A c c o u n ti n g I n f o r m a ti o n f o r

Ma n a g e r s

200101
Autumn 2012

Tutor Solutions Week 14

Copyright The University of Western Sydney, 2012

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200101 Accounting Information for Managers Autumn 2012

C ontac t Details
F irs t point of c ontac t for all enquiries and for s tudents having
diffic ulties with the unit:
Mrs Susan Green (Unit Administrator)
Building EQ Parramatta Campus
Phone: 9685 9207 Fax: 9685 9593 Email: business.courses@uws.edu.au
[Sue is normally in the office each week on Monday to Thursday inclusive]

Unit Coordinator
Graeme Mitchell: Vernon Bldg (ED), Room ED.G.212 Parramatta Campus; Email:
g.mitchell@uws.edu.au; Phone: 9685 9215 Mob: 0419 291 606

vUWS Coordinator

Simon Lenthen: Vernon Bldg (ED), Room: ED.G.11 Parramatta Campus; Email:
s.lenthen@uws.edu.au Phone: 9685 9476 Mob: 0414 325 676

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Autumn 2012 200101 Accounting Information for Managers

S c hedule of learning ac tivities

Week No. Text Reference / Lecture Topic/ Learning Tutorial Homework*

Date Outcomes (LO)
1 Introduction to accounting (Chapter 1). Read learning guide and unit outline.
27 February-2 Business structures (Chapter 2). Complete handout in class for Week 1.
March
2 Ethics and corporate governance Study guide: Chapter 1 (C2, C3, C4) and
5-9 March (Chapter 3). Chapter 2 (E1, E4, E5).
Business transactions (Chapter 4). Textbook: Chapter 1 (D1.7) and Chapter 2
(E2.15, E2.16a, E2.17a, P2.7).
3 Business transactions (Chapter 4). Study guide: Chapter 3 (C3, E1, E4) and
12-16 March Chapter 4 (C3).
Textbook: Chapter 3 (D3.10, D3.12,
D3.27) and Chapter 4 ( P4.3).
4 The balance sheet (Chapter 5, pp. 138- Study guide: Chapter 4 (E1, E5 a-e).
19-23 March 163). Textbook: Chapter 4 (E4.7, E4.8, P4.4,
P4.12).
5 Note: No lectures or tutorials this week. Due: Mid-semester examination on
26-30 March Staff will be available for additional Saturday, 31 March 2012.
consultation see vUWS for details. Note: Check vUWS site closer to the date
for further details.
6 The balance sheet cont. (Chapter 5, pp. Study guide: Chapter 5 (C1, E2a-c).
2-6 April 164-174). Textbook: Chapter 5 (E5.10, E5.11,
E5.13, E5.14).
7 Income statement and statement of Study guide: Chapter 5 (MC1-15, E4, E5).
9-13 April changes in equity (Chapter 6). Textbook: Chapter 5 (D5.9, D5.10, P5.2,
Time available in tutorial to work on P5.5).
group assignment.
8 INTRA SESSION BREAK INTRA SESSION BREAK
16-20 April
9 The cash flow statement (Chapter 7). Study guide: Chapter 6 (complete the
23-27 April sentence activity on p. 106, C2, E1).
Textbook: Chapter 6 (D6.5, D6.8, E6.1,
E6.2, E6.5, E6.11, P6.2).
10 Financial statement analysis (Chapter 8, Study guide: Chapter 7 (MC1-15, C2).
30 April-4 May pp. 303-22) Textbook: Chapter 7 (D7.2, D7.6, E7.2,
Due: Group assignment. E7.3, E7.9, E7.20, P7.2).
11 Financial statement analysis (Chapter 8, Study guide: Chapter 8 (C1, C2, E1).
7-11 May pp. 322-42). Textbook: Chapter 8 (D8.3, D8.10, E8.6,
E8.10, P8.1).
12 Budgeting (Chapter 9). Study guide: Chapter 8 (MC1-15, E3, E4,
14-18 May E5).
Textbook: Chapter 8 (D8.8, E8.7, E8.14,
P8.7).
13 Cost-volume-profit analysis (Chapter Study guide: Chapter 9 (C2, E1, E2).
21-25 May 10). Textbook: Chapter 9 (D9.7, D9.8, E9.2,
E9.9, P9.7).
14 Review lecture. Study guide: Chapter 10 (C2, C3, C4, E1).
28 May-1 June Textbook: Chapter 10 (D10.2, E10.2,
E10.3, E10.7, E10.13, P10.5).
Refer to learning outcomes on page 3
* Ch = Chapter, MC= Multiple Choice, C = Classification questions, D = Discussion questions, E = Exercises, P = Problems

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200101 Accounting Information for Managers Autumn 2012

Week 14 In-C las s S een S olutions

E10.2 Find the missing figure for each of the following
independent cases:

Selling Variable Units Contribution Fixed Profit

Price/unit costs/unit sold Margin (total) costs (Loss)
$40 $20 60 000 $1 200 000 $900 000 $300 000
$18 $12 10 000 $60 000 $48 000 $12 000
$25 $20 50 000 $250 000 $250 000 0
$8 $6 100 000 $200 000 $50 000 $150 000
$5 $4 500 000 $500 000 $460 000 $40 000

E10.7 In the Whine Company, it costs $20 per unit ($15 variable
and $5 fixed) to make a product that normally sells for $45. A foreign
wholesaler offers to buy 3000 units at $25 each. The Whine Company
will incur special shipping costs of $1 per unit.
Required
Assuming that Whine has excess operating capacity, indicate
the net profit (or loss) it would realise by accepting the special
order.

