ACCT - 2201 Managerial Accounting

Project Overview
Spring 2020

Overview:

In this semester-long project, you are playing the role of consultant to a budding ice cream company, Leaf Peepers
Ice Cream, Inc. This project is an accumulation of Excel problems based on LPIC and the same base data. There
will be a segment for each chapter to be worked on in class that includes both calculations and analysis. By the
time we finish the prologue and 9 chapters assigned in our textbook you will have a comprehensive analysis of the
company's cost data that will allow you to make a presentation to management. Your grade will be based on both
your individual and group efforts. Your individual segments are due by 11:59 pm via EC Learn the day we finish
each chapter (as outlined on the syllabus) and are graded individually according to the rubric included. At the end
of the semester you will collaborate with your assigned group to present on your findings in place of a final exam.
Your grade for the group portion is not dependent on your group, meaning all group members do not get the
same grade. The rubrics for the segment and then group portion are included.

Management at LPIC handled by its two owners, Cal Kidd and B.J. Bryson. Cal and B.J. started the ice cream
company 2 years ago, so they are now in their 3rd year. They have hired staff, including a financial accountant, but
all executive and operational management is handled by Cal and B.J. Just last year they were able to start taking a
relatively modest salary, but they are still well below the salary they were making in their corporate jobs prior to
starting LPIC. They both have mortgages, spouses, children, and savings to rebuild after investing in this company
so their salary is not sustainable. They have decided that if they are unable to quadruple their salaries by next year
they will have to abandon this venture. They are currently each paying themselves $55,000 per year: $50,000
each allocated to executive, and $5,000 each allocated to manufacturing. Cal and B.J. knows their ice cream is
good, but what they don't know is how to analyze financial data and to make managerial decisions from that data.
They're looking to hire a managerial accounting consultant to help with analysis and decision making that will
hopefully lead to them being able to increase their salaries to a point that will sustain their families and keep the
doors of LPIC open.

Grading (see rubrics attached):

For each project segment:
Points Requirement
1.) 3 Proper use of excel formulas and linking.
2.) 3 Proper use of excel accounting formatting.
3.) 3 Print to PDF.
4.) 3 Calculations are accurate.
5.) 3 Analysis is accurate.
6.) 3 Analysis is thorough.
7.) 3 Analysis is written well (spelling, grammar, professional voice, understandability etc.)
For group portion of project:
Points Requirement
1.) 5 An overview of the company, its operations, and its challenges was provided.
A comparative contribution income statement using BEFORE and AFTER proposal figures was
5
2.) completed and explained.
3.) 5 BEFORE and AFTER analysis calculations (break-even, etc.) were calculated and explained.
4.) 5 Master Budget was recalculated to reflect the two proposals.
5.) 5 Positive and negative impact on the Balanced Score Card.
6.) 5 Compilation of observations.
7.) 5 Presenter used appropriate vocabulary and showed an obvious understanding of concepts.
8.) 3 Collaboration with assigned group is observed.
9.) 3 Group members reported that you "pulled your weight" during collaboration.
10.) 3 Professional 1.) dress, 2.) demeanor, and 3.) speech during presentation.
11.) 3 Professional PowerPoint presentation was provided.
12.) 3 Presentation was accurate.
13.) 3 Presenter spoke for 3-5 minutes.
14.) 3 Presenter was a good audience member.

Group projects due: The day of presentation, which is final exam day. One PowerPoint per group must be
submitted via EC Learn.
Section 01 - Saturday, May 9th 12:30pm-2:30pm
Section 02 - Friday, May 8th 12:30pm - 2:30pm
 ACCT - 2201 Managerial Accounting
Project Segment Rubric
Spring 2020
Points
3 2 1 0 Earned
Student used proper Student used
Student used some Student did not use
Proper use of excel formulas and linking formulas and linking
1 formulas and linking. throughout the through most of the
formulas and linking, excel formulas or
but mostly did not. linking.
whole segment. segment.

Student used proper Student used excel

Student used some
accounting accounting
Proper use of excel excel accounting Student did not use
2 accounting formatting.
formatting formatting through
formatting, but accounting formats.
throughout the most of the
mostly did not.
segment. segment.

Student created and Student created and Student did not

Student created and submitted a PDF of submitted a PDF of submit a PDF of the
submitted a PDF of the segment that the segment that segment or it what is
the segment that is would be would be submitted is not
3 Print to PDF aesthetically aesthetically aesthetically visually appealing or
pleasing and pleasing and pleasing and would require more
presents all data and presents all data and presents all data and than 2 corrections to
analyses. analyses with 1 analyses with 2 see all data and
correction. corrections. analyses.

Student made more

Calculations are Student made no Student made only 1 Student made 2-3
4 accurate. calculation errors. calculation error. calculation errors.
than 3 calculation
errors.

Student made a
reasonable attempt Student made no
All responses to
Student made only 1 to provide an reasonable attempt
5 Analysis is accurate. analysis prompts are
error in analyses. accurate analysis, to provide an
accurate.
but analysis is mostly accurate analysis.
incorrect.

Student missed
Student missed only
Analysis provides a more than 1 prompt, Student did not
1 prompt, OR was
6 Analysis is thorough. thorough response
not thorough with
OR was not provide thorough
to all prompts. thorough with more responses.
only 1 prompt.
than 1 prompt.

