ACCTBA3

WRITTEN GROUP BUSINESS CASE

Term 3, Academic Year 2016-2017

Dodrio Doorknob Design Company manufactures expensive brass doorknobs. It has total
assets amounting to 2,500,000 and liabilities of 1,500,000.

The fixed costs of producing and marketing the doorknob is 500,000. The variable costs
per unit are the manufacturing costs (materials, labor and overhead) and marketing costs of
400. The normal selling price of a doorknob is 3,000.

After careful study of the production, it was determined that manufacturing overhead was
closely related to material usage. Thus manufacturing overhead to production is allocated
based on pounds of materials used.

The following are the production standards:

Cost /
Input
Doorknob
Direct Material (brass) 0.3 lb at 100 / lb 30.00
Direct Labor 1.2 hrs at 200 / hr 240.00
Variable Manufacturing overhead 60 / lb x 0.3 lb
18.00

Actual results for July 2017 are as follows:

Production 35,000 doorknobs

Direct Material Purchased 12,000 lb at 110 / lb
Direct Materials Used 10,450 lbs
Direct Labor 38, 500 hrs for 8,085,000
Variable Manufacturing overhead 641,500

As a managerial accountant and business analyst for Dodrio, the undertakings are as follows:

A. Flexible-budget variances. Ascertain whether each is favorable (F) or unfavorable (U)

and recommendations for improvement.

(1) Materials Price Variance _________________

(2) Raw Materials Inventory _________________
(3) Materials Quantity/ Usage Variance _________________
(4) Labor Rate Variance _________________
(5) Labor Efficiency Variance _________________
(6) Variable MOH Rate Variance _________________
(7) Variable MOH Efficiency Variance: _________________
B. Analysis:
(8) How much is the normal contribution margin percentage? _________________
(9) How many units must be sold to break even? _________________
(10) How many units must be sold earn a profit of 2 million? _________________
(11) If 1,500 units are sold, how much is the margin of safety? _____________;
_______%; _____________ units
(12) If 500 units are sold, what is the degree of operating leverage?(round-off to 2
decimal places)? _________________
(13) If 500 units are sold, what is the ROI? _______%
(14) If the target contribution margin percentage is 80%, what should be the selling price?
_________________

C. Special order. An order has been received from an overseas customer for 1,000 units to
be delivered this month. This order would have no effect on the company's normal sales
and would not change the total amount of the company's fixed costs. The variable
marketing cost would be 20% less per unit on this order than on normal sales.

Suppose there is ample idle capacity to produce the units required by the overseas
customer and the special discounted price on the special order is at a discounted price of
25% less than its normal selling price per unit.

(15) By how much would this special order increase (decrease) the company's net
operating income for the month? _________________
1. REQUIRED:
a) Show calculations for the independent situations.
b) Support your answers with qualitative information. Do not forget to include your
references.
c) Write a memorandum to management on findings and recommendations.
2. Format of Written Report:
a) Paper size: 8.5 x 11
b) Margin: 1 on all sides
c) Font and Font size: Tahoma 11
d) Paragraph alignment: Justified
e) Paragraph spacing: 1.5
f) Attachments: Include (1) peer evaluation of each group member, and (2) other
attachments at the end of your report.
g) Insert the entire report in a short sliding folder with transparent cover.
h) The cover page template is shown on the next page:

DODRIO DOORKNOB DESIGN 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, Given Name, M.I.*
Surname, Given Name, M.I.
Surname, Given Name, M.I.
Surname, Given Name, M.I.

August __, 2017

*NOTE: The names should be arranged alphabetically.

3. Deadline of Written Report:

a) MW class: August 7, 2017 (Monday), during class hours
b) TH class: August 8, 2017 (Tuesday), during class hours
4. Rubric/Criteria for Grading:
c) To compute for the 5% team grade, please refer to the syllabus for the rubric.
d) To compute for the individual written group business case analysis grade, the average
peer evaluation grade (refer to Item#6) will be multiplied to the team grade. A sample
computation follows:
Application of ACCTBA3-related tools 100% * weight of 50% = 50.00%
Depth of insights 90% * weight of 30% = 27.00%
Quality in writing paper 90% * weight of 20% = 18.00%
Team grade = 95.00%
Multiplied by: Average peer evaluation grade
(Assume 2 exemplary, 1 satisfactory or 290%/3) 96.67%
INDIVIDUAL GRADE 91.83%
Multiplied by: Business case grade 5%
INDIVIDUAL BUSINESS CASE GRADE 4.59%

5. Peer Evaluation
a) On a one-half sheet of bond paper, cross-wise, write the names of all your group mates
(in alphabetical order).
b) Give the corresponding percentage (70, 80, 90, 100) for each of your group mate. Refer
to table below. Be fair when evaluating.
c) Print your name then sign as evaluator.
d) Include this as an attachment at the end of the paper.

CRITERIA EXEMPLARY SATISFACTORY DEVELOPING BEGINNING

100% 90% 80% 70%
Contributio The student The student The student The student
n to teams contributes to contributes to contributes does not
final output the teams final the teams final somewhat to contribute to
[100%] output more output as the teams final the teams final
than what is expected. output. output.
expected.