Module: Management Decision
Access cost-volume-profit techniques to determine optimal managerial decision.
Examine the effects of changes in sales price, cost and volume.
The company has developed a target budget for selling 50,000 units in the upcoming year. The estimated budget is to sell 40,000 golf shirts and 10,000 pairs of shoes. Therefore the sales mix is 4 golf shirts for every pair of golf shoes sold. No fixed expenses are assigned to either golf shirts or golf shoes. As long as the company keeps selling golf shirts and shoes, the fixed expenses will not change therefore they are deducted in total rather than allocated to the individual product lines. The forecasted income statement is attached below.
Use the data tables attached to solve Case Study problems:
The CFO is in the process of making a business decision based on revenue generating concepts to increase sales for next year. He has asked for your assistance in examining the effects of financial changes in the sales mix. He needs assistance using cost-volume-profit techniques.
1. His first question to you: what is the company's CM ratio and variable expense ratio for golf shirts and golf shoes?
2. His second question, is what is the current break even point? (use the equation method)
3. His third question, what would happen if we increase sales by $400,000 next year. Let's assume the cost behavior pattern remains unchanged, by how much will the company's net income increase? (use the CM ratio to compute answer)
4. His fourth question is how many golf shirts and pairs of shoes are needed to be sold to earn $66,900 in operating income?
Based on the information provided to the CFO, he has now developed a new proposal to increase sales for next year. The CFO is determined to increase sales therefore he has set up a commission of 6% to the sales staff team. Consider the golf shop's original sales mix of 40,000 golf shirts and 10,000 shoes. In an effort to stimulate sales, the golf shop sales incentive will be use the target market of youth golf teams. This move has increased the sales commission paid on each golf shirt to 12.3%. The CFO believes that this move will generate additional sales of 10,000 golf shirts, with no effect on shoes sales.
5. How will this move alter the golf shops sales mix?
6. Calculate and explain how will it affect the breakeven point?
Information Literacy: Creation of New Information/Participation in Field
7. Select and organize expert information and weigh the information against your own emerging research. Do you think the company should accept the CFO's proposal to increase sales commission? By lowering the contribution margin per unit of golf shirts and shifting a greater percentage of sales to those golf shirts, more golf shirts and more shoes will have to be sold in order to break even. Is this change a good move? Include in your analysis, what happens to the breakeven point if the sales mix changes.
8. If the sales proposal should be accepted and if sales remain at current level, what will the income or loss from operations be for the budgeted year.
9. Identify basic cost behavior patterns and explain how changes in activity level affect the total cost and unit cost.
Digital Fluency: Creation of Digital Files
The CFO is anxious to increase the company's profit and has asked you to prepare an analysis and summary of your findings. Prepare an analysis report to support the business decision. You may use graphs and other statistical data to present findings. Apply advanced formatting features to present and produce a professional document. Create the information to present to users in a visually interesting and organized manner.
Module: Professional Business Ethics and Internal Control
Select an appropriate conclusion to an ethical dilemma.
You have now worked for GolfPro Center for a few years and along your journey have obtained your CPA license. Now that you have become a CPA you have taken on extra work on the side by performing tax services to some small business clients. Desert Willow Golf Course is one of your new small business accounts and you are obligated to compete their corporate tax return by April 15th.
Ironically, Desert Willow Golf Course, is also a customer of GolfPro Center as they purchase inventory to stock their pro-shop at the golf course. Desert Willow Golf Course has recently fallen more than 90 days past due on paying their bills to GolfPro Center. In your position at GolfPro Center you have been assigned to review and perform an internal audit of Desert Willow Golf Course's customer account. In addition, you are also responsible for preparing and estimating the Allowance for Doubtful Accounts for GolfPro Center. When preparing the report, you have left Desert Willow Golf Course off of the aging report. The CFO has asked you for your justification for not including Desert Willow Golf Course on the 90+ aging report. Your reply is, it seems there are some audit related questions about the collectible amount for Desert Willow Golf Course; therefore you have come up with an explanation for not including them in the estimated allowance report which satisfies the CFO.
GolfPro Center is now growing and has decided to expand by opening a new store in Southern California. Since you have now obtained your CPA license the company has offered you a nice promotion and raise with GolfPro Center. You will have to transfer to a new location to begin gathering a team to start the finance department at the new store in Southern California. You have accepted the promotion and leave immediately. In the mean time you have decided to quit doing accounting on the side which includes your business with Desert Willow Golf Course. In moving, you have not completed the corporate tax return Form 1120 for Desert Willow Golf Course which should be filed with the IRS by a specific date. You also failed to inform Desert Willow Golf Course of your new relocation. In trying to locate you, Desert Willow Golf Course contacts GolfPro Center and discloses your side work business.