Analysis is Analysis contains Quality of student's

Analysis contains 1 -
understandable, has more than 3 spelling, writing undermines
3 spelling, grammar,
no spelling or grammar, or the attempt to
Analysis is written or professional voice
7 well.
grammatical errors,
departures that do
professional voice communicate
and uses departures that do meaning, and/or
not undermine
professional voice not undermine professional voice is
understandability.
throughout. understandability. not used at all.
 ACCT - 2201 Managerial Accounting
Project Group Presentation Rubric
Spring 2020

Name: Group Number:

Points
5 2.5 0 Earned

An overview of the company, its

Overview was vague or Overview was substantially
1 operations, and its challenges was Overview was thorough.
incomplete. incomplete or not provided.
provided.

A comparative contribution income

Income statements are Income statements are Income statements and/or
2 statement using BEFORE and AFTER
proposal figures was completed and
completed correctly and completed correctly, but not explanation were incorrect or
explained thoroughly. explained thoroughly. missing.
explained.

BEFORE and AFTER analysis Calculations are completed Calculations are completed
Calculations and/or explanation
3 calculations (break-even, etc.) were correctly and explained correctly, but not explained
were incorrect or missing.
calculated and explained. thoroughly. thoroughly.

Master budget updated Master budget updated Master budget and/or

4 Master Budget was recalculated to
reflect the two proposals.
correctly and explained correctly, but not explained explanation were incorrect or
thoroughly. thoroughly. missing.

Positive and negative impacts Positive and negative impacts

Postive and negative impacts
5 Positive and negative impact on the
Balanced Score Card.
with methods to mitigate
negative impacts were
with methods to mitigate
negative impacts were listed,
with methods to mitigate were
incorrect or missing.
explained thoroughly. but not explained.

Observations were concluded,

Observations were concluded,
and the impact on LPIC and its Observations, conclusion and
6 Compilation of observations. managers' salaries is explained
and the impact on LPIC and its
impact are incorrect or missing.
managers' salaries is listed.
thoroughly.

Presenter used appropriate Some appropriate vocabulary Use of appropriate vocabulary

Appropriate vocabulary was
was used and/or presenter was substantially missing
7 vocabulary and showed an obvious used throughout and presenter
seemed uncomfortable with and/or presenter seemed to
understanding of concepts. showed comfort with topics.
topics. have no knowledge of topics.

3 1.5 0
Student collaborated with their
Student collaborated Student did not collaborate
8 Collaboration
observed.
with assigned group is substantially with their
assigned group some, but was
mostly disconnected from the
with their assigned group
assigned group. during prep days.
group.

Group members reported that you All other group members At least 1 group member did All other group members did
9 "pulled your weight" during reported that you "pulled your not report that you "pulled not report that you "pulled
collaboration. weight." your weight." your weight."

10 Professional 1.) dress, 2.) demeanor,

and 3.) speech during presentation.
Student satisfied all 3
throughout the presentation.
Student did not satisfy 1 of 3. Student did not satisfy 2 or all.

A PowerPoint presentation of A PowerPoint presentation was

11 Professional PowerPoint
presentation was provided.
professional quality was submitted, but it was not
No PowerPoint presentation
was submitted.
submitted. professional quality.

Presentation had 2 Presentation had 3 or more

12 Presentation was accurate. Presentation had 1 inaccuracy.
inaccuracies. inaccuracies.

Presenter spoke for 3-5 Presenter spoke for 2-3 Presenter spoke for less than 2
13 Presenter spoke for 3-5 minutes. minutes. minutes. minutes.

Presenter listened attentively

Presenter did not listen
14 Presenter
member.
was a good audience and asked a question of, or
make a comment to, another
Presenter listened attentively. attentively and/or was
distracting.
group.

Total Points Earned (Out of 56)

 ACCT - 2201 Managerial Accounting
Project Presentation Group Assessment
Spring 2020

Indicate whether each group member did a substantially equal amount of work as everyone else. For anyone
who you say did not do substantially the same amount of work, please explain.

Group # Substantially Equal Amount of

Work?
Yes No

Explanation, if necessary.

Please provide your feedback on this project. I'd love to hear anything you liked, disliked, whatever, about
any part of it.
 ACCT - 2201 Managerial Accounting
Project Segment 1

Leaf Peeper's Ice Cream, Inc. (LPIC) is a maker of ice cream with Autumn-inspired flavors. Their sales volume is
larger than the owners could have imagined, and each year they grow. Despite their sales success, profits are
not as high as expected. Cal Kidd and B.J. Bryson, owners and managers of LPIC, have released a RFP (request
for proposal) to hear pitches for managerial accounting services.

Explain to management what the difference is between sales (revenues) and profits (net income).

The difference between sales and profits is that sales are what the company is selling to consumers and it is all
the money that the company is bringing in (revenues). Profits are the sales minus the other expenses that are
needed to make the product and it's what you would take home at the end of the day (net income).

The first thing you decide to do when putting together your pitch is categorize the costs incurred by LPIC.

ing

ing
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tur

tur
tra

M a i re c t
fac

fac
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nis

M a re c t
ling

nu

nu
ed

mi
ri a

Ind
Di
Se l
Fi x

Ad
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Freight-out x x
Cream used to make ice cream x x
Sugar used to make ice cream x x
Factory machine operator wages x x
Food grade oil for machines* x x
Factory rent x x
Factory utilities x x
Vanilla used to make ice cream x x
Office building occupancy x x
Advertising (general) x x
Toppings to make ice cream x x
Cartons to hold ice cream x x
Finished goods refrigeration x x
Accountant salary x x
Sales commissions x x
Management salary x x
Labels for ice cream cartons x x

*Machines oiled every 2,000 hours of use. Machinery does not run 24/7 and has downtime.

