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GROUP ASSIGNMENT
SUBJECT: MANAGERIAL ACCOUNTING
ABC Ltd. Inc is a brand-new sport organization. Because it is still very young, the company does not have a solid management accounting system to provide information for the decision making of senior management. The main business that ABC operates is organizing football matches as well as indoor and outdoor sports events. Let's say that you are hired to work as an accounting assistant for the chief accountant of ABC and you are assigned some tasks as follows: You have been provided with two different resources to help you complete this exercise. Use ONE of the two resources:
- An instruction MS Word format
- A worksheet in MS Excel format. Access the link below to download and finish the assignment: https://docs.google.com/spreadsheets/d/1I1DkzGg2FHVI5HM7xNXFgtUoiUzz_DeO/edit? usp=sharing&ouid=114655148697128018858&rtpof=true&sd=true
Task number 1: Cost Classification ABC is organizing a football festival in the city. Your task is to match the typical expenditures in Table A with the scenarios in Table B. Table A - Typical Expenditures Group A Repairs and Maintenance Electricity Canteen Supplies Cleaning Group B Trophies Balls, Flags and Whistles Referee Fees Shade Tents Group C Printing of Art Union Tickets Cost of Notice in Newspaper of Art Union Results Art Union Prizes Group D Payments to coaches Hire of courts Coaching manuals Group E Computer Expenses Telephone and Postage Paper and Printing Group F Water Usage Fertiliser and Grass Seed Mowing and Line Marking Group G Airfares Accommodation and food Team Apparel Group H Supplies for Barbecue Hire of Jumping Castles for Children Giveaway T-Shirts and Caps Table B – Scenarios Scenarios Put the Letter of the appropriate group in this column
- Come n’ try promotional event
- Junior football carnival
- Fundraising campaign
- General administration of the organisation
- Running costs of the clubhouse
- Indoor basketball clinic for coaches
- Facility maintenance costs (outdoor)
- Taking a team to a national championship
COLUMN 1 COLUMN 2 COLUMN 3 COLUMN 4 Item Income or Expenditure Factor Group Show your answer and workings in this column
- Canteen Sales
- Newspaper Advertising
- Bar Attendant
- Membership Fees
- Cost of Floodlights
- Game Fees
- Pitch Mowing
- Team Apparel Cost
Task number 3: Break- Even Analysis You are provided the spreadsheet in which are six Break-Event point problems which increase in degree of difficulty from Case A to Case F. In each spreadsheet you will need to put in formulae to work out income, and then formulae to work out costs. You should remember that the number of spectators/participants is a very important element in working out the total income and the amount of variable costs. Once you have set out the spreadsheet, find your solution by manipulating the number of spectators/participants. Be aware that the model presented overleaf needs to be adjusted in design and content for each problem. The main purpose of the example is mostly to demonstrate that you will need an income and an expenditure section. Case A – Basic break-even point problem In this simple problem your task is to work out the number of participants required to ensure the event breaks-even. The data you need to make your calculation is as follows:
- Total Fixed Costs: $10,
- Variable Cost per Participant: $2.
- Ticket Price per Participant: $ Case B – Variation of the basic break-even point problem This problem is much the same problem as in case A except that you are given the number of participants and you must work out what is the minimum price that spectators must be charged. The data you need to make your calculation is as follows:
- Total Fixed Costs: $10,
- Variable Cost per Participant: $5.
- Number of Participants Required: 500 Case C – Awards evening The club committee are putting on an awards evening in the clubhouse. The ticket price will be $30 per person, and it is expected that 100 people will attend. The committee will spend $1500 on entertainment and prizes. What is the maximum cost of the meal per person that can be afforded, if the event is not to make a loss? Case D – Calculating the break-even point of three possible venues for an event The committee of a sport organization is considering three different venues to stage a major fundraising event. Venue A has a maximum seating capacity of 500 people and costs $1,200 to hire. Venue B has a maximum capacity of 1000 and costs $3,500 and Venue C has a maximum capacity of 2000 and costs $9,000. If the variable cost for each participant is $5.20, which venue would be the most profitable at maximum capacity?
