ACCT6004 Management Accounting - JB Sports Case Study Assignment Help

Get Expert Help on Case Study

Activity 1

Answer 1

  1. The petrol cost of company owned vehicles used for product delivery is considered to be a variable cost as the fuel or petrol consumption vary with mileage. 
  2. The monthly sales staff payroll of $12000 is a fixed cost as it is a fixed amount of pay given to the staff. On the other hand, the 6% sales commission on jerseys is a variable cost as it varies with the units of jerseys sold. Therefore, the payroll plus the sales commission is known as the mixed cost, which is inclusive of both fixed and variable elements.
  3. The monthly rental of $300 for credit card processing equipment is fixed in nature as it is a fixed amount that has to be paid each month. 
  4. Cost of goods sold for $14.80 per jersey is variable in nature as it includes all those costs that are variable and change with the number of units sold
  5. The cost ($1) of price tags attached to each jersey is variable cost as it changes with the number of units sold.
  6. Inventory insurance that costs $2 per $1000 of sales is a variable cost as it changes with the amount of inventory lost. The more the inventory is covered, the higher the inventory insurance is paid.
  7. Web hosting costs are operating costs, therefore, will be categorized as mixed costs, which have both fixed and variable elements. 

Answer 2

  1. The operating profit = contribution margin – fixed costs

From the contribution format income statement we can deduce operating profits through the above equation. In Sports strength’s case, the operating profit will be as follows:

Operating profit = 207900 – 190,000 = $17,900

  1. The number of units of the jerseys sold can be deduced as follows:

No. of jerseys or units sold = sales/unit cost = 1039500/20 = 51975 jerseys.

If it had sold 16% less than it had expected then the number of jerseys it would have planned to sell can be calculated as follow:

No. of jerseys = 16% less sales/unit cost 

                         = 873180/20 = 43659 jerseys.

The extra sales value is = original sales – new sales

                                        = 1039500 – 873180

                                        = 166320

  1. If the number of jerseys sold were 70,000, then the cost of goods sold will be $103600 and the sales commission will be $84000

Sales = 70,000 x $20 = 1400,000

Cost of goods sold = $14.8 x 70000 = $1036000

Sales commission = 1400000 x 6% = $84000

T

Therefore, the total variable expenses shown in the income statement will be:

Cost of goods sold + sales commission = 1036000+ 84000

                                                                  = $1120000

And the fixed expenses of $190,000 remain the same. 

The total expenses being: variable expenses + fixed expenses = 1120000+190000 = $1310000

  1. The ad campaign is fixed cost or expense that does not change with the changes in the number of jerseys produced or the sales volume of the jerseys. Therefore, the amount of $35000 will come in the fixed expenses section of the income statement and there will be an operating loss of $17100. 

Ask a New Question
*
*
*
*
*

Plagiarism Checker

Submit your documents and get Plagiarism report
Check Plagiarism

Chat with our Experts

Want to contact us directly? No Problem. We are always here for you

TOP

Connect on WHATSAPP: +61-416-195006, Uninterrupted Access 24x7, 100% Confidential

X