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ACTMANA/ACCTBA3 GROUP BUSINESS CASE (5% of class standing grade)

3 rd Term, Academic Year 2014 - 2015

WORLDS APART CORPORATION Adapted from: Hilton, Ronald W. and Platt, D.E. (2011). Managerial Accounting: Creating Value in a Global Business Environment, Environment Global edition. McGraw-Hill.

BUDGETED INCOME STATEMENT (PREPARED BY COST ACCOUNTANT) Worlds Apart Corporation is a wholesale merchandising supply company which engages independent sales agent to market the company’s products throughout the Philippine archipelago. Currently, its products are produced at an average cost of Php 468.00 per unit. Per cost accountant, gross margin is estimated at 35% of sales. Number of units sold is regarded as the activity driver as to cost behavior. Sales agents are paid sales commission of 15% of total sales. On the other hand, personnel in the administrative department are paid Php 22,500 per month. Shipping and handling costs are Php 130,000 per year plus Php 25 per unit sold. Monthly rent expenses for selling and administrative office are Php 8,750 and Php 6,650 per month, in that order.

For the year ending December 31, 2013, 25,750 units are expected to be sold.

SALES AGENT PROPOSAL Sales agents are proposing that their current commission rate be adjusted to 17%. According to them, this will motivate them to increase their sales effort thereby, increasing the expected units of sales by 10%. They are likewise proposing to decrease the variable shipping and handling cost by Php 2.75 per unit and the fixed shipping and handling cost by Php 15,000. All other expenses will remain the same.

MANAGEMENT PROPOSAL The company’s management is considering the possibility of employing full-time sales personnel instead of the sales agents. Three individuals would be required, at an estimated annual salary of Php 67,500 each plus commission of five percent of sales. In addition, a sales manager would be employed at a fixed annual salary of Php 180,000. All other fixed costs, as well as the variable cost percentages, would remain the same as the estimates in the 2013 budgeted income statements. No increase in sales is expected.

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INSTRUCTIONS:

1. This is a group business case consisting of a maximum of 4 members in a group.

2. From the information gathered in the case, the group must then submit a written report forming analysis, conclusions and recommendations on the case. Incorporate the answers to the following guide questions. Do not round off decimal places while solving. Only round off (to nearest to decimal places) when providing final answers on the answer summary sheet.

WORLDS APART CORPORATION

a. Prepare a traditional format income statement for the year ending December 31, 2013 based on the budgeted income statement.

b. Prepare a contribution format income statement for the year ending December 31, 2013 based on the budgeted income statement.

c. Prepare a contribution format income statement for the year ending December 31, 2013 applying the changes in the sales agent proposal. Based on your findings, will the proposed changes be approved? Why or why not?

d. Prepare a contribution format income statement for the year ending December 31, 2013 applying the changes in the management proposal. Based on your findings, will the proposed changes be approved? Why or why not?

e. Compute the estimated break-even point in sales pesos for the year ending December 31, 2013 based on the (1) contribution format income statement prepared by the cost accountant (2) contribution format income statement applying the changes in the sales agent proposal and (3) contribution format income statement applying the changes in the management proposal.

f. Compute the estimated unit sales that would be required for the year ending December 31, 2013, to yield the same net operating income as projected in the budged income statement if management continues to use the independent sales agents and agree to the their proposed changes.

g. Compute the estimated volume in sales pesos that would generate an identical net income for the year ending December 31, 2013, regardless whether the company chooses to implement the changes as proposed by the sales agents or by the management.

h. What qualitative factors should the company consider in choosing between the proposals of the sales agents and the management?

3. Outline:

I.

INTRODUCTION

II. DISCUSSION:

(This is the bulk of the paper.

Be sure to include answers to guide questions and

support your answers with computations and logical ANALYSIS.)

III.CONCLUSION/RECOMMENDATION

IV. REFERENCES: (if any)

V. ANSWER SUMMARY (refer to last page of file)

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4.

Format of Written Report:

a) Paper size: 8.5” x 11”

b) Margin: 1” on all sides

c) Font and Font size: Tahoma 11

d) Paragraph alignment: Justified

e) Paragraph spacing: 1.5

f) Length of written report: 5 to 10 pages, EXCLUDING cover page and attachments

g) Attachments: Include the copy of the business case and other attachments at the end of your report.

h) Insert the entire report in a short sliding folder.

i) The cover page should be as follows:

WORLDS APART CORPORATION

A Group Business Case Presented to the Accountancy Department De La Salle University

In partial fulfillment Of the course requirements In ACTMANA / ACCTBA3

SUBMITTED TO:

Gonzales, Nino Jose B.