Task number 4: Gross Profit Scenarios Here are three budgeting problems that introduce Gross Profit as an important factor in setting budgets where Sales of Products are involved. As with all budgeting problems, utilize a spreadsheet wherever possible to set out your workings and perform your calculations. Case A – Simple Gross Profit calculation – No inventory (stock) involved ABC purchases the following items of clothing to resell to its members:
- Shirts – quantity 200, costing $20 each, selling price $30 each
- Shorts – quantity 200, costing $15 each, selling price $20 each
- Socks – quantity 200 (pairs), costing $6 each, selling price $10 each All items of clothing were sold. Your task is to calculate the Gross Profit in dollars and percentage terms for each of the three lines of clothing. What is the overall Gross Profit in dollar and percent terms, and which line of clothing was the most profitable? Case B – Gross Profit calculation with changes of inventory(stock) involved ABC runs a bar in its clubhouse. During the month of June, the accounts show that purchases and sales for the four categories of products that are sold from the bar were as in Table 1. Table 1 Category Purchases Sales Beer 6,000 10, Wine 4,500 8, Spirits 2,000 3, Table 2 Other 800 900 Opening Stock 01-Jun Closing Stock 30-Jun A stock take was taken at beginning and end of June and the stock levels as shown in Table 2. Your task is to prepare a spreadsheet that calculates the Gross Profit for each category in dollar and percent terms, and the same for overall Gross Profit of the bar for the month of June. Category $ $ Beer 500 800 Wine 1,000 1, Spirits 750 900 Other 250 500 Total 2,500 3, Case C – Increasing profit from the clubhouse bar ABC runs a bar in its clubhouse which is open for business for 3 hours in the evening on Friday, Saturday, and Sunday (a total of 9 hours per week). The number of sales per hour is generally $500 per hour except on Saturday evening when sales rise to $600 per hour. Over the last one year, according to financial accounting records, the Gross Profit on bar sales is generally 36%. Keeping the bar open requires one bartender paid at the rate of $25.00 per hour and it is also estimated that electricity costs $5.00 per hour. The management committee wants to make more profit from the bar and is trying to decide between two options. Option 1: Open one more hour on Saturday evening on the basis that the extra hour achieves the same sales per hour as other hours on Saturday ($600/hr). There would be no attempt to
change bar prices to increase Gross Profit. Option 2: Keep the same opening hours for the three evenings but increase prices a small amount to achieve a Gross Profit of 40%. Prepare three spreadsheets that show the gross profit and net profit in the bar for (a) the existing scenario (b) the extra hour on Saturday scenario and (c) the increase in Gross Profit percentage from 36% to 40%.
Task number 6: Event Budget Your task is to create a budget for a four-day weightlifting tournament. This exercise will assist the learner to understand how to set out a financial statement that shows anticipated income and expenditure for a project such as an event. Your Scenario The ABC Company (ABC) has been invited to bid for a four-day international weightlifting tournament. The event will take place in six months’ time. Although it would seem a welcome boost to the organization to run this tournament, the ABC committee are concerned as to whether the event can be run profitably. The last time this event was run in Australia, the Western Australian Weightlifting Association hosted it and they made a loss of $20,000. The ABC committee has asked you to investigate probable income and expenditure and prepare a budget for next week's committee meeting. After some initial investigations you have come up with the following information. Venue Costs The Theatre of the Sleeman Sports Complex is available for the dates of this event. It is a great venue as it was used for the Commonwealth Games in 1982. The venue will cost a $75 per hour and it is expected that the event will start at 12:00 noon and finish at 8:00pm on each of the four days. Therefore, is a need to hire the venue for 8 hours per day. The venue has excellent sound and lighting systems and therefore there is no need to bring in extra equipment. However, the venue manager does not allow users to have access to the sound/lighting control room. Instead, there is a requirement to pay for a sound/lighting system operator who will be hired by the venue manager. The cost of the sound/lighting system operator is $40 per hour. The venue has a maximum capacity of 3,000 people. Equipment Costs Although the association has plenty of weightlifting equipment, the ABC committee thinks it appropriate to purchase a new bar and weights for the competition platform. A quote has been received from the supplier as follows: Item Required Qty Required Price Each
- 20Kg Bar and Collars 1 $1,250.
