Budgeted Income Statement

| October 22, 2018

.gif”>Qatar University

College of
Business and Economics

Department
of Accounting and Information Systems

ACCT 116 –
Managerial Accounting

Fall 2014

Group
Project

Due date:
Written assignment to be submitted on 23rd November 2014

This assignment contributes
10% to the total assessment for this course The assignment is to be done in
syndicates of 5 members

1. Syndicate Membership:

You are required to form syndicates of 5 members
and submit a syndicate form (see attachment) to your instructor by 26th
October 2014. Your mark will be based on the mark that your syndicate achieves.

2. Background Information

Gonzales plc is considering the following budgeted income statement
for the coming year:

Budgeted
Income Statement

$

$

$

Sales at $4 per unit

320,000

Less

Materials

120,000

Wages

48,000

Variable
overhead

24,000

192,000

128,000

Less Fixed Overhead

Factory costs

10,000

Administration costs

20,000

Marketing costs

20,000

50,000

Profit

78,000

The directors of Gonzales wish to see profit
increased to at least $100,000 and have asked the marketing manager to suggest
alternative strategies of achieving this. The factory is currently working at
50% of capacity and the alternatives proposed by the marketing manager are as
follows:

Alternative 1: To
increase sales by a combined strategy of reducing the selling price to $3.70
per unit and undertaking a special marketing campaign at a cost of $21,600.

Alternative
2: To accept an offer from an
overseas customer to purchase units at $3.00 each(these are additional
to those included in the original budgeted income statement as shown above). If
this offer was accepted, Gonzales would incur additional administration costs
of $5,000.

Required:

a)
Using an excel sheet that
shows the relevant formulas; calculate the
break-even point

(in units as well as in
dollars)for the original
budgeted income statement provided above.

(Weight
10%)

b) Assuming that Alternative (1)
proposed above of reducing selling price and undertaking a marketing campaign
was adopted, calculate the quantity that would need to be sold to yield a
profit of $100,000. You are required to present your answers in an excel
sheet that shows the relevant formulas.

(Weight
20%)

c) Regarding Alternative (2) above,
and assuming that the order from an overseas customer for additional units was
accepted, you are required to determine the volume of units that would need to
be sold to the overseas customer to increase the profit from the current
budgeted figure of $78,000 to the required figure of $100,000. You are
required to present your answers in an excel sheet that shows the
relevant formulas.

(Weight
20%)

d) It has always been argued that certain
underlying assumptions place definite limitations on the use of CVP analysis.
Therefore, it is essential that anyone preparing CVP information should be
aware of the underlying assumptions on which the information is to be derived.
If these assumptions are not recognized, serious errors may result and
incorrect conclusions may be drawn from the analysis. In word format,
discuss these assumptions underlying cost-volume-profit analysis.

(Weight
25%)

e) Regarding the two alternatives proposed above,
and to enable the directors of Gonzales to decide which alternative is
favoured, in word format, you are required to provide
management with an analysis and assessment of any other factors that
should be taken into accountwhen advising the directors of Gonzales
with regard to these twoalternatives.

(Weight
25%)

(Total
Marks: 10)

2

General guidelines:

Your report should contain:

(a) Group assessment cover sheet. This cover sheet
must include your team members’ full names and student ID numbers.

(b) The report should contain, immediately
after the cover sheet, a paragraph which highlights the
contribution of each member towards the accomplishment of the project and also
the steps and procedures undertaken in order to come up with this contribution.

(c) The report is a joint responsibility, and each member is responsible fornumerical
accuracy, presentation, and standard of writing. If there are problems within
the group which you cannot resolve, please discuss with your instructor

IMMEDIATELY
as no late complaints will be considered. If the problemsare not resolved
and it is felt there has been an unequal contribution, then, exceptionally,
you should inform your instructor of the proportion of the workwhich
has been contributed by each member.

(d) Please use Times New Roman
as the font, size 12, and lines are to be 1.5 spaced NOT SINGLE SPACED, also
ADJUST THE LINES IN ALL THE PARAGRAPHES.

(e) To satisfy the last two requirements, you
are expected to refer to several internet websites and state
their links in the list of references at the end of your report.
Failing to do so would be treated as plagiarism- a breach ofregulations
with serious penalties.

(f) The team leader must send/submit a copy of the
report to the instructor’s e-mail or online on the Blackboard by the due
date; Sunday 23rd November 2014. The
team leader is also required to submit a hard copy to the instructor by the due
date.

3

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