Business Accounting and Finance Intake (1)

Table of Contents
Business Accounting and Finance Intake (1)............................................................................. 1 Question 1-The Coca-Cola Company Management Discussion ........................................... 3 1. Introduction ..................................................................................................................... 3 2. Are sweeteners and packaging a variable cost or a fixed cost? What is the impact on the contribution margin of an increase in the per unit cost of sweeteners or packaging? What are the implications for profitability? ........................................................................... 3 2- In your opinion, are marketing expenditures a fixed cost, variable cost, or mixed cost to the Coca-Cola Company? Give justification for your answer. .............................................. 4 3- Which of the two measures cited for measuring volume represents the activity index as defined in this chapter? Why might Coca-Cola use two different measures? ....................... 4 Question 2 .............................................................................................................................. 5 1. Introduction ................................................................................................................. 5 2. Explain how an understanding of CVP analysis would improve the performance of the manager of a human resource-consulting firm like TMP Human Resource Consulting. ......................................................................................................................... 5 3. As a graduate of a human resource management course, you have finally become the manager of TMP Human Resource Consulting. In setting your salary at $500000 you need to calculate what the service fee need to increase by to maintain the company's profit equal to at least 25% of total service fees. ....................................................................................... 6 4. The suggestion of increasing variable expenses by $1200 per client and fixed advertising expenses by $300000 the firm will increase the number of clients by 100 per year. This suggestion can improve profitability. Why or why not? ....................................... 7 Question 3 .......................................................................................................................... 8 1. The report for the plant supervisor on direct labor cost variances for March................. 8 References: ............................................................................................................................. 9

Question 1-The Coca-Cola Company Management Discussion

1.

Introduction

In the annual report of coca-cola, the information shown below was provided: Their gross margin declined to 61% this year from 62% in the prior year, primarily due to costs for materials such as sweeteners and packaging. The increases (in selling expenses) in the last years were primarily due to higher marketing expenditures in support of our company's volume growth. They measure their sales volume in two ways: (1) gallon shipments of concentrates and syrups and (2) units cases of finished product (bottles and cans of Coke sold by bottlers).

2.

Are sweeteners and packaging a variable cost or a fixed cost? What is the

impact on the contribution margin of an increase in the per unit cost of sweeteners or packaging? What are the implications for profitability?
Packaging and sweeteners and are variable cost to Coca-Cola since the major line of the company is the selling ad making of syrup to the bottlers. Consequently, the costs of the packaging are sweeteners are directly added to the overall variable cost of the construction. Variable costs are openly related to the involvement margin, because the superior the variable cost, the lower the involvement margin is (presumed sales stay stable). As the result, an enhancement in the per unit cost of packaging and sweeteners will decrease the involvement margin for the Coca-Cola company. This will guide to a decline in the productivity unless the company can enhance its selling price, enhance the number of unit sells or decrease other cost.

2- In your opinion, are marketing expenditures a fixed cost, variable cost, or mixed cost to the Coca-Cola Company? Give justification for your answer.

Derived from the explanation of the company the increase in selling expenses in the last two years were primarily due to higher marketing expenditures in support of our Companys volume growth, it sounds like the marketing expenditures are a variable cost since it propose that they differ with the amount of unit sold. Even though, the marketing expenses are not directly relative to sales, since other aspects as well influence the units sold. Consequently, it is not an uncontaminated variable cost. In contrast, it is as well not a fixed cost, particular that there is a correlation between marketing expenses and sales. As a result, marketing expenses might best be managed as a diverse cost, having both a variable and fixed component.

3- Which of the two measures cited for measuring volume represents the activity index as defined in this chapter? Why might Coca-Cola use two different measures?
Coca-Cola Company calculates their sales quantity in two ways, which are gallon consignments of syrups and concentrated, and unit cases of completed produce (cans and bottles of Coke sold by bottlers). The activity directory is the first measure since it best imitate the companies manufacture and sales at the wholesale level, with considering the fact that the principal line of business is the producing and selling of syrup to bottlers. Whereas, the second measure (unit cases of completed produce), signify the amount of action by Cokes main consumers, the bottlers. Coca-Cola in addition keep path of this because it present information about what is the condition at the trade level.

Question 2

1.

Introduction

TMP Human Resource Consulting had the following contribution margin income for the year ended 2013:

2.