Cal and B.J. asked you why you cared about the cost behavior of their different expenses. Explain to them what
a variable cost is and what a fixed cost is.

Cost behavior analysis is important because it lets management know how to plan for business operations and
with taking alternative courses of action. The difference between variable cost and fixed cost is that a variable
cost is a cost that can change based on many factors including production such as the amount of ice cream
cartons. A fixed cost is a cost that is constant and doesn't change such as rent.

Explain to management what the role and value of management accounting is.

The role and value of managerial accounting is to provide accurate information to management in order to help
with the decision making process. Managerial accounting is important in the decision making process because it
provides calculations of important numbers that can be used to make important long/short term decisions such
as continuing to produce a product or producing something else.

Explain the ethical responsibility you would have as LPIC's managerial accounting consultant.

The responsibility that I would have as a managerial accounting consultant for LPIC is to only assign projects to
members that know how to handle the information, to keep the information discussed confidential, to carry
out ethical practices that benefit the company I'm consulting with, and to disclose any relevant information to
management.

List the stakeholders affected by the recommendations and decisions that you and management make. What
responsibility do you and management have to those stakeholders?

Stakeholders are a group of people who have an investment in LPIC. The recommendations and decisions that
management and I make affect the employees, owners, stockholders, suppliers, customers, and sometimes
even society. The responsibility that management and I have to these stakeholders it to make sure that we
make decisions that benefit not just one stakeholder but all of them whenever possible.
 ACCT - 2201 Managerial Accounting
Project Segment 2

Congratulations! Your pitch to LPIC was so thorough and convincing that Cal and B.J. decided to hire you as
their managerial accounting consultant! Your first task is to provide some solid figures for management at
LPIC to determine how much it costs to make a batch of their ice cream. Their gut tells them that the price
they sell their pints at is enough to cover the costs, but they need numbers to back up their instincts. They
provided their recipe and all of the costs you requested for the calculation.

Unit of
Ice Cream Recipe Cost Measure Batch Cost
40 Cups of cream $ 0.20 /Cup 8.00
15 Cups of sugar 0.07 /Cup 1.05
20 Ounces of vanilla 0.60 /Ounce 12.00
25 Cups of toppings $ 0.25 /Cup 6.25

Total Cost of Ingredients 27.30

Unit of
Packaging Cost Measure Batch Cost
40 pint containers $ 0.15 /Container 6.00
40 labels $ 0.06 /Label 2.40

Total Cost of Packaging Materials 8.40

Unit of
Labor Cost Measure Batch Cost
0.75 Hours of Labor $ 37.00 /Hour 27.75

Total Cost of Labor 27.75

Overhead
Overhead is allocated based on direct labor hours (DLH).
Production in 2020 is expected to be 18,610 batches.
Estimated overhead costs for 2020 $ 229,950
Expected direct labor hours 13958

$ 18,610 $ 1.33
= per DLH
13958

Outline LPIC's production costs by creating a sample Job Cost Sheet for an order of one batch of LPIC's ice
cream.

Materials Labor Overhead

QTY NAME RATE QTY RATE QTY RATE
40 Cups of cream $ 0.20 0.75 $ 37.00 0.75 $ 1.33
15 Cups of sugar 0.07
20 Ounces of vanilla 0.60
25 Cups of toppings 0.25
40 pint containers 0.15
40 labels $ 0.06

Total
Total Materials $ 35.70 Total Labor $ 37.00 Overhead $ 1.33
Total Job Cost $ 74.03

Based on the cost per batch, and the cost per pint, is it possible for LPIC to make a profit at their current
per-batch price point? Support your answer with number data.

LPIC's LPIC's Gross

LPIC's Cost Selling Price Profit
Per batch $ 74.03 $ 93.00 $ 18.97
Per pint $ 1.85 $ 2.33 $ 0.47

It is possible for LPIC to make a profit of $0.47 per pint of ice cream and $18.97 per batch of forty.

Considering a whole-business approach, what else should LPIC consider when pricing their products? Why?

LPIC should consider the cost of marketing, shipping, and getting approval from the FDIC & other legal
issues when pricing their ice cream. These other costs should be considered when deciding on the price for
the ice cream because LPIC doesn't want to be selling their product for less then the price to get the
product to the consumer.
 ACCT - 2201 Managerial Accounting
Project Segment 3

With the growth of LPIC, management is considering adding another product line. Ice cream pops seem to be popular, and the
founders think they can dream up a creative twist on the product. Their idea is a pumpkin spice ice cream dipped in white chocolate
and sprinkled with walnuts. Each 5 gallon batch of ice cream would make 128 pops, and the cost information is below.

Cal feels confident in pricing the new product as far as direct materials and direct labor are concerned, but he is not sure which
approach to take in applying overhead since the process for manufacturing pints is very different from the process for manufacturing
ice cream pops. Cal read an article online about activity-based costing, and would like you to allocate overhead based on the
information that follows. You'll notice there is a $50,000 increase to estimated overhead costs in comparison to segment 2. This is due
to the increase in overhead costs for adding pops to production.

