GIFT UNIVERSITY

GUJRANWALA
Semester Fall 2014
Management Accounting Decision Making (ACC-612)

Assignment No. 1
Please read the following Instructions carefully before attempting the
assignment solution.

Deadline for submission of Assignment is November 12, 2014 at

4:00 pm.

This is a group assignment. You need to work in group of maximum 3 (Three).

Use MS Excel to solve the assignment by using proper formulas and functions
and using of links to calculate the figures of the budgets. Only excel based
assignment will be accepted.

Cheating or copying of assignment is strictly prohibited; No credit will be given to

copied assignment.

You can consult the concerned chapters from recommended books and related
online materials. However, keep in mind do not forget to give reference note in
such case because it will be treated as copying and cheating.
Submit soft as well as hard copy of the assignment with in due date.
Read question carefully and answer every point, you are required to explain.
Show working where necessary.
Negative marking will be done for copied assignments and irrelevant details.
Make sure that you submit the Assignment before due date. No assignment will
be accepted after the due date.
Total marks available are 50.

Question:
Carnival Corporation owns and operates a fleet of cruise ships. The company measures its activity in terms of
passenger cruise-days. For example, a family of four on a five-day cruise is counted as 20 passenger cruisedays. Many of the expenses of cruise ships-for example, the costs of food served to passengers vary with the
number of passenger cruise-days. By accessing Carnival Corporation's annual report in the Investor Relations
section of their web site www.carnivalcorp.com, you can find information about their expenses and passenger
cruise-days for the last three years. Operating Expenses, Selling and Administrative Expenses, and
Depreciation and Amortization Expenses are listed in the company's income statement. The passenger cruisedays are listed in the section of the annual report called Management's Discussion and Analysis of Financial
Condition and Results of Operations.
1. For each of the three categories of expenses listed above, do the following:
a. Plot the expense against passenger cruise-days.
b. Using the scattergraph method, estimate the fixed and variable components of the expense. Do
you have much confidence in your estimates? Why or why not?
c. Using the highlow method, estimate the fixed and variable components of the expense. Do you
have much confidence in this estimate? Why or why not?
2. Use what you believe to be the best estimates of fixed and variable costs from your analyses above to
estimate how the total cost of the company varies with the number of passenger cruise-days. Express
the relation in terms of the cost formula Y= a + bX, where Y is total cost and X is passenger cruise-

days. (Ignore interest expense and income tax expense. Only include Operating Expenses, Selling and
Administrative, and Depreciation and Amortization in the total cost.)