Explain how an understanding of CVP analysis would improve the

performance of the manager of a human resource-consulting firm like TMP Human Resource Consulting.
Managers require estimating future profits, costs, and revenues to assist them plan and observe functions. They apply cost-volume-profit (CVP) analysis to recognize the levels of functioning action required to stay away from losing, attain targeted incomes, plan future functions, and check organizational performance. Managers as well analyze functioning risk as they select a suitable cost structure (Shim et al., 2011). CVP helps managers recognize the interrelationships between cost, profit, and volume. It observes in more features the relationships between: volume or level of activity, Prices of products, Total fixed cost, Mix of product sold, and Per unit variable cost. Once the association is understood, after that managers can begin to decide within an institute, such as which produces to make, the combine of produces to make, costing decisions, advertising approaches, and which amenities to obtain or finance (Hansen and Mowen, 2014). Managers can apply sales predicts to find out volume for future construction. CVP analysis supposes that manufacture is within the appropriate range, which indicates that no extra 5

sources are required. Managers should be capable to conclude highest construction, and if sales predictions go above maximum capability, they will recognize to add sources. Obviously, this will reorganize the CVP and new statements will have to be made within the new appropriate range (McWatters et al., 2008).

3.

As a graduate of a human resource management course, you have finally

become the manager of TMP Human Resource Consulting. In setting your salary at $500000 you need to calculate what the service fee need to increase by to maintain the company's profit equal to at least 25% of total service fees.
An organizations cost structure is the part of variable and fixed costs to total costs. Cost structures fluctuate extensively among firms and among industries within an industry. An organizations cost structure has a significant effect on the compassion of its profits to adjust in volume (Bucklin, 2011). Operating influence explains the degree to which an organizations cost structure is pretended of fixed costs. Operating influence can differ between industries as well as within an industry. Operating influence is high in firms with a high part of fixed costs and a low part of variable costs and results in a high involvement margin per unit. The higher the firms fixed costs, the higher the manage point. Once the manage point has been reached, however, profit enhances at a high rate. Therefore, as a manager of TMP Human Resource Consulting for setting our salary at $500000 we should decreases the companies fixed costs and maintain the company's profit equal to at least 25% of total service fees.

4.

The suggestion of increasing variable expenses by $1200 per client and

fixed advertising expenses by $300000 the firm will increase the number of clients by 100 per year. This suggestion can improve profitability. Why or why not?
The method for a product's break-even point stated in units is: Total Fixed Costs divided by Contribution Margin per Unit. The contribution margin per unit is the product's selling price minus its variable costs and expenses. Fixed expenses and fixed costs are those, which do not alter as volume changes. Variable expenses and costs enhance as volume enhances and they will reduce when volume reduces (Roger, 2010). To decrease a company's break-even point we could decrease the amount of fixed costs. We can also decrease the break-even point by raising the contribution margin per unit. The contribution margin will enhance if there is a decreasing in variable expenses and costs per unit. The contribution margin will enhance if the company is capable to enhance its selling prices. Maybe a mixture of decreased fixed costs, decreased variable costs, and insignificant enhances in prices is probable. Some products might be improved to present unique elements that customers will provide financial support and the extra profits is greater than the variable costs needed to insert those elements. Certainty is more complex than a simple formula because companies have more than one product, competition may not permit for rising selling prices, agreements may not permit definite actions, etc (Tsorakidis et al., 2011) . Consequently, the suggestion of friend to increase variable expenses by $1200 per client and fixed advertising expenses by $300000 the firm will increase the number of clients by 100 per year can improve profitability.

Question 3

1. The report for the plant supervisor on direct labor cost variances for March
Job No A257 A258 A259 Actual Hours 221 450 300 Standers Hours 225 430 300 Quantity Variance 80 F 400 U 180 U Actual Rate 20 22 20.5 Standard Rate 20 20 20 Price variance 0N 450 N 0N Repeated job Rush job Replacement worker A260 116 110 112 F 18 20 0N New Trainee explanation

References:
BUCKLIN, L. P. (2011) Productivity in marketing, Marketing Classics Press.

HANSEN, D. & MOWEN, M. (2014) Cornerstones of Cost Management, Cengage Learning.

MCWATTERS, C. S., ZIMMERMAN, J. L. & MORSE, D. (2008) Management accounting: analysis and interpretation, Pearson Education.

ROGER, K. (2010) Strategic Marketing Problems: Cases And Comments, 12/E, Pearson Education India.

SHIM, J. K., SIEGEL, J. G. & SHIM, A. I. (2011) The vest-pocket MBA, Penguin.

TSORAKIDIS, N., PAPADOULOS, S., ZERRES, M. & ZERRES, C. (2011) Break-Even Analysis, Bookboon.