Bus.313: Managerial Accounting ONE COMPLETED ASSIGNMENT TO BE SUBMITTED BY EACH GROUP
Dr. Ahiarah
Group No.___________________________
GROUP ASSIGNMENT #1 BASED ON ETO TEXT, Chapter 2
Due Date:
Thursday Sept. 15, 2011
If group HW is submitted when due, then it will be graded for the full point value indicated for each part; if
submitted after the due date but before the comprehensive exam on the associated chapter, it will be graded
for no more than 2 points possible for each part. Any group HW submitted after the comprehensive exam on
associated chapter will not be graded.
Using an instrument in the pattern of Exhibit 1 below, rate each of your group member's contribution to the
performance of the group in this particular homework on a scale of 0 (zero) to 100 percent. You may also rate
yourself. Please submit this instrument when the group homework is submitted.
Exhibit 1
Group #__
Abel C
Braden T
Cotton G
Denta P
Grp.HW #_
Contr. %
Contr. %
Contr. %
Contr. %
Part I. (7 points max.) GUIDING INSTRUCTIONS: Please supply the missing words for each enumerated
blank space by copying verbatim from the narrated “Self-Study Review Problem” for Chapter 2. To facilitate
the grading, you must respond to Part I in the separate form provided. Only responses submitted in that
form will be graded.
Welcome to Mensa Mountaineering! This self-study problem introduces you to the
(1)______________________, and the (2)______________________
….
Often, the manager of a business is interested in knowing how costs behave for a number of reasons. One
reason might be to (3)______________________. Another might be to (4)______________________ or the
(5)______________________. In this case, we want to know what happens to costs in an expedition, in
relation to the number of climbers on a given trip. The number of climbers increase from four to six in this
example, but notice that the (6)______________________ stay the same in total, or remain
(7)______________________. This behavior is known as (8)_____________behavior, and we call the cost a
fixed cost.
….
Another interesting thing happens when we divide the total cost by the total number of climbers on a given
trip. The cost per climber (9)_______________as the number of climbers (10)_______________! This, too, is
the behavior of a (11)_______________and is known as “economy of scale”.
…
Now, we are changing the (12)_______________ of the problem. Previously, we looked at
(13)_______________________________. Now, we are looking at (14)____________________________ that
they guide. The behavior is that of a variable cost. Costs are (15)____________ in total as the number of
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expeditions go up. Notice also that the cost per unit, or, cost per expedition remains the
(16)_________________, as the activity, the number of expeditions, changes. This is also the behavior of a
(17)_________________. A cost that has the same cost per unit as an activity changes is always a variable
cost. Use this (18)_________________ cost behavior when examining costs.
….
It’s Magic!
(operating leverage)
Here is the magic of (19)____________; a twenty percent increase in revenue produces about a fifty five
percent increase in profit! But, here’s the danger; a twenty percent decrease in revenue produces a fifty five
percent decrease in profit! This magic, where a (20)_________________ change in revenue results in a
(21)_________________change in profit is called (22)_________________. Operating leverage
(23)_________________ changes in profit in relation to changes in sales revenue.
….
It’s A Lack Of Magic!
(operating leverage missing!)
The magic is gone; a twenty percent increase in revenue only produces a twenty percent increase in profit!
The cost of guide salaries changes with the volume of sales revenue, and that change is proportionate to the
revenue. Remember that the 20 percent change in revenue resulted in the same change in profit. The magic,
operating leverage, is missing in (24)_________________. While variable costs provide less risk, the
percentage change in revenue will always equal the percentage change in profit when only variable costs exist.
….
Thank you for helping Mensa Mountaineering Company understand its (25)_________________. We have
learned the behavior of fixed and variable costs in relation to different activities. We have also learned that
costs can change their behavior when related to a different activity. We have also learned a little bit about the
concept of (26)_________________, which magnifies profit and loss in relation to sales revenue. Only
(27)_________________ have the property we call leverage. (28)_________________ have no leverage. Most
businesses have a mixture of variable and fixed costs.
Part II. (5 points max.)
The group should go to the CONNECT-PLUS site and collectively complete, grade
and discuss Ch2FreePrct Assignment. Print and submit your completed and graded work. Evidence of
“graded” required here is the actual SCORE that CONNECT-PLUS reports on each graded work (neither the
question’s potential point value, nor a “correct” check mark suffices for “graded”). If your actual score is not
printable, clearly indicate, in writing here, the name of the group member in whose CONNECT-PLUS account
this part was completed
Part III. (5 points max.)
The following are selected questions from the web-quiz on Chapter 2. To
ensure a desirable group score on these, it is highly recommended that the group collectively go over same
questions at the Student Online Learning Center site hyper-linked in the course syllabus. A one-liner answer
to each question will receive a maximum of 0.25 point, whereas if you show the sequence of steps, with
accurate supporting computations, leading to your answer for each question, you will receive the full point
value of the question. Bear this in mind: if you cannot explain the answer you show, your chances of passing
an exam on this type of question are not good, regardless of your score on this group assignment.
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Part III (1)
BOX
A
BOX B
(A) The graph depicted in BOX A, above, indicates what cost-behavior pattern?
Your answer:____________________________________
(B) The scattergraph depicted in BOX B, above, indicates what cost-behavior pattern?
Your answer:____________________________________
Part III (2) Given the following:
What is the estimated variable cost per unit? Please show your answer and the computation(s) supporting it
below:
Part III (3)
Given the following:
Which item does not contain any fixed cost behavior? Please show your answer and the computation(s)
supporting it below:
Part III (4)
(A) Body Boards Inc.(BBI) produces and sells 500 surfboards a year. It has a variable cost per unit of $175.
Its total fixed costs are $25,000 per year. What is the total cost of producing 500 boards? Please show your
answer and the computation(s) supporting it below:
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(B) Body Boards Inc.(BBI) produces and sells 500 surfboards a year. BBI has a variable cost per unit of
$175 and produces 500 surfboards per year. Its total fixed costs are $25,000 per year. What is the average
cost of producing one surfboard? Please show your answer and the computation(s) supporting it below:
Part III (5) Please answer 5(a) to 5(d) based on the data in the box below concerning Georgetown Motors.
Georgetown Motors has the following information available for the month of March:
(A) Georgetown's contribution margin is:
below:
Please show your answer and the computation(s) supporting it
(B) Georgetown's Magnitude of Operating Leverage is:
supporting it below:
Please show your answer and the computation(s)
C) Georgetown's management is expecting sales to increase 30% next month. What percentage will net
income increase? Please show your answer and the computation(s) supporting it below:
(D) Georgetown's management estimates that they could increase sales 50% if they increased their fixed
advertising expenses to $100,000. This action most likely would have what effect on their magnitude of
operating leverage? Please show your answer and the computation(s) supporting it below:
Part III (6) The table below provides volume and cost data for four companies. If the sales price per unit is
$100 and 2,000 units are sold which company exhibits the highest operating leverage?
Please show your answer and the computation(s) supporting it below:
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Part I of GROUP ASSIGNMENT #1 BASED ON ETO TEXT, Chapter 2
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Missing words
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