Estimated
Activity Cost Pool Overhead Cost Expected Activity Activity Rate

Labor-Related $ 50,000 15,758 DLH per DLH

Machine-Related 65,000 26,832 MH per MH
Batch Set Ups 70,000 4,722 setups per setup
Packaging 60,000 74,033 packages per package
General Factory $ 34,950 15,758 DLH per DLH

Product Information: Allocate Overhead to Products:

Pint Pop
DM cost per batch $ 35.70 $ 36.26 Activity cost pools Pint Pop
DL cost per batch $ 27.75 $ 22.20 Labor-Related
Batches Produced 18,610 3,000 Machine-Related
Batch Set Ups
Total Expected Activity: Packaging
Pint Pop General Factory
Direct Labor Hours 13,958 1,800
Machine Hours 22,332 4,500 Total Overhead Costs Allocated
Batch Set Ups 3,722 1,000 Number of Batches Made
Packages 62,000 12,000
MOH Cost Per Batch
Batch Cost:
Pint Pop
Direct Materials Cost Per Batch
Direct Labor Cost Per Batch
MOH Cost Per Batch
Total Cost Per Batch

Units Produced in Each Batch

Cost Per Unit

Page 8 of 40
How does the cost per unit for a pint using ABC compare to the cost per unit for a pint using traditional costing (segment 2)?

Based on your answer to the first question, do you think LPIC should implement ABC? Why or why not?

Based on the cost per unit for the pops do you think LPIC can manufacture this product, sell it to a retailer (like 7-11) for a profit, who
can then sell it to the end user for a profit? Support your answer with possible wholesale and retail price points.

Page 9 of 40
 ACCT - 2201 Managerial Accounting
Project Segment 4

LPIC had traditional financial statements created for the bank (GAAP) at the end of the year. They show a profit, but not as
much of a profit as they expected. The traditional format also does not give the details needed to make decisions. They
want to really analyze their financials to determine what their sales targets should be and how different ideas to boost
sales will effect their bottom line.

Pint
Number of batches sold 18,600
Selling price per batch $ 93.00
Variable materials and labor per batch 63.45
Variable Overhead per Batch 10.75
Variable selling expenses per batch 3.00
Variable administrative expenses per batch $ 2.50
Total fixed selling expenses $ 40,000
Management Salary 100,000
Accountant Salary 40,000
Office Occupancy 20,000
Fixed Factory Overhead $ 30,000

Leaf Peepers Ice Cream, Inc. Leaf Peepers Ice Cream, Inc.
Traditional Income Statement - Projected Contribution Income Statement - Projected
For the Year Ended December 31, 2020 For the Year Ended December 31, 2020

Sales
Sales Variable Costs
Cost of Goods Sold Variable Material and Labor Costs
Gross Profit Variable Overhead
Variable Selling Expenses
Selling Expenses Variable Administrative Expenses
Administrative Expenses Total Variable Costs
Total Selling & Administrative Expenses Contribution Margin
Net Operating Income
Fixed Costs
Fixed Selling Expenses
Fixed Administrative Expenses
Fixed Overhead Expenses
Total Fixed Costs
Net Operating Income

Calculate the contribution margin ratio for LPIC. What does it tell you, and why is that information important?

Page 10 of 40
Calculate break-even in dollars and sales for LPIC. What does this tell you?
Dollars Batches

At the current sales volume, what is the margin of safety in batches and dollars? What is the significance of this?
Dollars Batches

How many units need to be sold in order to profit $ 50,000 ?

Page 11 of 40
Management is still considering adding the ice cream pops as a new product line. Create a new contribution income
statement combining the information for pops with the information for pints of ice cream.

Pops
Number of batches sold 3,000
Selling price per batch $ 88.00
Variable materials and labor per batch 64.01
Variable Overhead per Batch 11.00
Variable selling expenses per batch 2.00
Variable administrative expenses per batch 2.50
Increase in fixed costs $ 17,000

Leaf Peepers Ice Cream, Inc.

Contribution Income Statement - Projected
For the Year Ended December 31, 2020
Pints Add Pops Total
Sales
Variable Costs
Variable Materials and Labor Costs
Variable Overhead
Variable Selling Expenses
Variable Administrative Expenses
Total Variable Costs
Contribution Margin

Page 12 of 40
 ACCT - 2201 Managerial Accounting
Project Segment 5

LPIC is very interested in managing costs, which is most of what they have asked you to consult on. However
they are also concerned with pricing their products properly. After your analysis in chapter 2's segment LPIC
management knows that the price they sell their products at needs to cover all of their costs, both variable and
fixed, but they are having a hard time figuring out what base they should use for determining price when
variable and fixed costs behave so differently. They are familiar with the variable and absorption costing
methods, but they are at a loss when figuring out which method is right for pricing. Complete the analysis for
pricing the pints. (Reference Segment 4 for costs and quantities)

(Per Batch) Variable Absorption

Variable Materials & Labor
Variable Overhead
Fixed Overhead
Cost per Batch

Based on the current selling price per batch, what is the percentage markup under each of the two costing
methods?
Variable Absorption

Which costing method should LPIC use for pricing purposes? Explain why.

Research the cost of pints of high end ice creams similar to Leaf Peepers' Ice Cream. Can LPIC increase the
selling price of a batch and still remain competitive? If so, what do you think is the highest price they can sell a
batch for? Don't forget there is a middle-man!

Highest Possible Price

Produce a projected contribution income statement using the price you proposed in the previous question.

