FMGT 2294

Assignment – Cost-Volume-Profit

Question 1

Crescent Corporation manufactures multi-function photocopiers that are sold through a network of independent sales agents. These sales agents sell a variety of products to businesses in addition to crescent’s photocopiers. The sales agents are paid a 19% commission on sales, and this commission rate was used when Crescent’s management prepared the following budgeted income statement for the coming year:

Since the completion of the above statement, Crescent’s management has learned that the independent sales agents are demanding an increase in the sales commission rate to 22% of sales for the upcoming year. This would be the third increase in commissions in five years. As a result, Crescent management has decided to investigate the possibility of the hiring its own sales staff to replace the independent sales agents.

Crescent’s controller estimates the company will have to hire six salespeople to cover the current market area, and the total annual payroll cost of these employees will be about $350,000, including benefits. The salespeople will also be paid commissions of 12% of sales. Travel and entertainment expenses are expected to be $200,000 for the year. The company will also have to hire a sales manager whose salary and benefits will total approximately $100,000 per year. To make up for promotions that the independent agents have been running on behalf of Crescent, management believes the company’s budget for fixed advertising expenses will increase by $400,000.

Required:

Assuming sales of $20,000,000, construct a budgeted contribution-format income statement for the upcoming year for each of the following activities:

The independent sales agents commission remains unchanged at 19%

The independent sales agents commission increases to 22%

The company employs its own sales force

Calculate Crescent Corporation’s break-even point in sales revenue for the upcoming year assuming the following:

The independent sales agents commission remains unchanged at 19%

The independent sales agents commission increases to 22%

The company employs its own sales force

Refer to your answer to 1(b) above. If the company employs its own sales force, what level of of sales revenue would be necessary to generate the operating income the company would realize if sales are $20,000,000 and the company continues to sell through agents (at a 22% commission rate)?

Determine the sales revenue at which operating income would be the equal regardless of whether Crescent Corporation sells through sales agents ( at 22% commission rate) or employs its own sales force.

Would you recommend the company retain the sales agents at 22% commission or would you recommend that the company employ its own sales force? Provide a detailed explanation to support your recommendation.

The Federal government (and state and local governments as well) calculate billable rate as:

Billable Rate = Wage Rate + (Approved Overhead + Indirect Costs) Factor x (Wage Rate)

Given the following business costs for the previous year submitted for review and approval to a Federal agency:

a) Determine the approval overhead for this business

b) Determine the billable rate for an engineer that is paid $50/hour.

You are an event management company. Your customers want you to create an event with the 'wow' factor was the brief given to you by North Cypriot Young Businessman Association who were looking to hold a conference followed by an evening of entertainment for 200 guest with overnight accommodation with Palm Beach Hotel. They are going to invite investors from Turkey to make them invest in North Cyprus by the means of Tourism. As an event management company what kind of solutions can you offer them. Design an event and make your customers happy. You have a 100.000 USD budget. Just give a tentative budget doesn’t have to be too detailed. -WRITE MAXIMUM 500 WORDS

Develop a list of revenue streams for a NASCAR racing team.

1. In order for revenue to be recognized, it must be both _______________________ and ________________________.

2. Net sales less cost of goods sold equals ____________________________________.

3. Another term for income from operations is called ____________________________, and is calculated by taking gross profit less operating expenses.

4. Gross sales less sales discounts and sales returns & allowances are called ___________________________, and represent the revenues resulting from selling a product or service.

5. The most significant expense for most manufacturing companies and merchandising companies is called ___________________________________.

6. The calculation for gross margin (profit) ratio is ________________________________.

7. Expenses, other than cost of goods sold, that are incurred in the day-to-day activities of the entity are called ___________________________________.

8. _______________________ is the excess of revenues & gains over expenses & losses.

9. FOB _______________________ means title passes from seller to buyer when the merchandise being shipped arrives at its destination.

10. FOB _______________________ means title passes from seller to buyer when the merchandise being shipped leaves the seller’s premises.

The value of a sports franchise is directly related to the amount of revenue that a franchise can generate. The file here represents the value in 2013 (in $millions) and the annual revenue (in $millions) for the 30 Major League Baseball franchises. (Data extracted from www.forbes.com/mlb-valuations/list.) Suppose you want to develop a simple linear regression model to predict franchise value based on annual revenue generated. What are the values for (1) the proportion of variation in value of a sports franchise that is explained by annual revenue , (2) the sum of squares Y , (3) the sum of squares predicted , (4) the sum of squares error , (5) the intercept A , (6) the slope b , (7) the predicted value of a sports franchise (in $millions) that generates $300 millions of annual revenue , and (8) the standard error of estimate ?

The value of a sports franchise is directly related to the amount of revenue that a franchise can generate. The file here represents the value in 2013 (in $millions) and the annual revenue (in $millions) for the 30 Major League Baseball franchises. (Data extracted from www.forbes.com/mlb-valuations/list.) Suppose you want to develop a simple linear regression model to predict franchise value based on annual revenue generated. What are the values for (1) the proportion of variation in value of a sports franchise that is explained by annual revenue , (2) the sum of squares Y , (3) the sum of squares predicted , (4) the sum of squares error , (5) the intercept A , (6) the slope b , (7) the predicted value of a sports franchise (in $millions) that generates $300 millions of annual revenue , and (8) the standard error of estimate ?

What are the economic drivers for revenue and profitability of a hospital, and what are the potential strategies to maximize profits and returns on investment??