Ethics and Professionalism: Ethical and Situational Awareness
1. Determine the best outcome for this situation: Do you think it is ethically appropriate to provide tax services to Desert Willow Golf Course, a customer of GolfPro Center, while at the same time being employed by GolfPro Center? Evaluate the impact this decision has on laws and on your own core of beliefs and personal ethics.
Information Literacy: Ethical Use of Information
2. According to the Case Study, have you violated any of your ethical responsibilities to GolfPro Center and to Desert Willow Golf Course? In your response be specific and reference the AICPA Code of Professional Conduct in answering the question. Provide attribution and integrate citations for all resource types. Provide APA style in-text citations and a reference entry for the AICPA Code.
3. Ethics and Professionalism: Integrity
What if your new boss at your new job in Southern California just found out about your dual role as internal auditor and tax accountant for the corporate office of GolfPro Center. What would you expect the new boss should do? Determine the level responsibility your new boss has on the impact this decision will make for the overall department.
Internal Control
Ethics and Professionalism: Attitudes
1. Explain to the department what internal control is and why the company should establish an internal control system.
Ethics and Professionalism: Attitudes
2. Currently John works as the accountant for GolfPro Center. He opens the mail for the company everyday and sets aside all of the incoming checks for the company. He lists all incoming checks on a spreadsheet which includes the name of the customer and the check amount. He then records all of the checks into the accounting system by applying the payment to the customers account. Next he prepares the checks for the bank deposit. He completes the bank deposit slip and attaches all checks. He then gives the incoming check spreadsheet, checks and bank deposit to you the review and sign off on. After your approval, he then hand carries the checks to the bank each day to deposit. Define cash receipts and discuss the basic controls for cash receipts. Also, explain directly how the company could improve its internal control procedure for handling cash receipts. Include in your response the demonstration of the importance of understanding the segregation of duties and how additional proper documentation could be used to improve the final approval process.
Ethics and Professionalism: Attitudes
3. John approves all requests for payment out of the $200 fund, which is replenished at the end of each month. At the end of each month, John submits a list of all accounts and amounts to be charged and a check is written to him for the total amount. John is the only person ever to tally the fund. Explain the internal control weakness and describe how internal controls can be improved upon. What questions would you ask to find out additional information regarding this internal control situation?
Ethics and Professionalism: Attitudes
4. "All of the company's cash disbursements are made by check. Each check must be supported by an approved voucher, which is in turn supported by the appropriate invoice and, for purchases, a receiving document. After reviewing the supporting documentation, you approve the voucher. John prepares the checks for the CFO's signature. John also maintains the company's check register (the cash disbursements journal) and reconciles the bank account at the end of each month.
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Diversity and Teamwork: Skills
5. GolfPro Center has just completed the annual audit. The auditors presented a list of control deficiencies to the CFO. The CFO has asked you to meet with your team to decide on a improvement plan. Using the above examples as control evidences, explain how you would gather your department team to discuss how to improve on these items. Include the following details in your response: Discuss the team members and resources you would gather to discuss this matter. Advocate respect, value and appreciation for individuals working within the finance department, explain the communication skills needed to approach the team. Describe the professional skills needed to accomplish the task.
Diversity and Teamwork: Skills
6. Continuing along the results of the annual audit, explain how an audit enhances the quality for financial statement reporting and managements report on internal controls. Include in your repose if an audit actually guarantee a fair presentation of a company's financial statements.
Diversity of Accounting Issues
Diversity and Teamwork: Knowledge
1. Research the FASB Website.
Go to the website of the Financial Accountant Standards Board. Identify the most recently issued financial reporting standard and summarize briefly its principal provisions. Also search under Project Activities to identify the reporting issue with the most recent update. Describe the issue and the nature of the action taken by the FASB. In your response, demonstrate a profound appreciation of the meaning of diversity in accounting standards, explain the need for diverse perspectives.
Diversity and Teamwork: Knowledge
2. Research the IASB Website
Go to the website of the International Accounting Standards Board. Search for the International Financial Reporting Standards (IFRS) summaries. Identify the most recently issue international financial reporting standard and summarize briefly its principle provisions. In your response, demonstrate a profound appreciation of the meaning of diversity in accounting standards, explain the need for diverse perspectives.
Diversity and Teamwork: Attitudes
3. Critique and criticize bias regarding accounting practice issues in diversity by explaining the reasons for differences in accounting practice's across countries.
Diversity and Teamwork: Skills
4. "International Financial Reporting Standards are gaining support around the globe. In 2007, the SEC eliminated the requirement for foreign companies that issue stock in the United States to include in their financial statements a reconciliation of IFRS to U.S. GAAP. There also is serious discussion of allowing U.S. companies to choose whether to prepare their financial statements according to U.S. GAAP or IFRS. Do you think U.S. companies should be allowed the choice of reporting under either U.S. GAAP or IFRS? Provide arguments both for and against this idea. Interpret intercultural experience from multiple perspectives and worldviews."
Note: Need module 4, 5, 6
Attachment:- Case Study.rar