Leaf Peepers Ice Cream, Inc.

Contribution Income Statement - Projected
For the Year Ended December 31, 2020

Sales
Variable Costs
Variable Product Costs
Variable Overhead
Variable Selling Expenses
Variable Administrative Expenses
Total Variable Costs
Contribution Margin

Fixed Costs
Fixed Selling Expenses
Fixed Administrative Expenses
Fixed Overhead Expenses
Total Fixed Costs
Net Operating Income

What is the new break-even point in both dollars and batches?

Dollars Batches

Recall that each batch contains 40 pint containers. Compare LPIC's selling price per pint with the old batch
price (see segment 2) to the selling price per pint with the proposed price. How will this affect retailers and
customers?
Old Per-Pint Price New Per-Pint Price
 744560861.xlsx
ACCT - 2201 Managerial Accounting
Project Segment 6

Thanks to your hard work, management at LPIC is really starting to feel like they have a handle on things. Now they are looking to the
future. They have some estimated figures (sales, equipment purchases, etc.) and they would like to be able to better predict their income,
expenses, and cash flows. Use the information management provided below and on the PY Balance Sheet tab to create a workable master
budget for Cal and B.J. for 2020.

Given Data - Assumptions Quarter

1 2 3 4
Budgeted sales in batches 3,700 5,000 6,400 3,500

Sales Budget
Sales collected in the quarter sales are made 70%
Sales collected in the quarter after sales are made 30%

Production Budget
Desired ending finished goods inventory at quarter end 20% of the budgeted batch sales of the next quarter
Q1 2021 expected batch sales 3,750

Direct Materials Budget

Percentage of next quarter's production needs in ending inventory 10%
Q1 2021 expected production needs $ 160,000
Percentage of purchases paid in the quarter purchased 20%
Percentage of purchases paid in the quarter after purchased 80%

Depreciation as part of MOH $ 15,000 per Q

Fixed selling and administrative:

A minimum of $30,000 cash is required in the bank

The company may borrow or repay the amount needed at the beginning of any quarter
Borrowings must be in $ 10,000 increments
Annual simple interest rate 12.00%
Interest MUST be paid at the end of the year.
Dividends paid each quarter $ 2,000

Equipment purchases Quarter

1 2 3 4
$ 20,000 $ 10,000 $ - $ 10,000

Page 15
 744560861.xlsx
Enter a formula into each of the cells coded grey.
ALL CELLS SHOULD BE LINKED!

Sales Budget - Schedule 1 Quarter

1 2 3 4 Year
Budgeted batch sales
Selling price per batch
Total sales

Schedule of Expected Cash Collections Quarter

1 2 3 4 Year
Accounts receivable, beginning balance
First-quarter sales
Second-quarter sales
Third-quarter sales
Fourth-quarter sales
Total cash collections

Production Budget - Schedule 2 Quarter

1 2 3 4 Year
Total number of budgeted batch sales
Add desired ending finished goods inventory
Total needs
Less beginning inventory (# of batches)
Required production in batches

Direct Materials Purchases Budget - Schedule 3 Quarter

1 2 3 4 Year
Required production - number of batches - Schedule 2
Cost of raw materials per batch
Total cost of raw materials needed
Add desired ending inventory of raw materials
Total cost of raw materials needed
Less beginning inventory of raw materials
Cost of raw materials to be purchased

Schedule of Expected Cash Payments for Raw Materials Quarter

1 2 3 4 Year
Accounts payable, beginning balance
Cash paid in the first-quarter for purchases
Cash paid in the second-quarter for purchases
Cash paid in the third-quarter for purchases
Cash paid in the fourth-quarter for purchases
Total cash disbursements for raw materials

Direct Labor Budget - Schedule 4 Quarter

1 2 3 4 Year
Required production in batches - Schedule 2
Direct labor-hours per batch
Total direct labor-hours needed
Direct labor cost per hour
Total direct labor cost

Page 16
 744560861.xlsx
Manufacturing Overhead Budget - Schedule 5 Quarter
1 2 3 4 Year
Budgeted direct labor-hours (Schedule 4)
Variable manufacturing overhead rate per hour
Total variable manufacturing overhead
Fixed manufacturing overhead
Total manufacturing overhead
Less depreciation - non cash expense
Cash disbursements to manufacturing overhead

Total manufacturing overhead (a)

Budgeted direct labor-hours (b)
Predetermined overhead rate for the year (a) / (b)

Ending Finished Goods Inventory Budget - Schedule 6 Quantity Cost Total

Item
Production cost per batch
Direct materials per batch
Direct labor hours per hour
Manufacturing overhead hours per hour
Batch product cost

Budgeted finished goods inventory:

Ending finished goods inventory in batches (Schedule 2)
Batch product cost (see above)
Ending finished goods inventory in dollars

Selling and Administrative Budget - Schedule 7 Quarter

1 2 3 4 Year
Budgeted number of batch sales
Variable selling and administrative expense per batch
Variable selling and administrative expense
Fixed selling and administrative expenses:
Fixed selling expenses
Administrative Salaries
Office Occupancy
Total fixed selling and administrative expenses
Total selling and administrative expenses

