Acct 207 Assignment Northern Apparel Inc Is Thinking Of Making A Spe ✓ Solved

ACCT 207 Assignment Northern Apparel Inc. is thinking of making a specialty parka for children. The initial research has determined that the parka could sell for 5. Fixed manufacturing overhead is 0,000 per month. Fixed selling costs are ,000 per month. Variable costs to manufacture are estimated as follows: Direct materials .50 Direct labour 6.15 Manufacturing overhead 1.20 Variable selling cost is estimated at 3.5% of sales.

Required: a) Calculate the break-even point in units and in dollars. b) Calculate the new break-even point in units and sales dollars for each of the following independent situations: i. Variable manufacturing costs increased by 40%. ii. Fixed manufacturing overhead costs increased by 25% and variable manufacturing costs increased by 50%, except for direct materials, which doubled in price due to a problem with importing leather. Variable selling cost increased to 4% of sales. iii. The estimated selling price was overestimated, and the actual price is 0. c) Using the revised estimates from part (b) (iii) as the best estimate, what is the margin of safety percentage if the company thinks it will sell 2,000 units per month? d) The management accountant wants to provide the production department with relevant information for decision-making in relation to the production of this parka.

Two of the key decision makers are the assembly supervisor and the vice-president of production. Contrast the information needs of each of these individuals as they relate to the following: i. decision type ii. information format iii. information source Please complete a maximum 10 slide (no less than 7 slides) power-point presentation answering the above four questions plus attach an excel file with all your supporting calculations. two files (power-point and excel) This is super important and a requirement, so please pay attention. ACCT 207 D01 And D02 Assignment – 20% Of Final Grade Northern Apparel Inc. is thinking of making a specialty parka for children. The initial research has determined that the parka could sell for 5.

Fixed manufacturing overhead is 0,000 per month. Fixed selling costs are ,000 per month. Variable... Direct materials .50 Direct labour 6.15 Manufacturing overhead 1.20 Variable selling cost is estimated at 3.5% of sales. Required: a) Calculate the break-even point in units and in dollars. b) Calculate the new break-even point in units and sales dollars for each of the following independent situations: i.

Variable manufacturing costs increased by 40%. ii. Fixed manufacturing overhead costs increased by 25% and variable manufacturing costs increased by 50%, except for direct materials, which doubled in price due to a problem with importing leather. Variable selling cost increased to 4% of sales. iii. The estimated selling price was overestimated, and the actual price is 0. c) Using the revised estimates from part (b) (iii) as the best estimate, what is the margin of safety percentage if the company thinks it will sell 2,000 units per month? d) The management accountant wants to provide the production department with relevant information for decision-making in relation to the production of this parka. Two of the key decision makers are the assembly supervisor and the vice-president of pro... i. decision type ii. information format iii. information source

Paper for above instructions

1. Introduction

Northern Apparel Inc. is assessing the feasibility of manufacturing a specialty parka for children. This analysis involves calculating the break-even point under several scenarios, as well as evaluating the information needs of production team decision-makers. The company expects to price the parka at 5 and has identified various fixed and variable costs associated with production.

2. Break-even Point Calculation

a) Original Break-even Point Calculation

To determine the break-even point in units and sales dollars, we first need to calculate the total fixed costs and contribution margin per unit.

2.1 Fixed and Variable Costs

- Fixed Manufacturing Overhead: 0,000 per month
- Fixed Selling Costs: ,000 per month
- Total Fixed Costs: 0,000 + ,000 = 1,000
---

2.2 Variable Costs per Unit

The variable costs for manufacturing and selling each parka are:
- Direct Materials: .50
- Direct Labour: .15
- Manufacturing Overhead: .20
- Variable Selling Costs: 3.5% of sales price.
Given the selling price of 5:
- Variable Selling Cost = 3.5% × 195 = .83
Total Variable Costs per unit:
- Total Variable Costs = .50 + .15 + .20 + .83 = .68
---

2.3 Contribution Margin

Contribution Margin per unit is calculated as:
- Selling Price - Variable Costs per Unit = 5 - .68 = 2.32

