Acc202 Management Accounting Answers Assessment Answers

Required

1.Prepare an activity-based customer-cost report, distribution channel cost report and a customer-profitability analysis for the five customers. Ensure that you also include an overall total profitability analysis for the business.

3.Calculate the contribution margin per hour of selling the Super-chip and the Okay-chip. If no transfers of Super-chip are made to the Process Control Division, how many Super-chips and Okay-chips should the Semiconductor Division manufacture and sell? Show your calculations.

4.The Process Control Division expects to sell 5000 process-control units this year. From the viewpoint of AIC as a whole, should 5000 Super-chips be transferred to the Process Control Division to replace circuit boards? Show your calculations.

5.What transfer price, or range of prices, would ensure goal congruence among the division managers? Show your calculations and provide an explanation.

6.If labour capacity in the Semiconductor Division were 60 000 hours instead of 45 000 hours, would you answer differently to requirement 3 above? Show your calculations and provide an explanation.

Answer:

SCENARIO 1-PART 1

In the present question, we are required to compute the profitability and cost computation of business of Ms. Louise based on the details provided in the question sheet. The same has been presented here-in-below:

Further, the profitability analysis of the company has been detailed here-in-below:

Dear Louise,

Hope you are in the pink of your health and enjoying the fine weather.

This has reference to our last meeting wherein you have asked us to conduct an analysis of your business. In this regard, our analysis is here-in-below:

Report on Business of Louise Fairbern

The analysis has been carried out on the basis of detail provided by Ms. Louise .The analysis deals with specific attention to cost incurred on each customer to generate revenue, profit generated from each customer and profit generated from business line. The computation of the same is enclosed herewith:

On reading of the above tabulation, it may be inferred that:-

• Gross revenue earned from sales is AUD 10,01,220/- and the cost incurred is AUD 6,55,360/- which represent 65% of the sales. Thus, contribution from business or gross profits is AUD 345860/- which represents 35% of sales.
• Indirect cost incurred for generating revenue is AUD 3,40,400/- which represents 35% of the sales value of Louise’s business. Further, these indirect cost has been allocated both activity wise and turnover wise to derive the cost incurred for each customer to generate the sales stated above.
• Post above, discount allowed by Louise has been deducted to derive the net profit of each individual customer.
• After the above treatment, one can see that Louise’s business has incurred loss of AUD 21,600/- which represents 2% of sale;
• Further, analysing the profitability of business division wise one can see that the consultancy service has incurred loss of AUD 211. On the other hand, window treatment service incurred loss of AUD 21,389/. Thus, both division has incurred losse.

Recommendation

• Stop offering discount to Mr. Adam and Elm;
• Focus on cost cutting

Conclusion

Business is incurring losses. Remedial steps have been proposed.