Cash Budget - Schedule 8 Quarter

1 2 3 4 Year
Beginning cash balance
Add cash receipts:
Collections from customers
Total cash available
Less cash disbursements:
Direct materials
Direct labor
Manufacturing overhead
Selling and administrative
Equipment purchases
Dividends
Total cash disbursements
Excess (deficiency) of cash available over disbursements
Financing:
Borrowings (will calculate for you) 30,000 30,000 30,000 30,000 120,000
Repayments (will calculate for you) - - - - -
Interest expense (will calculate for you) 6,300 6,300
Cash from (to) financing 30,000 30,000 30,000 23,700 113,700

Page 17
 744560861.xlsx
Ending cash balance

Page 18
 744560861.xlsx

Budgeted Income Statement - Schedule 9

Sales From Schedule 1

Cost of goods sold From Schedules 1 & 6
Gross margin
Selling and administrative expenses From Schedule 7
Net operating income
Interest expense From Schedule 8
Net income

Budgeted Balance Sheet - Schedule 10

Assets
Current assets:
Cash From Schedule 8
Accounts receivable From Schedule 1
Raw materials inventory From Schedule 3
Finished goods inventory From Schedule 6
Total current assets
Plant, property, and equipment:
Land
Buildings and equipment Refer to PY BS
Accumulated depreciation Refer to PY BS
Property, plant, and equipment, net TOTAL ASSETS MUST BE EQUAL TO TOTAL
Total assets LIABILITIES & STOCKHOLDERS' EQUITY, BUT THIS IS
NOT ALWAYS PERFECT IN A BUDGET. PLUG A $2
Liabilities and Stockholders' Equity INCREASE TO ACCOUNTS PAYABLE TO MAKE THIS
Current liabilities: BALANCE SHEET BALANCE.
Accounts payable From Schedule 3
Note Payable
Total Liabilities
Stockholders' equity:
Common stock, no par Refer to PY BS
Retained earnings Recall the retained earnings formula.
Total stockholders' equity
Total liabilities and stockholders' equity

Take a minute to step back and review the results of your master budget. List 3 highlights that LPIC management would be interested in,
and explain why each is important.

Refer to Segment 5. Change the selling price per batch in your master budget from $93 to the price you proposed. What significant
changes do you notice in your budget? Explain the significant changes to management.

Page 19
 Leaf Peepers Ice Cream, Inc.
Balance Sheet
December 31, 2019

Assets
Current assets:
Cash $ 42,500
Accounts receivable 96,028
Raw materials inventory 16,317
Finished goods inventory 740 batches 56,099
Total current assets 210,944
Plant, property, and equipment:
Land 80,000
Buildings and equipment 700,000
Accumulated depreciation (305,600)
Property, plant, and equipment, net 474,400
Total assets $ 685,344

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable $ 74,039
Notes Payable -
Total Liabilities 74,039.00
Stockholders' equity:
Common stock, no par 175,000
Retained earnings 436,305
Total stockholders' equity 611,305
Total liabilities and stockholders' equity $ 685,344
 ACCT - 2201 Managerial Accounting
Project Segment 7

Cal and B.J. were very pleased with the master budget you completed. They're looking forward to using and
manipulating the budget through 2020 and for years to come. They realize, thought that they hired you late
in the game so Q1 of 2020 has already passed. LPIC would like you to compare their expected materials
costs for Q1 2020 production to what they actually spent to find out why their expectations are so far from
reality.

To start your analysis you create the standard cost card for the materials for a batch of ice cream.

Inputs Standard Quantity Standard Price Standard Cost

Cream
Sugar
Vanilla
Toppings
Container
Label
Total per Batch

LPIC management supplied the following actual activity for Q1 2020. Their batch production was as
predicted in the master budget.

Production: Q1 2021 batches

Actual Quantity Actual Price

Cream 163,000 $0.23
Sugar 56,390 0.0675
Vanilla 79,880 0.62
Toppings 89,925 0.26
Container 159,445 0.15
Label 160,215 $0.0550

To help set expectations you calculate the quantities that should have been used at the actual production
levels.

Expected (Standard)
Actual Quantity Quantity Difference
Cream 163,000
Sugar 56,390
Vanilla 79,880
Toppings 89,925
 Container 159,445
Label 160,215

What are you expecting to see in your variance analysis based on your comparison of actual and expected
quantities?

To help set expectations you calculate the difference between the amount that was expected to be paid per
unit of materials to what was actually paid.

Expected (Standard)
Actual Price Price Difference
Cream $0.23
Sugar 0.0675
Vanilla 0.62
Toppings 0.26
Container 0.15
Label $0.0550

What are you expecting to see in your variance analysis based on your comparison of actual and expected
prices?

You are now ready to calculate the total, quantity, and price variances in dollars. Indicate favorable and
unfavorable price and quantity variance as follows:

F = Favorable
U = Unfavorable

Actual Variances Standard

Production
Cream
Sugar
 Vanilla
Toppings
Container
Label
CREAM
AQ x AP AQ x SP SQ x SP
Actual Cost Flexible Budget Standard Cost
Total Spent
Variance
F vs. U
Price Variance Total Variance Quantity Variance

Total variance ties?

SUGAR
AQ x AP AQ x SP SQ x SP
Actual Cost Flexible Budget Standard Cost
Total Spent
Variance
F vs. U
Price Variance Total Variance Quantity Variance

Total variance ties?

VANILLA
AQ x AP AQ x SP SQ x SP
Actual Cost Flexible Budget Standard Cost
Total Spent
Variance
F vs. U
Price Variance Total Variance Quantity Variance

Total variance ties?

