ACC 601 Managerial Accounting Group Case 3

Acc 601 Managerial Accounting Group Case 3 (160 points) Instructions

Acc 601 Managerial Accounting Group Case 3 (160 points) Instructions: 1. As a group, complete the following activities in good form. Use excel or word only. Provide all supporting calculations to show how you arrived at your numbers 2. Add only the names of group members who participated in the completion of this assignment. 3. Submit only one copy of your completed work via Moodle. Do not send it to me by email. 4. Due: No later than the last day of Module 7. Please note that your professor has the right to change the due date of this assignment.

Paper For Above instruction

The assignment encompasses three distinct parts, each requiring detailed analysis and budgeting based on the provided data. The first part involves a capital budgeting decision for Matheson Electronics, necessitating the calculation of annual net cash inflows, net present value (NPV), and a final recommendation on whether to proceed with the project. The second part requires developing a comprehensive master budget for Earrings Unlimited for the upcoming quarter, including sales budgets, cash collections, merchandise purchases, cash budgets, and financial statements. The third part involves variance analysis for Marvel Parts, Inc., calculating materials, labor, and overhead variances based on actual and standard costs. Additionally, the assignment asks for performance evaluation metrics for DataSpan, Inc., and preparing a statement of cash flows for Weaver Company using the direct method. Each component demands meticulous calculation, interpretation, and presentation of financial data, emphasizing managerial decision-making, budgeting, variance analysis, and cash flow management.

Paper For Above instruction

Part A: Capital Budgeting Decisions for Matheson Electronics

Matheson Electronics is contemplating the launch of a new electronic device and has gathered relevant financial data. The project involves an initial investment in equipment costing $138,000, with a salvage value of $24,000 after six years, and an expected sales volume that peaks in later years. The planning requires calculating the annual net cash inflows, considering contributions, fixed costs, and advertising expenses, and then determining the project's NPV based on a discount rate of 13%. These calculations involve estimating revenues, variable costs, fixed costs, depreciation, and after-tax cash flows. The decision to proceed hinges on whether the NPV is positive.

To determine the annual net cash inflow, we subtract fixed expenses from contribution margins generated by sales. The contribution margin per unit is selling price ($55) minus variable costs ($35). With sales projections, the annual contribution margin is computed for each year. Fixed costs include salaries, maintenance, property taxes, insurance, and depreciation ($149,000 annually). Advertising expenditures vary yearly, influencing the cash flows. The initial capital expenditure is amortized over the project’s life, with salvage value factored into the terminal cash flow. The net present value is then calculated by discounting the net cash flows at 13%, including the initial investment and salvage value.

Based on these analyses, the project’s profitability and feasibility are evaluated. If the NPV exceeds zero, it indicates value creation and suggests that Matheson Electronics should accept the project. Conversely, a negative NPV would advise against proceeding.

Part B: Master Budget for Earrings Unlimited

As a new management trainee, the task is to prepare a master budget for Earrings Unlimited for the second quarter, drawing from past sales, inventory, and expenses data. The budget includes:

  • Sales Budget: Calculated for each month, based on actuals and budgets, with a total for the quarter.
  • Cash Collections: Using the credit sales collection pattern (20% current month, 70% following month, 10% after two months).
  • Merchandise Purchases Schedule: Based on sales forecasts, considering inventory policies (40% of next month’s sales).
  • Cash Disbursements: Payments for purchases, operating expenses, equipment purchases, dividends, and other expenditures, considering payment terms.
  • Cash Budget: Forecasting cash inflows and outflows, determining borrowing requirements to maintain minimum balances, and computing ending cash balances each month.
  • Budgeted Income Statement: Using the contribution approach, including revenues, variable costs, fixed expenses, and net income.
  • Budgeted Balance Sheet: Projected as of June 30, reflecting assets, liabilities, and equity based on operational estimates.

This budget aims to improve cash management, align expenses with sales, and prepare the company for future growth.

Part C: Variance Analysis for Marvel Parts, Inc.

Marvel Parts manufactures auto seat covers, and uses standard costing to monitor variances. The standards specify labor hours, material quantities, and costs per set. During August, actual costs and quantities were recorded, and the task involves calculating variances:

  • Materials Price and Quantity Variances: Comparing actual purchase costs and quantities to standards.
  • Labor Rate and Efficiency Variances: Assessing differences in hourly wages and labor productivity.
  • Variable Overhead Rate and Efficiency Variances: Analyzing overhead costs against standards and labor hours used.

These variances inform management about operational efficiencies, pricing strategies, and potential areas for cost control improvements.

Part D: Performance Measurement for DataSpan, Inc.

DataSpan has implemented a flexible manufacturing system and measures throughput time, delivery cycle time, and manufacturing cycle efficiency (MCE). Monthly data on processing times and delays are provided, and the task involves calculating these metrics for each month, evaluating trends, and analyzing the impact of Lean Production initiatives in months 5 and 6. Eliminating queue and inspection times affects throughput and efficiency, indicating process improvements.

Part E: Statement of Cash Flows for Weaver Company

Using comparative balance sheets and income statements, the goal is to prepare a statement of cash flows for the current year using the direct method. Adjustments are made to convert net income to net cash flows from operating activities, incorporating depreciation, gains/losses from asset sales, and changes in working capital. Cash flows from investing and financing activities are also detailed, including asset sales, stock repurchases, and dividends. The outcome is a comprehensive view of the company’s cash flows, assisting in assessing liquidity, solvency, and financial management.

References

  • Brigham, E. F., & Ehrhardt, M. C. (2017). Financial Management: Theory & Practice. Cengage Learning.
  • Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2018). Managerial Accounting. McGraw-Hill Education.
  • Horngren, C. T., Sundem, G. L., Stratton, W. O., & Burgstahler, D. (2015). Introduction to Management Accounting. Pearson.
  • Shim, J. K., & Siegel, J. G. (2019). Financial Management (5th Edition). Barron's Educational Series.
  • Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2019). Financial Accounting. Wiley.
  • Drury, C. (2018). Management and Cost Accounting. Cengage Learning.
  • Horngren, C. T., et al. (2014). Cost Accounting: A Managerial Emphasis. Pearson.
  • Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2019). Financial Accounting Theory and Analysis. Wiley.
  • Hansen, D. R., & Mowen, M. M. (2020). Cost Management: Accounting and Control. Cengage Learning.
  • Heisinger, K., & Hoyle, J. (2017). Managerial Accounting. Broadview Press.

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