MANAGEMENT ACCOUNTING

GROUP BUSINESS CASE ANALYSIS
Term 1, Academic Year 2014-2015
The following are the M.A. Cluster Company’s unit costs of manufacturing and marketing a
high-style pen at an output level of 20,000 units per month:
Manufacturing cost
Direct Materials
P1.00
Direct Labor
1.20
Variable manufacturing overhead cost
0.80
Fixed manufacturing overhead cost
0.50
Marketing Cost
Variable
1.50
Fixed
0.90
The following situations refer only to the preceding data: there is no connection between the
situations. Unless stated otherwise, assume a regular selling price of P6 per unit.
a. For an inventory of 10,000 units of the high-style pen presented in the Statement of
Financial Position, what is the appropriate unit cost to use?
b. The pen is usually produced and sold at the rate of 240,000 units per year (an average
of 20,000 per month). The selling price is P6 per unit, which yields total annual
revenues of P1,440,000. Total costs are P1,416,000, and operating income is P24,000,
or P0.10 per unit. Market research estimates that unit sales could be increased by 10%
if prices were cut to P5.80. Assuming the implied cost-behavior patterns continue, and
if this action is taken, what would be the impact on operating income and unit sales?
c. A contract with the government for 5,000 units o the pen calls for the reimbursement of
all manufacturing costs plus a fixed fee of P1,000. No variable marketing costs are
incurred on the government contract. You are asked to compare the following two
alternatives:
Sales Each Month To
Alternative A
Alternative B
Regular Customers
15,000 units
15,000 units
Government
0 units
5,000 units
Is operating income under alternative B greater than alternative A? If so, by how
much?
d. Assume the same data with respect to the government contras as in situation c except
that the two alternatives to be compared are as follows:
Sales Each Month To
Alternative A
Alternative B
Regular Customers
20,000 units
15,000 units
Government
0 units
5,000 units
Is operating income under alternative B greater than alternative A? If so, by how
much?
e. The company wants to enter a foreign market in which price competition is keen. The
company seeks a one-time-only special order for 10,000 units on a minimum-unit-price
basis. It expects that shipping costs for this order will amount to only P0.75 per uint,
but the fixed cost of obtaining the contract will be P4,000. The company incurs no
variable marketing costs other than shipping costs.
Domestic business will be
unaffected. What is the selling price to break-even?
f. The company has an inventory of 1,000 units of pens that must be sold immediately at
reduced prices. Otherwise, the inventory will become worthless. What is the unit cost
relevant for establishing the minimum selling price?

M. M. during class hours . during class hours b) TH class: August 19. Cluster Company’s sales staff. Cluster Company’s customers as sales orders are forwarded from M. Surname. M. REQUIRED: Show calculations for the independent situations. Cluster Company COMPANY A Group Business Case Presented to the Accountancy Department De La Salle University In partial fulfillment Of the course requirements In (name of course Section___) SUBMITTED TO: (Name of Faculty) SUBMITTED BY: Surname.5” x 11” b) Margin: 1” on all sides c) Font and Font size: Tahoma 11 d) Paragraph alignment: Justified e) Paragraph spacing: 1. 2. h) The cover page template is shown on the next page: M.g. and (2) other attachments at the end of your report. A proposal is received from an outside supplier who will make and ship the high-style pens directly to M. Given Name.A. but its variable marketing costs will be slashed by 20%. Given Name.I. 2014 (Monday). 2014 *NOTE: The names should be arranged alphabetically.A. 3. How much per unit would the company be able to pay the supplier without decreasing operating income? What non-quantifiable factors should the company consider in determining whether or not to buy from this outside supplier? 1.A. The company’s fixed marketing costs will be unaffected. Format of Written Report: a) Paper size: 8. Surname. Given Name.* Surname. 2014 (Tuesday). but its fixed manufacturing overhead will continue at 50% of present levels.5 f) Attachments: Include (1) peer evaluation of each group member.I. August __. M.I. Given Name. g) Insert the entire report in a short sliding folder with transparent cover. Support your answers with qualitative information when necessary. Do not forget to include your references.I. Deadline of Written Report: a) MW class: August 18. The company’s plant will be idle.

.00% Quality in writing paper – 90% * weight of 20% = 18. Be fair when evaluating. cross-wise. the average peer evaluation grade (refer to Item#6) will be multiplied to the team grade. 100) for each of your group mate. 90. please refer to the syllabus for the rubric. Refer to table below. BEGINNING 70% The student does not contribute to the team’s final output. DEVELOPING 80% The student contributes somewhat to the team’s final output. write the names of all your group mates (in alphabetical order). SATISFACTORY 90% The student contributes to the team’s final output as expected.4. d) To compute for the individual written group business case analysis grade. Rubric/Criteria for Grading: c) To compute for the 5% team grade. 80.59% 5. Peer Evaluation a) On a one-half sheet of bond paper.00% Team grade = 95. A sample computation follows: Application of ACCTBA3-related tools – 100% * weight of 50% = 50. d) Include this as an attachment at the end of the paper.00% Multiplied by: Average peer evaluation grade (Assume 2 exemplary. b) Give the corresponding percentage (70. CRITERIA Contribution to team’s final output [100%] EXEMPLARY 100% The student contributes to the team’s final output more than what is expected. 1 satisfactory or 290%/3) 96.83% Multiplied by: Business case grade 5% INDIVIDUAL BUSINESS CASE GRADE 4. c) Print your name then sign as evaluator.00% Depth of insights – 90% * weight of 30% = 27.67% INDIVIDUAL GRADE 91.