MY NUMBER 3

Project 3: Costing and Cost Allocations Start Here

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Scenario

In your last business report, you recommended a strategic decision about the revenue target to make LGI competitive. In Project 3, you will help LGI's leadership move the company forward on a path toward a sustainable future. The company needs to restore the confidence of shareholders and other stakeholders by maintaining a satisfactory level of operating performance.

LGI, like all companies, needs robust earnings before interest, taxes, depreciation, and amortization (EBITDA). In other words, earnings must be sufficient to cover LGI's investing activities, debt service, and taxes—with a healthy profit left for reinvestment and distributions to stockholders

Your Project 3 business report will focus on strengthening EBITDA. To do this, you will analyze LGI's cost structure and determine how to increase productivity. These tasks are prerequisites for identifying a future investment (Project 4) and how to finance it (Project 5).

Competencies

Your work will be evaluated using the competencies listed below.

· 3.1: Identify numerical or mathematical information that is relevant in a problem or situation.

· 3.2: Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution.

· 3.3: Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data.

· 10.3: Determine optimal financial decisions in pursuit of an organization's goals.

· 10.5: Develop operating forecasts and budgets and apply managerial accounting techniques to support strategic decisions.

Project 3: Costing and Cost Allocations Step 1: Prepare for the Project

For the next two weeks, you will focus on the specific actions LGI can take to strengthen its EBITDA. You will analyze cost-volume-profit, pricing decisions, and activity-based costing.  Log into O'Reilly by following these instructions  before accessing the chapters and completing the required reading.

Required Reading

Davis, C. E. & Davis, E. (2011).  Managerial Accounting . Wiley.

Chapter 3: Cost-Volume-Profit Analysis and Pricing Decisions

· Section 3.1 to 3.3

Chapter 7: Activity-Based Costing and Activity-Based Management

· Sections 7.1–7.2

Recommended Reading

Chapter 2: Cost Behavior and Cost Estimation

· Sections 2.1–2.3

Project 3: Costing and Cost Allocations Step 2: Review and Practice

Using the Project 3 Review and Practice Guide, review EBITDA and cost structures to set LGI on the path toward a sustainable future. Then apply what you have learned by completing the exercises and problems referenced in the Project 3 Review and Practice Guide.

You must review the guide and do the practice exercises and problems so that you

· are prepared to have informed discussions with your team about LGI’s income statement,

· understand what the cost data reveal about operational efficiency, and

· can use this information to make recommendations for improvements.

Complete this review and practice by the end of Week 5. 

Review and Practice

You must complete the review and practice content to participate in the discussion in Step 3.

Project 3 Review and Practice Guide

Project 3: Costing and Cost Allocations Step 3: Participate in the Required Project 3 Discussion

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You have finished reviewing the material and performing the exercises, but you have some questions. Participate in the Project 3 class discussion. Respond to the two questions below by posting in the discussion; then, respond to two of your classmates' discussion posts by the end of the week.

Discussion

Answer the following questions:

1. Discuss the concepts that were most challenging for you in the readings and review material. How did the practice exercises help clarify these?

2. What did you learn that will help you analyze LGI's cost structure to increase its productivity and put the company on a path to a sustainable future?

Before you participate in the discussion activity see  MBA discussion guidelines . 

Project 3: Costing and Cost Allocations Step 4: Complete the Analysis Calculation for Project 3

Your team has provided you with an Excel workbook containing LGI's financials. You will use the workbook to

· Determine how LGI can strengthen EBITDA

· Discover ways for LGI to increase productivity

· Perform cost calculations in the worksheets 

Complete the analysis calculation for the project:

· Download the Project 3 Excel Workbook, click the Instructions tab, and read the instructions.

· Calculate and evaluate costs using the worksheets.

· If you would like instructor feedback on this step, follow the instructions in the box below to submit your Excel file to the Assignments folder as a milestone by the end of Week 5. This is optional. If you choose to submit the milestone, you will receive instructor feedback you may use to make corrections before submitting your final Project 3. To distinguish the milestone submission from the file you will submit in Step 5, label your file as follows: P3_milestone_lastname_Calculation_date

Take Action

Submit your assignment to your instructor for review and feedback.

Follow these steps to access the assignment:

· Click My Tools in the top navigation bar.

· Click Assignments.

· Select the relevant assignment.

· You should use the comments your instructor made about your optional milestone submission to revise your calculations as needed. Next, proceed to Step 5, where you will answer questions about your analysis, make recommendations for the client, and compile and submit your final report. 

Project 3: Costing and Cost Allocations Step 5: Prepare the Analysis Report for Project 3

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You have developed an in-depth understanding of LGI's operating efficiency related to costing and the impact on EBITDA. You feel confident that your target revenue combined with a better mix of fixed and variable costs will positively boost LGI’s productivity, providing the company with a competitive edge. LGI will finally be on a path toward a sustainable future. Answer the questions in the Project 3 Questions – Report Template document. Prepare your analysis report including recommendations for how the company can improve its financial situation.

Complete the analysis report for the project:

· Download the Project 3 Questions – Report Template

· Read the instructions.

· Answer all the questions.

· Include your recommendations.

· Submit the analysis report (Word document) and analysis calculation (Excel file) to the Assignments folder as your final deliverable at the end of Week 6. Label your files as follows:

· P3_Final_lastname_Report_date.docx

· P3_Final_lastname_Calculation_date.xlsx

Check Your Evaluation Criteria

Before you submit your assignment, review the competencies below, which your instructor will use to evaluate your work. A good practice would be to use each competency as a self-check to confirm you have incorporated all of them. To view the complete grading rubric, click My Tools, select Assignments from the drop-down menu, and then click the project title.

· 3.1: Identify numerical or mathematical information that is relevant in a problem or situation.

· 3.2: Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution.

· 3.3: Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data.

· 10.3: Determine optimal financial decisions in pursuit of an organization's goals.

· 10.5: Develop operating forecasts and budgets and apply managerial accounting techniques to support strategic decisions.