to achieve the same profit as in 2011.

Contribution margin will decrease due to increased variable costsCurrently $20 less additional $4 variable marketing = $16

To achieve same profit as 2011 = ($400 000 + $160 000)/ ($16) =35 000 units

d. Would you recommend the change? Explain.

Based on the increased number of units required to achieve thesame profit, the change is not recommended in the short term.


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Week 14 Homework Solutions

Solutions to the Study Guide Questions can be found in the Study Guide

D10.2, E 10.3, P10.5

Chapter 10

D10.2 Using examples, distinguish between fixed and variable costs.

Total fixed costs do not change within the relevant range of activity. For example, regardless ofthe level of production, a manufacturer would still need to pay the rent, insurance and salaries ofpermanent staff.

Variable Costs per unit do not change, however, total variable costs change proportionately withchanges in activity. For example, a manufacturer who produces wooden tables. The cost per

table would be the same, however, the total cost of manufacturing the tables will changeproportionate to the level of production. Say each table consumed $10 of variable costs (such aswood, nails, glue), if 10 tables were manufactured the total variable cost would be $100 (10tables $10) and if 100 tables manufactured the total variable cost would be $1000 (100 tables $10).

E10.3 For each of the following independent situations, calculate the break-even point inunits:

a. Variable cost per unit of $2, annual fixed costs of $60 000 and selling price per

unit of $6

$60 000 / ($6 $2) = 15 000 units

b. Variable costs per unit of $10, annual fixed costs of $120 000 and selling price perunit of $20

$120 000 / ($20 $10) = 12 000 units

c. Variable costs per unit of $15, annual fixed costs of $90 000 and selling price of $18

$90 000 / ($18 $15) = 30 000 units


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P10.5 Break-even: single product; profit calculationJanna Processing is a single-product entity, and provides the following summarydata relating to its product for 2011:

Requireda. Calculate the break-even in units and sales dollars for 2011

Contribution margin = $50 (24 + 8) = $18

Breakeven units = $756 000/ $18 = 42 000 units

Sales $ = 42 000 units x selling price of $50 = $2 100 000Or using the contribution margin ratio method $756,000 / (18/50) = $2,100,000

b. Calculate the profit earned in 2011.

Profit in 2011 = (48 000 units * $18) - $756 000 = $108 000

c. Janna Processing is considering changes in plant operations and the productionprocess for 2012. The changes would result in a reduction of variable costs per unitof $6, and increase fixed manufacturing costs by $265 000. How many units would

need to be sold to earn the same profit as in 2011? Would you recommend thechanges?

Changes Existing Variable costs = $32 less $6 reduction = $24adjusting contribution margin to 50 26 = $24Fixed costs Currently $756,000 plus $265,000 additional = $1,021,000

To earn the same profit as 2011 = ($1 021 000 + $108 000)/$24 = 47 042 units This is slightly lessthan the 48 000 units required to sold in 2012 to earn the equivalent profit. This move, would alsohave some impact on the mix between fixed and variable costs (operating leverage).

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200101 AIM Homework Solutions Week 14 - Aut 2012