SUBMITTED BY:

Surname, Given Name, M.I.* Surname, Given Name, M.I. Surname, Given Name, M.I. Surname, Given Name, M.I.

Date

*NOTE: The names should be arranged alphabetically.

5. Deadline of Written Report:

MW class March 23, 2015 (Monday)

TH class March 24, 2015 (Tuesday)

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Each group must likewise present their findings in front of the class. A powerpoint presentation of the group’s respective solutions is recommended. The schedules for the group business presentation are as follows:

MW class March 23 and March 25

TH class March 24 and March 26

Please wear business attire for the report proper.

6. Rubric/Criteria for Grading:

a) To compute for the 5% team grade, please refer to next page for the rubric.

b) To compute for the individual written group business case analysis grade, the average peer evaluation grade (refer to Item#7) will be multiplied to the team grade. A sample computation follows:

Application of ACTMANA-related tools 100% * weight of 50% = 50.00%

Depth of insights Quality in writing paper

Team grade Multiplied by: Average peer evaluation grade (Assume 2 exemplary, 1 satisfactory or 290%/3) INDIVIDUAL GRADE Multiplied by: Business case grade INDIVIDUAL BUSINESS CASE GRADE

90%

90%

* weight of 30% = 27.00% * weight of 20% = 18.00%

= 95.00%

96.67%

5%

91.83%

4.59%

CRITERIA

EXEMPLARY

SATISFACTORY

DEVELOPING

BEGINNING

100%

90%

80%

70%

Applicatio

The group applies at least two ACTMANA- related tools and skills appropriately and includes only realistic assumptions in the paper.

The group applies two ACTMANA - related tools and skills appropriately and includes a few unrealistic assumptions in the paper.

The group applies only one ACTMANA - related tool and skill appropriately and includes some unrealistic assumptions in the paper.

The group fails to apply at least one ACTMANA - related tool and skill appropriately and includes many unrealistic assumptions in the paper.

n of

ACTMANA

-related

tools and

skills

[50%]

Depth of

The group

The group

The group relates somewhat improperly the case to the learnings in ACTMANA course and shows little knowledge on ACTMANA

The group fails to relate properly the case to the learnings in ACTMANA course and shows little to no knowledge on ACTMANA topics.

insights

relates properly

relates properly

and

the case to the

the case to the

discussion

learnings in

learnings in

s

ACTMANA course and shows comprehensive knowledge on ACTMANA topics.

ACTMANA course and shows some knowledge on ACTMANA topics.

[30%]

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topics.

 

Quality in

The group follows the format and has not one spelling/ grammatical error in the paper.

The group follows the format and uses only the English language in the paper which is at an acceptable level.

The group follows the format but uses a mixture of Filipino and English language in the paper and/or uses the English language somewhat inappropriately.

The group does not follow format and uses a mixture of Filipino and English language in the paper and/or uses the English language inappropriately.

writing

the paper

(format,

grammar)

[20%]

7. Peer Evaluation

a) On a one-half sheet of bond paper, cross-wise, write the names of all your group mates (in alphabetical order).

b) Give the corresponding percentage (70, 80, 90, 100) for each of your group mate. Refer to table below. Be fair when evaluating.

c) Print your name then sign as evaluator.

d) Include this as an attachment at the end of the paper.

CRITERIA

EXEMPLARY

SATISFACTORY

DEVELOPING

BEGINNING

100%

90%

80%

70%

Contributio n to team’s final output

The student

The student contributes to the team’s final output as expected.

The student contributes somewhat to the team’s final output.

The student does not contribute to the team’s final output.

contributes to

the team’s

final output

[100%]

more than

what is

     

expected.

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ANSWER SUMMARY This sheet serves as a guide for instructors during the actual business presentation. Students fill up this sheet with their final answers. For answers with descriptive nature, bullet points would suffice. For requirements A to D, just provide the summary of the accounts in this answer sheet i.e., total sales, total cost of goods sold, total selling and administrative expense, etc.)

A.

B.

C.

D.

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E.

1.

F.

G.

H.

2.

3.

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