Series of 20 questions

Managerial Accounting Coursework

Please complete each question or definition. Please write well, in American English, check answers for accuracy, spelling and grammar. Avoid overly prefacing sentences: “Besides.”

Four (4) questions @ 25 points (minimum 2 pages each question); 3 questions @ 50 points (minimum 4 pages each question) = 20 pages.

In-text cite and reference at least 10 academic articles, graduate managerial accounting textbooks, etc.

1.      25 points, two pages minimum

a)      What are the 3 decision rules for accepting net present value projects?

b)      What is so important about the phrase “net” present value? That is, what operation or assumption do you employ to get a “Net” number?

c)      Why the payback method is considered inferior to NPV?

d)     Why IRR is considered inferior to NPV?

e)      What element of the NPV model makes longer term projects more uncertain than shorter ones?

Make sure, in its entirety, this answer is worthy of 25 points.

2.      25 points, two pages minimum

Discuss the concept of cash flow, including the 3 segments on a formal cash flow statement; the role of depreciation; and how free cash flow (or net cash flow) is computed from net operating income. What is the difference between EBITDA and net operating income?

      Make sure this answer is worthy of 25 points.

3.      25 points, two pages minimum

Describe the performance analysis process, emphasizing the flexible budget, variances, and the problems associated with forecasting; be sure to include all necessary budgets.

      Make sure this answer is worthy of 25 points.

4.      25 points, two pages minimum

Sahara Company is faced with 2 alternatives when its sub-assembly manufacturing machinery needs immediate replacement:

a)      Rent new equipment for producing sub-assemblies for $55,000 per year

b)      Purchase sub-assemblies from an outside supplier for $8.00 each

Sahara’s current cost of production with the old equipment, based on 40,000 sub-assemblies per year, is:

Per unit

Direct material                              $2.75

Direct labor                                               $4.00

Variable overhead                         $0.60

Fixed overhead                             $3.65 ($0.75 supervision, $0.90 depreciation, $2.00 company overhead)

Total cost per unit                         $11.00

New equipment is estimated by its manufacturers to reduce direct labor costs and variable overhead costs by 25% . Supervision cost ($30,000 per year) and direct materials would not be affected; new equipment capacity would be 60,000 units per year. Company overhead would not be affected.

a)      The CEO is unsure of the best alternative and asks you  to perform an analysis of the total cost and unit cost for each alternative, based on 40,000 sub-assemblies per year

b)      Which course of action do you recommend?

c)      Does your recommendation change if the companies needs require 50,000 units? 60,000?

d)     What other factors do you recommend the company consider before making a decision?

Make sure, in its entirety, this answer is worthy of 25 points.

5.      50 points, four (4) pages minimum

Boeing Corporation announced a new plane, the 800 Series, in 2012, which will hold 600 passengers. They estimated the total  market for this size plane at 1,000 units over 10 years. They estimated they would capture 80% of the anticipated market over 10 years, beginning in 2011.

The fixed development cost they want to amortize was estimated at $12 billion, plus a variable component to manufacture of $20 million per plane. The budgeted profit was $5 million per plane.

Now, 2 years later, the project is bogged down. Competition has caused the sales forecast to be reduced to 60% of the original market; cost overruns have increased the fixed cost to $18  billion, but switching to new plastic airplane bodies will reduce variable cost to $15 million per plane. Accumulated costs of development etc. will be charged against earnings beginning in fiscal 2014; the first plan will be delivered June 1, 2014.

Compute and show clearly:

a)      Original projected selling price per plane

b)      revised price per plane (after cost overruns) if the budgeted dollar profit per plane is unchanged

c)      the degree of operating leverage in each case

d)     new forecasted selling price, if the gross margin (%) per the forecast originally used in A) is maintained under the revised cost

e)      what is the impact on corporate earnings per share over the life of the forecast manufacturing run (estimated corporate tax rate is 35%.  Boeing has 1 billion shares issued and outstanding.

Make sure, in its entirety, this answer is worthy of 50 points.

6.      50 points, four (4) pages minimum

Create a balanced scorecard for a company or division of your choice; use at least 4 major areas of performance measurement with at least 2 key metrics in each. Be sure to indicate clearly what the metrics mean, such as using a separate table to summarize the data to be measured. Pay attention to format and design, as if this was for top management.

Make sure this is a 50-point answer.

7.      50 points, four (4) pages minimum

Think about costing: describe at least 3 major types of costing systems; pay attention to detail and give an example of an industry of product for each and why; contrast the differences in the costing methods and display your knowledge, as a manager, of the applications of each type system. Highlight any weaknesses and/or special applications. Research the differences, if any, in applying one system you select as used in the US vs. another region of the world.

Make sure this is a 50-point answer.