Assignment 1: LASA 2: Executive Presentation
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InformationforPowerPoint.docxPART 1: The following information is available for GFI’s maintenance cost over the last seven months. Use the high low method to estimate the fixed and variable components of its maintenance cost. Would this be an effective way to estimate these costs? Justify your answer by explaining why this is an effective way or why it is not.
|
Month |
Operating Hours |
Maintenance cost |
|
February |
27 |
11,000 |
|
March |
54 |
13,800 |
|
April |
36 |
10,200 |
|
May |
45 |
12,000 |
|
June |
63 |
13,800 |
|
July |
72 |
18,000 |
|
August |
19 |
7,400 |
PART 2: In 2001, Ms. Kelle, the head of aerobic equipment sales, started a fitness magazine called the Dancing Elephant. The magazine sells 50,000 copies a month. The total variable costs at that volume are $40,000 and fixed costs are $20,000. An additional storage cost of $2,000 will be incurred if production exceeds 55,000 units.
You have been asked to forecast the following costs for two possible production runs of (a) 52,000 units and (b) 57,000 units:
· Total variable costs
· Variable cost per unit
· Total fixed cost
· Fixed cost per unit
|
· |
Budget |
Forecast A |
Forecast B |
|
Production |
50,000 |
52,000 |
57,000 |
|
Total variable costs |
|
|
|
|
Variable cost per unit |
|
|
|
|
Total fixed cost |
|
|
|
|
Fixed cost per unit |
|
|
|
PART 3: GFI manufacturers ping pong tables and has a JIT policy that ending inventory must equal 10 percent of the next month’s sales. It is estimated that April’s actual ending inventory will consist of 40,000 ping pong tables. May and June sales are estimated to be 400,000 and 350,000 tables respectively. Compute the number of tables to be produced that would appear on GFI’s production budget for the month of May.
Good management includes good budgeting. Explain why the bottom-up approach to budgeting is considered a more successful management technique then a top down approach. Provide an example of implementation of the bottom-up approach to budgeting.
PART 4: Computer A has a book value of $1,500 and a current resale value of $800. The computer is needed to fulfill a client order, but if it's used on this project then its resale value will be zero. The project contract is valued at $5,000. $2,000 has already been spent on specialized software, which will be used on the project and which has no value for any other use. A printer costing $400 is needed for a separate project.
Comment on and determine the costs which are relevant to the decision regarding whether or not to commit to complete the project. Based upon the information at hand, determine whether this project is profitable. Show your calculations.
Submission:
PART 1:
The following information is available for GFI’s maintenance cost over the last seven
months. Use the high low method to estimate the fixed and variable components of its
maintenance cost. Would this be an effective way to estimate these costs? Justify you
r answer by
explaining why this is an effective way or why it is not.
PART 2:
In 2001, Ms. Kelle, the head of aerobic equipment sales, started a fitness magazine
called the Dancing Elephant. The magazine sells 50,000 copies a month. The total variable costs
at that volume are $40,000 and fixed costs are $20,000. An additional storag
e cost of $2,000 will
be incurred if production exceeds 55,000 units.
You have been asked to forecast the following costs for t
wo possible production runs of (a)
52,000 units and (b) 57,000 units:
o
Total variable costs
o
Variable cost per unit
o
Total fixed cost
o
Fixed cost per unit
·
Budget
Forecast A
Forecast B
Production
50,000
52,000
57,000
Total variable costs
Variable cost per unit
Total fixed cost
Fixed cost per unit
Month
Operating Hours
Maintenance cost
February
27
11,000
March
54
13,800
April
36
10,200
May
45
12,000
June
63
13,800
July
72
18,000
August
19
7,400
PART 1: The following information is available for GFI’s maintenance cost over the last seven
months. Use the high low method to estimate the fixed and variable components of its
maintenance cost. Would this be an effective way to estimate these costs? Justify your answer by
explaining why this is an effective way or why it is not.
PART 2: In 2001, Ms. Kelle, the head of aerobic equipment sales, started a fitness magazine
called the Dancing Elephant. The magazine sells 50,000 copies a month. The total variable costs
at that volume are $40,000 and fixed costs are $20,000. An additional storage cost of $2,000 will
be incurred if production exceeds 55,000 units.
You have been asked to forecast the following costs for two possible production runs of (a)
52,000 units and (b) 57,000 units:
o Total variable costs
o Variable cost per unit
o Total fixed cost
o Fixed cost per unit
Budget Forecast A Forecast B
Production 50,000 52,000 57,000
Total variable costs
Variable cost per unit
Total fixed cost
Fixed cost per unit
Month Operating Hours Maintenance cost
February 27 11,000
March 54 13,800
April 36 10,200
May 45 12,000
June 63 13,800
July 72 18,000
August 19 7,400
