Bill French, Accountant

Bill French, Accountant - Cost & Management Accounting...

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(MBA Banking 1st Trimester) Case Study: Bill French, Accountant Presented by: Roll No. Name 1 Chirag Daultani 2 Kushal Agarwal 3 Akshay Cotha 4 Udit Sharma
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Characters in the case: Name Designation Bill French Staff Accountant Wes Davidson Controller John Cooper Production Control Fred Williams Manufacturing Ray Bradshaw Assistant Sales Manager Arnie Winetki General Sales Manager Hugh Fraser Administrative Assistant to President Important Facts of the case: 1. Bill French had been working with the firm for last six months and had been doing analysis work. He used to report to Wes Davidson and was considered very capable. 2. Bill French got an opportunity to attend informal manager’s meeting where he presented some break-even data. 3. The Duo Products Corporation had not made use of such analysis in the review or planning earlier. 4. Analysis and data presented by Bill French in the meeting is as follows: Product lines Aggregate A B C Sales at full capacity (units) 20,00,000 Actual sales volume (units) 15,00,000 6,00,000 4,00,000 5,00,000 Unit sales price ($) 1.20 1.67 1.50 0.40 Total sales revenue ($) 18,00,000 10,00,000 6,00,000 2,00,000 Variable cost per unit ($) 0.75 1.25 0.625 0.25 Total variable cost ($) 11,25,000 7,50,000 2,50,000 1,25,000 Fixed cost ($) 5,20,000 1,70,000 2,75,000 75,000 Net Profit ($) 1,55,000 80,000 75,000 0 Ratios Variable cost to sales 0.63 0.75 0.42 0.63 Variable income to sales 0.37 0.25 0.58 0.37 Utilization of capacity (%) 75 30 20 25 5. This analysis was challenged by the participants of the meeting and a discussion followed with each person putting in his views and also providing with revised information of the changes proposed for the following year.
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6. At the end of the meeting Fraser had put forward his views which was followed by Wes Davidson summarizing the revised information and directing Bill French to consider those and work to get things in shape. Revised Information for next year 1. Boost in sales by about 20% unitwise. 2. Increase in fixed cost of $10,000 per month for increasing capacity to 90%. 3. Product A to hold two-third volume next year i.e. 4,00,000 units 4. Product C to be produced more by additional 4,50,000 units next year. 5. Product B to not change much. 6. Doubling the price of Product C to 0.80 per unit with no change in cost. 7. 50% of Profit to be paid to Government as tax. 8. Special dividend of about 50% extra to be paid next year to stock holders on account of anniversary, in addition to the $50,000 divided already being paid every year. 9. To hold $25000 for the business. 10. May have to meet union demands which could increase variable cost by 10% for all products. Base calculation to be used as per revised information considering all of the
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Bill French, Accountant - Cost & Management Accounting...

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