ACCOUNT 701: Weekly Assignment F (Module 6)
Module 6 introduced some of the key concepts related to managerial accounting. This assignment
will help illustrate how financial and managerial accounting can work together. Also, this
assignment will most likely require you to step a bit outside of your comfort zone in working with
and developing numbers (similar to the restaurant project). In your careers you will eventually be
asked to help with the creation of a budget or similar type document. Being involved with such a
process is unique as it is forward looking in nature (and typically involves estimates). This
assignment, although involving historical thinking, will require you to use some of the same logic.
The steps for Assignment E are as follows:
1. Watch the Shark Tank clip that I have posted into Module 6.
2. While watching the clip be sure to think about what the accounting (financial statements) of
the business might look like. What assets or liabilities might they have? How is their cash
flow? How about revenue and expenses? During the video some key numbers will be
presented. Be sure to take note so you can include these in your assignment. The video is
short, if needed, you can watch it several times if needed.
3. After watching the video, prepare a multi-step income statement (6 points) that would
epresent the last 12 months of the businesses operation. Your income statement should
e prepared using a traditional format and include the following categories: Revenue, Cost
of Goods Sold, Gross Profit, Operating Expenses, and Net Income. We will assume that the
usiness is taxed as flow-through entity and therefore will not have any income tax
expense. For main categories that have more than one sub-item (e.g. operating expenses)
e sure to list each expense individually. Do not simply put a total for operating expenses. I
want to see the detail of the expenses you think the business might have. Assume all
individuals involved with the business are paid some sort of wage. In addition, the
husbands require that the business to pay rent for the use of the garage. Finally, the ladies
are not comfortable with accounting. Thus, they hire someone to perform this function for
them. In total your income statement should include the following:
a. At least five operating expenses.
. The Net Income for the 12-month period should a
ive at $20,000. You may have to
create some additional expenses (or increase your number estimates) to make this
occur.
4. After completing the traditional format income statement in #3, create a grid (2 points) that
lists the revenue and expense items contained on your income statement. An example of
the grid is included on page two. After you have created the grid you should have columns
that you will use to answer the following questions:
a. Identify the item as fixed, variable, or mixed?
. Identify the amount for each item. NOTE: (i) If variable,
eak it down to a per-unit
item; (ii) if fixed,
eak it down to an annual amount; (iii) if mixed,
eak down into
each of the respective categories.
STEP 4 EXAMPLE
ITEM (a) VARIABLE, FIXED, OR MIXED (b) AMOUNT (with label)
Revenue Variable $5 per item sold
Owner wages Fixed $50,000 per owner (per year)
5. Use the information you generated in 4 above and prepare a contribution format income
statement (6 points). The key categories for the contribution format statement should
include sales, variable expenses, contribution margin, fixed expenses, and net income. Like
the lecture items for this Module, please include per item and total amount. The variable
costs should be
oken down to a level that represents per unit sold. Fixed expenses should
epresent the twelve month period. As the video alluded, the quantity of items sold over
the last twelve months equals 5,000 balls. Remember, in total your net income needs to
mi
or the result from #3 above.
6. Upon completion of parts 1 to 5, the Sharks start asking some questions.
Here is the level of company interest and question that each of the Sharks would like to
have answered (3 points each; 12 points total).
a. SHARK 1 – Seems to want to invest in the business. She is curious how much the
company’s net income will increase if the production goes up 20%?
. SHARK 2 – Is willing to invest in your business if he can go on payroll for a fixed
annual salary of $30,000. How many more units will the business have to sell to be
able to support this added cost?
c. SHARK 3 – Feels that your selling price is too high. She wants to know what would
happen to net income if the sales price of the unit is lowered by $2.00?
d. SHARK 4 – Is excited about your business as he feels he can help save some costs.
Specifically, he is confident that accounting fees can be cut in half. In addition, he
has some suppliers that he thinks can shave .50 cents off each item produced. What
influence will these changes have on net income?
NOTE: Other than the questions asked by the Sharks assume everything else stays
constant. Each question should be viewed independently.
7. Organize the steps above so that your file is easy to read. I believe that this assignment can
e best organized in one Excel worksheet; however, the choice is yours on the best way to
submit.
8. Upload your assignment to Canvas. While uploading to Canvas treat the submission
window as though it is an email to the Sharks. Be concise but provide your answers to #6
for each of the four sharks. You can do this in bullet point format or whatever method you
feel is best to get my attention. This is part of the submission so please treat it like an email
you would send professionally. Keep the email as concise as possible. NOTE 1: Support for
the answers contained in the email should also be found in the Excel file. NOTE 2: Make
sure your Excel file is formatted to print properly.
Scoring: 30 Points Total (26 for Accuracy | 4 for Appearance and Timely submission)