2.4 Break-even Point in Units

The break-even point in units (BEPu) can be calculated using:
\[
BEPu = \frac{Total \, Fixed \, Costs}{Contribution \, Margin \, per \, Unit}
\]
\[
BEPu = \frac{171,000}{162.32} \approx 1,055 \, units
\]

2.5 Break-even Point in Sales Dollars

The break-even point in sales dollars (BEP$) is calculated as:
\[
BEP$ = BEPu \times Selling Price
\]
\[
BEP$ = 1,055 \times 195 \approx 205,725
\]

3. New Break-even Points under Various Scenarios

b) Independent Situations Analysis

i) Variable Manufacturing Costs Increased by 40%
New variable costs:
- Direct Materials: .50 (remains unchanged)
- Direct Labour: .15 × 1.4 = .61
- Manufacturing Overhead: .20 × 1.4 = .68
- Variable Selling Cost: .83 (remains unchanged)
New Total Variable Costs:
- Total = .50 + .61 + .68 + .83 = .62
New Contribution Margin:
\[
Contribution \, Margin = 195 - 35.62 = 159.38
\]
New BEPu:
\[
BEPu = \frac{171,000}{159.38} \approx 1,070 \, units
\]
New BEP$:
\[
BEP$ = 1,070 \times 195 \approx 209,850
\]
---
ii) Changes in Fixed and Variable Costs
- Fixed Manufacturing Overhead: 0,000 × 1.25 = 5,000
- Variable Direct Labour: .15 × 1.5 = .23
- Variable Manufacturing Overhead: .20 × 1.5 = .80
- Direct Materials: Doubles = .00
- New Variable Selling Cost: 4% of 5 = .80
New Total Variable Costs:
- Total = .00 + .23 + .80 + .80 = .83
New Contribution Margin:
\[
Contribution \, Margin = 195 - 55.83 = 139.17
\]
New BEPu:
\[
BEPu = \frac{175,000}{139.17} \approx 1,256 \, units
\]
New BEP$:
\[
BEP$ = 1,256 \times 195 \approx 245,520
\]
---
iii) Selling Price Overestimated (New Price = 0)
New Contribution Margin:
- Total Variable Costs remain unchanged from the original calculation (.68).
- Contribution Margin = 0 - .68 = 7.32
New BEPu:
\[
BEPu = \frac{171,000}{117.32} \approx 1,456 \, units
\]
New BEP$:
\[
BEP$ = 1,456 \times 150 \approx 218,400
\]

4. Margin of Safety Percentage

Using revised estimates from part (b)(iii) and projecting 2,000 units sold:
\[
Margin \, of \, Safety = Actual \, Sales \, Volume - BEP \, Volume
\]
\[
= 2000 - 1456 = 544
\]
Margin of Safety Percentage:
\[
\text{Margin of Safety \%} = \left( \frac{2000 - 1456}{2000} \right) \times 100 \approx 27.2\%
\]

5. Information Needs of Production Decision Makers

a) Decision Type

- Assembly Supervisor: Focuses on operational decisions that affect daily production schedules, material requirements, and labor allocation.
- Vice-President of Production: Involves strategic decision-making around capacity planning, long-term production efficiency, and cost optimization.

b) Information Format

- Assembly Supervisor: Requires detailed, operational reports - such as production timelines, daily output statistics, and immediate cost tracking.
- Vice-President of Production: Prefers summary reports reflecting key performance indicators and strategic overviews that aid in higher-level decision-making processes.

c) Information Source

- Assembly Supervisor: Utilizes direct information from production data, employee input, and work shift records.
- Vice-President of Production: Relies on aggregated internal reports, financial forecasts, market trends, and external benchmarking data.

6. Conclusion

The analyses suggest that Northern Apparel Inc. must closely monitor not only its fixed and variable costs but also pricing strategies to maintain viability in the market. Understanding the specific information needs of decision-makers can significantly enhance its production strategies, allowing for better resource allocation and overall efficiency.
---

References

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