Managerial Accounting Cost Analysis Motomart 2

Student ID:22980875

Email: [email protected]

Course: Senior Capstone Business Motomart Section 3.1

GRADE: 56%

La Juan – if you have questions on this assignment please contact me directly through your portal. I’ll be happy to assist.

Ken D.

Instructor

Step 1

The analysis shows that the semi-fixed expenses show an increasing trend due to the increased net variable revenue. The firm’s fixed expenditure is snowballing at a quicker stride linked to the increase in disposable variable revenue. The firm’s entire fixed expenses are growing by a more rapid hop equated to the rise in net irregular incomes. Consequently, this is a sign that the semi-fixed charge mainly comprises fixed cost; else, the augmentation stride in semi-fixed expenditures would be equivalent to lesser than the augmentation in the net variable proceeds. The operating profit has been declining from the year 1984 to the year 1988. It is roughly 43% in 1984 and cascades to -196% in 1988, which is exactly five years from 1984. The operating loss in 1988 is too much. What about the expense that is zero? This would not make sense and needs to be stated as an error or unusual circumstance. -5pts

Step 2

The firm’s semi-fixed expenses must have augmented as a result of an increase in the net variable incomes between the year 1984to 1988. Though, there are some expensive items that portray a mixed trend and a decrease over that period.

Vacation expense item only improved between the year 1984 and 1985 by $ 26,105 and decreased over the other years. It further declined between the years 1985 and 1986 by $ 7,237,409. It also decreased by $409 between 1986 and 1987. It further decreased between 1987 and 1988 by $ 791. The cause of the trend might be an increase or decrease in the number of units.

Freight expense displayed varied tendency as it solitary augmented between 1984 and 1985 by $11,706. They also augmented between 1985 and 1986 by $541. The freight expenses decreased from 1986 to 1987 by $ 797. The charge was reduced between 1987 and 1988 by $ 1,068. The motive for this trend might be as a result of a high and low regulator on variable cost. This infrequent trend might also be a result of a decrease or increase in the figure of units.

Motor vehicle expense exhibited a varied trend as there was a trivial surge between 1984 and 1985 of $805. There was a stable deterioration afterward in 1986 of $ 54, deterioration of $3,294 in the year 1987 and decrease in 1988 of $887. The cause for this trend is that the number of units might have increased.

The demonstrators’ expenses decreased by $ 5,486 between the year 1984 to 1985. There was a decrease of $3,456 in 1986, with a surge from 1986 to 1987 of $2,679. There is a radical decrease in the year 1988 of $ 3,485. This trend in demonstrators’ expense items may be a result of inflation of variable cost per unit.

The floor planning expense displayed a mixed trend with a rise between 1984 and 1985 of $ 22,582. The expenses diminished between the years 1985 and 1986 to $24,912. There was a decrease from 1986 to 1987 of $120,072. Thereafter, a great rise from the year 1987 to 1988 of $148,915. This trend in floor planning expense may be a result of a change in units.

Step 3 See Excel Attachment.

This can be arrived by considering high as well as low points of each activity.

-1/2pt each, -8pts total

Step 4 See Excel Attachment

-1pt each, -21pts

The problem encountered is that the data was huge. Most of the variable cost values was negative which is impossible in practical.

The R squared measures are too low and in some cases the R squared is zero.

Most of the slopes are negative.

My conclusions are not consistent with those of high-low efforts. The reason behind this is due to the fact that the high low formula is leading to negative fixed cost while the regression methods is displaying adverse variable costs.

Step 5

The firm’s data can be used to come up with a dependable financial prediction. The reason behind this is the fact that the firm has to have meager financial records annually. The data should not be relied upon, as you state below. There are three main principles that need to be stated as to why it was not correctly constructed data. -10pts

I would not depend on this prediction because the use of a new retail vehicle as the base year doesn’t provide a clear depiction of fixed as well as variable components of semi-fixed expense.