TOPPINGS
AQ x AP AQ x SP SQ x SP
Actual Cost Flexible Budget Standard Cost
Total Spent
Variance
F vs. U
Price Variance Total Variance Quantity Variance

Total variance ties?

Based on your observations of the variances among the ingredients, which two variances do you think
should be top priority to investigate? Why? What do you think an investigation of the variances will
uncover?
CONTAINER
AQ x AP AQ x SP SQ x SP
Actual Cost Flexible Budget Standard Cost
Total Spent
Variance
F vs. U
Price Variance Total Variance Quantity Variance

Total variance ties?

LABEL
AQ x AP AQ x SP SQ x SP
Actual Cost Flexible Budget Standard Cost
Total Spent
Variance
F vs. U
Price Variance Total Variance Quantity Variance

Total variance ties?

Based on the price and quantity variances for packaging materials, what appears to be the problem(s)?
Explain your answer.

What policies, programs, or initiatives might you suggest Cal and B.J. implement to help prevent and detect
large variances, and communicate variances to decision makers within the organization?
 ACCT - 2201 Managerial Accounting
Project Segment 8

Due to the low net operating LPIC is exploring all options to increase revenues and decrease costs. One of their
largest expenses is direct labor. Their labor force is not protected by collective bargaining so they are looking at
ways of reducing the labor cost. Management has provided the following breakdown of the $37/hour average direct
labor cost.

Hourly Yearly
Wage $ 30.00 $ 62,400.00 $30 per hour, 40 hours per week, 52 weeks per year.
Social Security Taxes 1.86 3,868.80 6.2% of wages up to $137,700.
Medicare Tax 0.44 904.80 1.45% of all wages.
Federal Unemployment 0.18 42.00 .6% of wages up to $7,000.
State Unemployment 0.04 77.38 2% of wages up to $15,000.
401(k) match 1.50 3,120.00 5% of wages.
Health & Dental Insurance 2.77 5,760.00 Employer cost is $480 per month.
Worker's Compensation Insurance 0.22 460.00 Average cost of $460 per employee per year.
Total Average Direct Labor Cost $ 37.00 $ 76,632.98

Based on the breakdown of labor costs above. What actions do you recommend LPIC take to reduce their labor
cost? Explain the actions you recommend and calculate the financial impact of those changes.

Recommended Hourly Yearly

Wage
Social Security Taxes
Medicare Tax
Federal Unemployment
State Unemployment
401(k) match
Health & Dental Insurance
Worker's Compensation Insurance
Total Average Direct Labor Cost

If LPIC implements the options you suggest, how might the employees respond?

What effect might the employees' response have on the company's financials and customer satisfaction?

Are there any actions that LPIC could take to mitigate the responses you indicated in the prior two questions?
 ACCT - 2201 Managerial Accounting
Project Segment 9

LPIC management was approached by a national conveyor belt and automation company, Efficiency and Belt Consultants, Inc.
(EBC), with an offer to do a free automation audit at their factory. Management didn't see the harm in having experts take a lo
at their set up for free so they agreed.

EBC's completed audit resulted in the recommendation to implement two elements of automation: conveyor belts and ingred
measuring. EBC's proposal suggests that installing a set of belts between blending and packaging and between freezing and
finished goods will reduce labor hours by 7% in the packaging and freezing stages. The cost of the belts is $25,000. The cost of
equipment to automate measuring ingredients is $14,000, and will reduce labor by 10% in the blending stage. Both conveyor
belts and the measuring equipment will be capitalized over 5 years using the straight-line method and no salvage value.

Labor
Proposal: Cost Reduction Stage Cost Recovery
Conveyor Belt 1 $ 25,000 7% Packaging 5 Years
Conveyor Belt 2 25,000 7% Freezing 5 Years
Measuring Equipment $ 14,000 10% Blending 5 Years

You received an email with this information from management asking you to analyze the proposal. To determine if LPIC should
implement any part of the proposal you need to break down the costs incurred in each step of the process.

Management explains to you that despite LPIC's growth, they still do not have enough demand to run a third shift. Also, due to
the nature of their product, no batches are left in process at the end of the second shift. This is why there is no beginning and
ending WIP inventory.
Inventory Balances
Beginning Ending
Raw Materials $ 16,317 $ -
Work In Process - Blending - -
Work In Process - Packaging - -
Work In Process - Freezing - -
Finished Goods $ 56,099 $ -

Raw Materials Purchases $ -

Materials Used - Blending per batch

Materials Used - Packaging per batch
Materials Used - Freezing per batch

Direct Labor Rate per hour OR

Labor Used - Blending 0.500 hour per batch OR

Labor Used - Packaging 0.167 hour per batch OR
Labor Used - Freezing 0.083 hour per batch OR

Overhead Rate per DLH OR

Overhead Used - Blending per batch

Overhead Used - Packaging per batch
Overhead Used - Freezing per batch

1. Raw Materials 2. Work In Process - Blending

Beginning Balance Beginning Balance

+ Purchases + Raw Materials
= Raw Materials Available + Direct Labor
- Ending Balance + Overhead
= Raw Materials Used = Available for Packaging
- Ending Balance
= Transferred to Packaging

3. Work-In Process - Packaging 4. Work In Process - Freezing

Beginning Balance Beginning Balance

+ Transferred From Blending + Transferred From Packaging
+ Raw Materials + Raw Materials
+ Direct Labor + Direct Labor
+ Overhead + Overhead
= Available for Freezing = Available to be Finished
- Ending Balance - Ending Balance
= Transferred to Freezing = Transferred to Finished Goods

5. Finished Goods 6. Raw Materials Reconciliation

Beginning Balance Raw Materials Used in Blending

+ Transferred From Freezing + Raw Materials Used in Packaging
= Goods Available for Sale + Raw Materials Used in Freezing
- Ending Balance = Total Raw Materials Used
= Cost of Goods Sold Ties to Raw Materials Schedule?

