# I-Asgn5 - LESSON 5 Assignment Question 1(8 marks Computer...

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LESSON 5 Assignment Question 1 (8 marks) Computer question Detmer Holdings AG of Zurich, Switzerland, has just introduced a new fashion watch for which the company is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each SFr2 per unit reduction in the selling price. (SFr2 denotes 2 Swiss francs) The company’s present selling price is SFr90 per unit, and variable expenses are SFr60 per unit. Fixed expenses are SFr840,000 per year. The present annual sales volume (at the SFr90 selling price) is 25,000 units. Required a. (2 marks) What is the present yearly net income or loss? b. (2 marks) What is the present break-even point in units and in Swiss franc sales? c. (2 marks) Assuming that the marketing studies are correct, what is the maximum profit that the company can earn yearly? At how many units and at what selling price per unit would the company generate this profit? d. (2 marks) What would be the break-even point in units and in Swiss franc sales using the selling price you determined in (3) above (for example, the selling price at the level of maximum profits)? Why is this break-even point different from the break-even point you computed in (1) above? Use the procedure described below to complete worksheet L5Q1. From this worksheet, answer the four requirements for the problem. Procedure 1. Open the file MA1L5Q1. 2. Observe the layout of the worksheet. In particular, notice that cells A5 to E15 contain a data table. 3. Complete the income statement in rows 19 to 23, using the values in the data table to calculate the net income. 4. Complete the break-even analysis for requirement 2 by entering appropriate formulas in cells E28 and E30. Management Accounting Fundamentals Assignment 5 1

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5. As part of the solution to requirement 3, complete the income-volume sensitivity analysis table in rows 38 to 46. Note that you should enter formulas rather than actual values in these cells. 6. Save a copy of your completed worksheet. 7. Copy and paste cells A17 to G48 into your assignment Word document. 8. Display the formulas in your completed worksheet. Copy and paste the formulas in cells A17 to G48 into your assignment Word document. Question 2 (14 marks) Computer question Before completing this question, you should work through Computer illustration 5-1 in the Lesson Notes. In the past, Big Piney Resort has had great difficulty in predicting its costs at various levels of activity through the year. The reason is that the company has never attempted to study its cost structure by analysing cost behaviour patterns. The president has now become convinced that such an analysis is necessary if the company is to maintain its profits and its competitive position. Accordingly, an analysis of cost behaviour patterns has been undertaken. The company has managed to identify variable and fixed costs in all areas of its operation
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I-Asgn5 - LESSON 5 Assignment Question 1(8 marks Computer...

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