Unit Contribution Margin from Normal Sales

Sales Price per unit $45

Variable costs 15
Contribution margin $30

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Autumn 2012 200101 Accounting Information for Managers

Unit Contribution Margin From Special Order

Sales Price $25
Variable costs 16 ( additional $1 shipping costs)
Contribution margin $ 9

Profit would increase by $9 x 3 000 units = $27 000

Fixed costs are irrelevant, as the level of costs will not change
within the relevant range.

E10.13 Chloe Enterprises operates a single-product entity. Data

relating to the product for 2011 were as follows:

a. Calculate the break-even units for 2011.

Selling price $60

Less: variable manufacturing $28
variable marketing etc. 12 40
Contribution Margin = $20

Break-even = $480 000/ ($20) = 24 000 units

b. Calculate the profit achieved in 2011.

Profit = (32 000 units *$20) $480 000 = $160 000

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200101 Accounting Information for Managers Autumn 2012

c. Changes in marketing strategy are planned for 2012. This

would increase variable marketing and distribution costs by
$4 per unit, and reduce fixed non-manufacturing costs by
$80 000 per year. Calculate the units that would need to be
sold in 2012 to achieve the same profit as in 2011.

Contribution margin will decrease due to increased variable costs

Currently $20 less additional $4 variable marketing = $16

To achieve same profit as 2011 = ($400 000 + $160 000)/ ($16) =

35 000 units

d. Would you recommend the change? Explain.

Based on the increased number of units required to achieve the

same profit, the change is not recommended in the short term.

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Autumn 2012 200101 Accounting Information for Managers

Week 14 Homework S olutions

Solutions to the Study Guide Questions can be found in the Study Guide

D10.2, E 10.3, P 10.5

C hapter 10

D10.2 Using examples, distinguish between fixed and variable costs.

Total fixed costs do not change within the relevant range of activity. For example, regardless of
the level of production, a manufacturer would still need to pay the rent, insurance and salaries of
permanent staff.

Variable Costs per unit do not change, however, total variable costs change proportionately with
changes in activity. For example, a manufacturer who produces wooden tables. The cost per
table would be the same, however, the total cost of manufacturing the tables will change
proportionate to the level of production. Say each table consumed $10 of variable costs (such as
wood, nails, glue), if 10 tables were manufactured the total variable cost would be $100 (10
tables $10) and if 100 tables manufactured the total variable cost would be $1000 (100 tables
$10).

E10.3 For each of the following independent situations, calculate the break-even point in
units:

a. Variable cost per unit of $2, annual fixed costs of $60 000 and selling price per
unit of $6

$60 000 / ($6 $2) = 15 000 units

b. Variable costs per unit of $10, annual fixed costs of $120 000 and selling price per
unit of $20

$120 000 / ($20 $10) = 12 000 units

c. Variable costs per unit of $15, annual fixed costs of $90 000 and selling price of $18

$90 000 / ($18 $15) = 30 000 units

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200101 Accounting Information for Managers Autumn 2012

P10.5 Break-even: single product; profit calculation

Janna Processing is a single-product entity, and provides the following summary
data relating to its product for 2011:

Required
a. Calculate the break-even in units and sales dollars for 2011

Contribution margin = $50 (24 + 8) = $18

Breakeven units = $756 000/ $18 = 42 000 units

Sales $ = 42 000 units x selling price of $50 = $2 100 000

Or using the contribution margin ratio method $756,000 / (18/50) = $2,100,000

b. Calculate the profit earned in 2011.

Profit in 2011 = (48 000 units * $18) - $756 000 = $108 000

c. Janna Processing is considering changes in plant operations and the production

process for 2012. The changes would result in a reduction of variable costs per unit
of $6, and increase fixed manufacturing costs by $265 000. How many units would
need to be sold to earn the same profit as in 2011? Would you recommend the
changes?

Changes
Existing Variable costs = $32 less $6 reduction = $24
adjusting contribution margin to 50 26 = $24
Fixed costs Currently $756,000 plus $265,000 additional = $1,021,000

To earn the same profit as 2011 = ($1 021 000 + $108 000)/$24 = 47 042 units This is slightly less
than the 48 000 units required to sold in 2012 to earn the equivalent profit. This move, would also
have some impact on the mix between fixed and variable costs (operating leverage).

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