ACC 207 Final Project Milestone One: Guidelines And Rubric

Acc 207 Final Project Milestone One Guidelines And Rubric Draft of C

Classifying a company’s costs allows for an in-depth analysis of the impact that changes in output have on revenues, costs, and net income or net loss. A cost-volume-profit (CVP) analysis will be completed in order to determine the breakeven point. Relevant costs will be used to prepare a flexible budget. Additionally, an appropriate costing system should be selected and the choice should be substantiated with reasonable rationale. Finally, a memo should be prepared for management that summarizes the results of the quantitative analysis and makes recommendations for an optimal costing system to be ethically used by key decision makers.

For Milestone One, you will use the MDE Manufacturing Budget (Table I) to analyze costs, contribution margin, and breakeven point for the bird feeder division of the company. In Tab 1 of your Student Workbook, classify costs as either product or period costs. Briefly explain the difference between the types of costs. Then, analyze the actual costs and, using Tab 2 of your Student Workbook, complete a cost-volume-profit analysis to determine how many bird feeders must be sold at the current cost and sales price level to earn a $10,000 profit and how much the sales price would have to increase to earn a $10,000 profit at the same cost and sales volume level. Submit the Student Workbook with Tabs 1 and 2 completed with your cost calculations and a 1–2 page Word document that explains the implications of your findings and addresses all of the critical elements in Section I.

Paper For Above instruction

The task involves a comprehensive analysis of costs and profitability in the bird feeder division of a manufacturing company. The process begins with classifying all costs as either product costs or period costs, understanding their implications on financial decision-making. Product costs include direct materials, direct labor, and manufacturing overhead associated directly with production, while period costs encompass selling, general, and administrative expenses that do not directly relate to production (Horngren et al., 2014). Accurate classification ensures proper financial analysis and cost control.

The next step involves performing a cost-volume-profit (CVP) analysis to determine the breakeven point—the level of sales at which total revenues equal total costs, resulting in neither profit nor loss. This analysis provides critical insights for short-term planning, particularly regarding sales targets and pricing strategies. The CVP analysis will compute the contribution margin per unit and the contribution margin ratio. The contribution margin per unit is calculated as the difference between sales price per unit and variable costs per unit, reflecting the amount each unit contributes to covering fixed costs and generating profit (Garrison, Noreen, & Brewer, 2015). The contribution margin ratio, expressed as a percentage, indicates the proportion of each sales dollar contributing to fixed costs and profit.

Using the contribution margin and fixed costs, the breakeven point in units and revenue can be precisely determined. The breakeven quantity is obtained by dividing total fixed costs by the contribution margin per unit, while breakeven revenue multiplies this quantity by the sales price per unit. These calculations serve as essential benchmarks for assessing the company's current performance and setting realistic sales goals (Drury, 2013).

Furthermore, the analysis involves assessing whether the company is currently breaking even. If the total contribution margin at actual sales volume covers fixed costs, the company is breakeven; otherwise, it is incurring a loss. This evaluation informs management about the efficiency of current operations and guides short-term decision-making regarding pricing adjustments or cost reductions.

The analysis also explores how much the sales price would need to increase to achieve a desired profit of $10,000, holding the same sales volume. This requires recalculating the selling price per unit by adding the target profit to total fixed costs and dividing by the sales volume, thereby determining the necessary price increase to meet profitability objectives.

Executing this analysis offers strategic insights into the division's financial health and operational efficiency. It helps management identify whether current pricing strategies are sufficient or if adjustments are needed to enhance profitability. Moreover, understanding the breakeven point and contribution margins supports informed decisions about production levels, cost controls, and pricing policies, aligning operational strategies with financial goals.

In conclusion, classifying costs accurately and performing a thorough CVP analysis enables a deep understanding of the division’s profitability dynamics. These insights are critical for short-term planning, pricing strategies, and operational improvements. The resulting financial data informs management decisions that can improve the division’s performance and contribute to the company's overall financial stability.

References

• Drury, C. (2013). Management and Cost Accounting (8th ed.). Cengage Learning.
• Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2015). Managerial Accounting (15th ed.). McGraw-Hill Education.
• Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2014). Introduction to Management Accounting (16th ed.). Pearson.