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朋友快考试了请教我一道题，可惜我已经毕业很久，也不记得怎么做了，请大虾救命~~急！！！


MANAGEMENT ACCOUNTING

Case Study


PRM, a medium size supply company in Melbourne, produces three quality of papers using different types of timbers: Supreme, Recycle papers, and Durable. In the past 10 years the company has been generating a profitable level of revenue. However, in the past year, the fallen of Australian currency has made those imported raw materials more expensive. The Sale performance for the first quarter are shown below:

PRM
Profit Report
First Quarter
(in $’000s)

                                                           Supreme       Recycle Papers     Durable            Total
Sales                                                      $  480              $270       $270       $ 1 020
Cost of goods sold                                                 300               230        315            845
Gross Margin                                                  180                40        (45)            175
Selling and admin’ expenses                                   100                47          40         187
Profit before taxes                                           $80                $(7)      $(85)        $(12)

Diana Button, general manager, is concerned about the results of the pricing, selling and production policies. After reviewing the 2nd quarter result, she asked her management staff to consider her proposed course of action, comprising the following changes to operations:

1.        Drop the “Durable” line immediately. “Durable” should not be returned to the product line unless the problems with the pump could be identified and resolved.
2.        Increase quarterly sales promotion by $ 100 000 on the “Supreme” line in order to increase sales volume by 15%.
3.        Cut product on the “Recycle Papers” by 50% and cut the traceable advertising and promotion for this line to $20 000 each quarter.






Steve Levie, the management accountant, suggested a more careful study of the financial relationships to determine the possible effects on the company’s operating results of the managing director’s proposed course of action. The general manager agreed and assigned Mandy Davis, the assistant accountant, to prepare an analysis. Davis has gathered the following information:

1.        The unit sale process for the three papers are as follows:
              Supreme                     $ 60
              Recycle Papers           $ 27
              Durable                       $ 40
2.        The company is manufacturing at capacity and is selling all papers it produces. All three papers are manufactured with common equipment and facilities.
3.        The quarterly general selling and admin’ expense is allocated to the 3 papers lines in proportion to their dollar sales volume.
4.        Special selling expenses are incurred for each papers as follows:


                              Quarterly advertising and promotion       Shipping expense
Supreme                               $23 000                                $7 per unit
Recycle                                  $11 000                                  $3 per unit
Durable                             $  6 000                                   $7 per unit

The unit manufacturing costs for the three products are as follows:

                                                  Supreme            Recycle           Durable
Raw material                                    $ 10              $ 5                  $11
Direct labour                                      12                6                    13
Variable manufacturing overhead                    13.5              9                    13
Fixed manufacturing overhead                         5               3                     5
Total                                              $40.5             $23                  $42

  Required:

a)        Use the data presented by Steve and assume that Diana’s proposed course of action was implemented at the beginning of the first quarter. Evaluate, whether the decisions made for respective production lines were correct.
b)        Are there any qualitative factors that PRM should consider before it determines to drop any production line? Explain your answer!

万分感谢～～