This Assessment includes 6 parts, each related to a different case scenario. For each scenario, you will assume an important role with a fictional company and analyze various aspects of that company using accounting tools and measures. Parts I, II, IV, and V require you to make calculations using spreadsheet software such as Excel. Part III, requires you to analyze various types of centers for a specific company. Part VI requires you to analyze data presented in the accompanying project documents and make decisions based on that data. Access the Assessment Scenarios document provided with this Assessment and analyze the appropriate scenario for each part.
Access the following to complete this Assessment:
IG009 Assessment Scenarios
This assessment has six parts. Click each of the items below to complete this assessment.
Part I: Performance Report and Variances
Access Part I of the IG009 Assessment Scenarios document. Honey Bear Confections (HBC) is a small organization dedicated to making bear-shaped sweets with honey as a sugar substitute. You have just been promoted to the position of manager of the production department at HBC when your supervisor shows you a static budget report. She tells you to “get it fixed.” You suspect she is alluding to a problem with productivity and efficiency. Review the “HBC Static Budget Report,” and then prepare a performance report using spreadsheet software, such as Excel.
Part II: Making Investment Decisions Using NPV, ARR, IRR, and Payback
Access Part II of the IG009 Assessment Scenarios document. As the new product development manager, you are considering investment proposals for two mutually exclusive investment opportunities. The two proposals must be evaluated using net present value (NPV), accounting rate of return (ARR), internal rate of return (IRR), and payback. Review the cash flow information in the “Investments” section of the Assessment Scenarios document, and then analyze the investment proposals using Excel or another spreadsheet software to calculate NPV, ARR, IRR, and payback. Write a report that presents your findings (1–2 pages).
Your report should include the following:
Your calculations of NPV, payback, IRR, and ARR
An evaluation of each of the investment opportunities
Your recommendation for which investment opportunity should yield the highest
Note: Part II requires you to submit an Excel sheet tab and a section in Word. Be sure each is clearly labeled when you submit your Assessment.
Part III: Cost Centers, Profit Centers, and Investment Centers
Select a company that you are familiar with, or do some research on a company you are interested in, then determine what that company’s cost centers, profit centers, and investment centers are (there may be more than one of each). Provide a rationale for your conclusions (3–4 paragraphs).
Part IV: Full Cost and Variable Cost Transfer Pricing Methods
Phipps manufactures circuit boards in Division A in a country with a 30% income tax rate and transfers these circuit boards to Division B in a country with a 40% income tax. An import duty of 15% of the transfer price is paid on all imported products. The import duty is not deductible in computing taxable income. The circuit boards’ full cost is $1,000 and variable cost is $700; they are sold by Division B for $1,200. The tax authorities in both countries allow firms to use either variable cost or full cost as the transfer price. Using Excel or another spreadsheet software, prepare a summary that shows a comparison of the full cost transfer pricing method and variable cost transfer pricing method. Your summary should clearly show the total taxes the company would be subject to under each method.
Part V: Computing Variances Using Standard and Actual Costs
Access Part V of the IG009 Assessment Scenarios document. You are the senior controller for Healing Touch, a manufacturer of high-quality products designed to help support healthy spines. Its newest product offering is a massage chair and you plan to perform a variance analysis of the chairs manufactured this month to determine if the standards are being met. Once you have completed the analysis, you plan to show it to the production department manager and ask for an explanation of any variances that you believe should be examined. Assuming that Healing Touch manufactured 500 massage chairs this month, use the data contained in Part V of the Assessment Scenarios document to calculate all materials and labor variances in Excel (or other spreadsheet software). Be sure to include price, quantity, wage rate, and labor efficiency variances.
Part VI: Break-Even Point
Access Part VI of the IG009 Assessment Scenarios document. Dr. Lucy Zang, a noted local podiatrist, plans to open a retail shoe store specializing in hard-to-find footwear for people with feet problems, such as bunions, flat feet, mallet toes, and diabetic feet. She has asked you to help her figure out what sales need to be each month to keep the store open, and has given you some basic numbers to work with. Using the estimates provided in Part VI of the Assessment Scenarios document, calculate the amount of sales the Happy Feet store must do each month to break even.
Assessment Scenarios
Part I: Performance Report and Variances
HBC Static Budget Report
| Honey Bear Confections (HBC) Manufacturing Overhead Static Budget Report For Month Ended June 20XX | ||||
| Budget | Actual | Variance (U or F) | ||
| Production in bags of candy | 10,000 | 12,000 | 2,000F | |
| Costs: | ||||
| Indirect labor | $26,000 | $31,200 | $5,200U | |
| Supplies | 25,000 | 29,500 | 4,500U | |
| Utilities | 19,000 | 22,500 | 3,500U | |
| TOTAL | $70,000 | $83,200 | $13,200U |
Part II: Making Investment Decisions Using NPV, ARR, IRR, and Payback
Investments
| Investment A | Investment B | |
| Required Investment | $50,000 | $150,000 |
| Annual Cash Flows | 20,000 | 56,000 |
| Annual Net Income | 8,000 | 34,000 |
| Project Life | 5 years | 5 years |
| Cost of Capital | 10% | 10% |
Part V: Computing Variances Using Standard and Actual Costs
| Healing Touch Standard and Actual Costs | ||
| Standard Cost Sheet: Massage Chair | ||
| Metal tubing | 6 meters @ $3 | $18.00 |
| Leather | 2 square meters @ $7 | 14.00 |
| Padding | 3 kilograms @$4 | 12.00 |
| Direct labor | 4 hours @ $15 | 60.00 |
| Total standard cost | $104.00 | |
| Actual Costs Incurred for the Month: Massage Chair | ||
| Metal tubing | 3,100 meters | $9,455 |
| Leather | 1,100 square meters | 7,722 |
| Padding | 1,600 kilograms | 6,560 |
| Direct Labor | 1,800 hours | 27,270 |
| Total cost | $51,007 |
Part VI: Break-Even Point
| Dr. Lucy Zang—Happy Feet Store | ||
| Selling Price | $220 | per shoe |
| Operating Costs: | ||
| Cost of shoes | $110 | per shoe |
| Other Costs: | ||
| Fixed Rent | $13,333 | monthly |
| Variable Rent | 3% | of sales |
| Other | $38,000 | monthly |
| Interest | $11,667 | monthly |