Now that you've broken down the costs as they're incurred in the process you can compare the current cash outflow for the
equipment to the cash saved for labor if the changes are implemented.
 Conveyor Belts Measuring
Cash Impact
Equipment Cost
Labor Costs Saved Year 1
Labor Costs Saved Year 2
Labor Costs Saved Year 3
Labor Costs Saved Year 4
Labor Costs Saved Year 5
Net Cash Impact

What assumptions are being made in the cash flow model above? What are the flaws of those assumptions?

Prepare an income statement for the year ended December 31, 2020 incorporating the effect of implementing the proposed
changes to the manufacturing process.

Leaf Peepers Ice Cream, Inc.

Contribution Income Statement - Projected
For the Year Ended December 31, 2020

Pre-Change Impact Post-Change

Sales
Variable Costs
Variable Material and Labor Costs
Variable Overhead
Variable Selling Expenses
Variable Administrative Expenses
Total Variable Costs
Contribution Margin

Fixed Costs
Fixed Selling Expenses
Fixed Administrative Expenses
Fixed Overhead Expenses
Total Fixed Costs
Net Operating Income

Based on your analyses, do you recommend that LPIC accept ABC's proposal for the three pieces of equipment? Explain your
answer.
In Segment 8 you explored the effects of changing employee pay packages. Compare and contrast the option to adjust the pay
package to reducing hours from efficiency upgrades. Is one better than the other? Would you recommend doing both? Explain
your response.

If LPIC installs the ingredient measuring equipment they will reduce their labor hours, and they will also correct and prevent a
mismeasuring issues. Assuming all ingredient quantity variances from segment 7 are the result of mismeasurement, explain th
impact of the success of this new equipment in automating the ingredient measurement process.
fficiency and Belt Consultants, Inc.
e harm in having experts take a look

mation: conveyor belts and ingredient

ging and between freezing and
f the belts is $25,000. The cost of the
e blending stage. Both conveyor
thod and no salvage value.

Method
Straight Line
Straight Line
Straight Line

posal. To determine if LPIC should

of the process.

nd to run a third shift. Also, due to

is why there is no beginning and
production in batches

per batch

dollars per batch

dollars per batch
dollars per batch

per batch
he current cash outflow for the
e assumptions?

t of implementing the proposed

ces of equipment? Explain your

ntrast the option to adjust the pay
u recommend doing both? Explain

ey will also correct and prevent any

lt of mismeasurement, explain the
cess.
 ACCT - 2201 Managerial Accounting
Project - Group Final

You have been working hard for weeks performing analyses for Leaf Peeper's Ice Cream's management team. It's now time to
present the results of your findings and demonstrate whether the changes you are recommending to Cal and B.J. are enough
for them to quadruple their salaries.

Requirement 1:
Provide an overview of the company, its operations, and its challenges that have lead LPIC to hire you as their managerial
accounting consultant.

Requirement 2:
Create a comparative contribution income statement showing what the result of LPIC's operations are BEFORE the proposed
changes and AFTER the proposed changes.
Proposed changes: Segment 5 - change batch price
Segment 8 - change employee pay package
Segment 9 - install efficiency equipment

Leaf Peepers Ice Cream, Inc.

Contribution Income Statement - Projected
For the Year Ended December 31, 2020

Pre-Change Impact Post-Change

Sales
Variable Costs
Variable Material and Labor Costs
Variable Overhead
Variable Selling Expenses
Variable Administrative Expenses
Total Variable Costs
Contribution Margin

Fixed Costs
Fixed Selling Expenses
Fixed Administrative Expenses
Fixed Overhead Expenses
Total Fixed Costs
Net Operating Income

Requirement 3:
Calculate the following:
BEFORE AFTER $ CHANGE % CHANGE

Break-Even in Sales Dollars

Break-Even in Batches

Margin of Safety in Sales Dollars

Margin of Safety in Batches

Average Batches Produced per Day

Production Days to Break-Even

Requirement 4:

Incorporate the three proposed changes into the master budget. In the original segment you discussed what items were
important for management to know. How did those items change? Do you notice anything else that management should
know about?

Requirement 5:

Compile the changes you observe in requirements 3, 4, and 5. Why are these changes important? Can management
quadruple their salaries? If not, do you recommend they close LPIC? If they quadruple their salaries, will the net operating
income be high enough for LPIC to reinvest in itself and grow?

Requirement 6:
List and describe both the positive and negative impacts the proposed changes (including increasing Cal and B.J.'s pay) would
have on the balanced scorecard. How can LPIC act to mitigate the potential negative impacts?

Requirement 7:
After completing requirements 1-6, prepare a PowerPoint to present the results of items 1-6. A professional PowerPoint:
Avoids cartoonish images and effects.
Contains bullet-points, not paragraphs.
Uses readable type and size of font.
Summarizes larger sets of data rather than displaying it all.
Is free from grammatical, spelling, punctuation, and other errors.