- 25Kg Disc, Rubber 2 $
- 20Kg Disc, Rubber 2 $
- 15Kg Disc, Rubber 2 $
- 10Kg Disc, Rubber 2 $
- 5Kg Disc, Kevlar 2 $
- 2.5Kg Disc, Kevlar 2 $
- 1Kg Disc, Metal 2 $
- .5Kg Disc, Metal 2 $ Accommodation for Referees There is no actual payment for referees, but it is generally the practice that referees who have travelled interstate have fully paid accommodation provided. The number of such referees requiring such accommodation is six (6) and the average accommodation cost is expected to be $120 per night. Accommodation for these six referees needs to be provided the night before the event starts and each night after there has been a day of competition. Program Printing The official tournament program is expected to have eight (8) A4 pages, full color both sides, folder and stapled in the middle to make a booklet of sixteen (16) A5 pages. It has been agreed that should arrange for 1,000 programs to be made. This will require 8, pages to be printed. You have received a quote from the printer that, for quantities of 1,000 sheets, one sheet full color both sides will cost $0.40. There is an additional cost of $50 for stapling and folding and making 1,000 booklets. You will be able to reduce the cost of this program printing by charging spectators $5 per program. Trophies A very large number of trophies will be needed. The tournament will have a total of eight bodyweight divisions, that is eight (8) for men and seven (7) for women. There will be a need to present a 1st, 2nd and 3rd place trophy in each of these 15 bodyweight divisions. It has been agreed that you have $100 to spend on trophies for each bodyweight division, and that this will be apportioned as follows:
- 1st place $
- 2nd place $
- 3rd place $ Functions
Task number 7: Create a simple program budget. Instructions Using the data given below, create a spreadsheet that will work out what each participant must be charged, so that the program will make a $2,000 profit on the basis that the maximum number of participants is achieved. For this exercise, you are not provided with a ready-to-go Excel file. You must prepare the spreadsheet yourself, however a suggested layout for your spreadsheet is given below. Your Scenario Data ABC is planning to put on a ten-week program to introduce kids into drama. The maximum number of participants is 20. A hall has been booked in the town's cultural center for two hours each Wednesday evening for $30 per hour. A qualified teacher has been hired for the program who will cost $45 per hour. ABC has a sound system of its own but there is likely to be a need to purchase music costing $30. The program will be advertised in the local newspaper over a three-week period at a total cost of $390. There will be photocopying costs of $80. How much should ABC charge each participant for the ten-week program if ABC wants to make a $2,000 profit. Produce a one-page summary that sets out all costs and shows how the participant’s fees are calculated. Ensure your document has a professional appearance and has appropriate headers and footers.
Task number 8: Employment Budgets In this exercise provides you are provided with ready-to-go formatted spreadsheets and instructions on how to complete. This exercise introduces several terms associated with employment and the remuneration of workers. Using the provided spreadsheet, your task is to find the total cost of employment of five positions in scenario A and the five positions in scenario B below. Scenario A – Salaries Calculation of Superannuation and Total Employment Cost Positions Annual Salary Employer's Superannuation Contribution Total Employment Cost $ % $ $ Chief Executive Full-Time (^) 40,000 24% Senior Team Coach Part-Time (^) 26,000 24% Participation Development Officer Full-Time (^) 35,000 24% Junior Coaching Director Part-Time (^) 20,000 24% Administration Assistant Full-Time 21,000 24% Total Employment Budget (^) 142, Please turn over for Scenario B - Wages
Task number 9: Cashflow Budgeting Your task As a manager of ABC company, you are required to complete a cash flow forecast using the template provided. Your cash flow forecast will predict the bank balance at the end of each month for every month of the year. The information you have at your disposal to complete this task is as follows: A. The event management company has on its books four (4) major events to run which will take place in March, May, August, and October. B. The total of $285,000 of ticket sales will be earned in the months that the events are held. The March event will earn $65,000, and the other events in May, August and October will earn $70,000, 85,000 and $65,000 respectively. C. Expenditure on casual salaries, travel and transport, and venue hire will occur only in the months in which the four events take place. These expenditures will be the same for each event. D. Salaries and Office and administration expenses will occur evenly every month. E. The company's opening bank balance on 1 January is $5, F. The company will receive a government grant of $50,000 in July. G. The company will make a small income from Merchandising during the months in which the four events are staged. The event in March will earn $1,300 merchandising income, and the other events in May, August and October will earn $1,600, $1,800 and $1,300 respectively.
