|Assignment ID Number||AFFGEHU83939HD|
|Type of Document||Essay|
Costs Variable Selling and Administrative Cost
ACC00724 (Accounting for Managers) S2, 2018 ASSIGNMENT 2 (20 MARKS) Question 1 (5 marks) Refer to the company you studied for Assignment one. Using some of the information you gleaned there, as well as additional information, calculate the cash cycle period for each of the five years. Then, reviewing the Statement of Cash flows for the most recent two years, evaluate the trends of overall cash flows, but particularly those related to cash flows from operating activities.
Question 2 (8 marks)
Telesmart Ltd. manufactures a high end smart phone with dual sim cards that is popular with young travelers. Related financial data for this product for the last year is as follows:
Sales 5,000 units Selling price $420 per unit Variable manufacturing cost $144 per unit Fixed manufacturing costs $460,000 Variable selling and administrative costs $36 per unit Fixed selling and administrative costs $500,000.
The CEO is under pressure from the Board of Directors to increase the profitability of the phones and has asked executives from different departments for suggestions. Three managers have responded with the following ideas:
You have been asked by the CEO, Sharon Whitmore, to comment on each of these three proposals before she presents them to the Board of Directors. Draft a report in response to this request. You are not asked to make one particular choice or recommendation, but rather to explore the potential strengths and weaknesses that includes discussion on the breakeven, potential profits and, where possible, the margin of safety related to each proposal. Keep in mind that the sales volumes should be treated as estimates only and your report should consider potential variations in actual sales and their effects. Give both qualitative and quantitative support to your comments.
Question 3 (7 marks) You are the accountant for FreeWheels Ltd, a tandem bicycle manufacturer that is located in Coffs Harbour and has customers in Australia and the USA. Their estimated current sales volume is 6,000 units per month and based on this level of production, the company has budgeted the following costs and prices per unit:
Manufacturing Costs per unit (Based on production of 6,000 units per month) Direct Material Cost $75.00 Direct Labour Cost 35.00 Variable Factory Overhead 10.00 Fixed Factory Overhead 20.00 Total Manufacturing Cost 140.00 Selling & Administrative Costs Variable Selling and Administrative Cost 25.00 Fixed Selling and Administrative Cost 20.00 45.00 Total Cost Per Unit 185.00 Selling Price Per Unit $370.00
Cycle World Ltd is an overseas company that sells bicycles all over the world, with the majority of their market in China and India. They have approached FreeWheels about obtaining a quote for a special one-off order as they would like to purchase 25,000 bikes. As this will be a special order sale, there will be no costs incurred for variable selling and administrative costs and no additional fixed costs will be incurred. This order is because their existing supplier has suffered substantial earthquake damage to their premises, but the CEO of Cycle World Ltd also hinted to your CEO that if they are satisfied with the product, this might not be the last deal between the two businesses.
Required: 1. Given this knowledge, what amount should FreeWheels Ltd. bid for this contract in
each of the following circumstances: a) The FreeWheels’s annual factory capacity is 100,000 units. b) The FreeWheels’s annual factory capacity is 90,000 units. (To fulfil the order, you may
have to pull the product from your regular production).
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