Cashflow Forecast Template Total Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Opening Balance 5,000 5, Income Ticket Sales Merchandising Government Grant Total Expenditure
Task number 11: Profit by Cost Centre Overview of Exercise The purpose of this exercise is to show methods for estimating the profitability of individual "departments" within a business. In this example, the business is "ABC Company”, and it has four departments - a leisure pool, a sports hall, squash courts and a sauna/jacuzzi area. The profitability of departments in a business entity can only be calculated if all income and all costs of each department are known, or at least estimated. This poses a challenge, as it is often the case that a business has no way of measuring, with any accuracy, all the costs incurred by each department. For example, typical overheads such as electricity, administration, insurance, rates, and financing costs can only be arbitrarily divided between departments. (arbitrary = at one's own discretion). To estimate the profitability of individual departments, therefore, all overheads must be divided up and apportioned among departments according to some form of internal metrics. In this exercise, there are three types of internal metrics suggested: A. The floor space of each department, measured in square meters (see table 4) B. The proportion of the overall staff that work in the department (see table 5) C. The capital cost of the building in which the department is situated if this is known (table 1) Each of these criteria may be suitable as a means of apportioning different overheads. For example, it might be suitable to choose floor space as the apportionment method for electricity and/or rates. However, it would make sense to choose the proportion of the overall staff in each department as a basis for apportioning the center manager’s salary and/or office administration costs. In this exercise, your task is to work out the profitability of each department using the given template below. The task has been made easier for you, as the method for apportioning each overhead has been selected for you. All you need to do is to perform the arithmetic and find out how each department in ABC Company contributes to overall business profitability. Your Scenario The ABC Company was built at a cost of $ million (see Table 1) and has just finished its first year of operation. The Centre has the following facilities:
- A leisure pool.
- A multipurpose sports hall
- Four (4) squash courts
- Changing rooms that include saunas and Jacuzzis Corby City Council, owners of the complex, is keen to find out the profitability of the Table 1: CAPITAL COST of Sports Centre Department Capital Cost $’000s Capital Cost % Leisure Pool 2,700 45% Sports Hall 2,300 38% Changing / Sauna / Jacuzzis
Squash Courts
Total 6,000 100%
whole business and each of its departments separately. The total income from the complex was $1. million and Table 2 provides a breakdown of this amount per department. The center had overhead costs of $400, for the year. These costs are identified in Table 3. These costs must be apportioned across the four departments. The method of apportionment for each overhead cost is given to you in the worksheet accompanying this exercise. You will need the data in Tables 4 and 5 below and Table 1 above to carry out the apportionment. Table 2: INCOME per Department Department $’000s Leisure Pool 650 Sports Hall 600 Sauna / Jacuzzis 50 Squash Courts 250 Total 1550 Table 3: OVERHEADS to be apportioned $’000s Advertising 15 Auditors Costs 10 Cleaning 20 Electricity 40 Financing Cost 65 Insurance 10 Maintenance 50 Managers Salary 100 Office Costs 75 Rates 40 Security 15 Staff Uniforms 5 Vehicle Costs 20 Total 400 You will notice that the apportionment figures from tables 1, 4 and 5 have been transferred to the worksheet template. Table 4: FLOOR SPACE for each department Cost Centre Floor Area M Floor Area % Leisure Pool 1,400 47% Sports Hall 1,200 40% Changing/Sauna/Jacuzzis 100 3% Squash Courts 300 10% Total 3,000 100% Table 5: Proportions of STAFFING ESTABLISHMENT No of People Proportion Leisure Pool Staff 14 43% Sports Hall 10 30% Sauna/Jacuzzi 4 12% Squash Courts 5 15% Total Full-Time Equivalent 33 100%
