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Written Business Case 3T 2016-2017
Written Business Case 3T 2016-2017
Dodrio Doorknob Design Company manufactures expensive brass doorknobs. It has total
assets amounting to 2,500,000 and liabilities of 1,500,000.
The fixed costs of producing and marketing the doorknob is 500,000. The variable costs per
unit are the manufacturing costs (materials, labor and overhead) and marketing costs of 400.
The normal selling price of a doorknob is 3,000.
After careful study of the production, it was determined that manufacturing overhead was
closely related to material usage. Thus manufacturing overhead to production is allocated
based on pounds of materials used.
As a managerial accountant and business analyst for Dodrio, the undertakings are as follows:
A. Flexible-budget variances. Ascertain whether each is favorable (F) or unfavorable (U) and
recommendations for improvement.
B. Analysis:
(8) How much is the normal contribution margin percentage? _________________
(9) How many units must be sold to break even? _________________
(10) How many units must be sold earn a profit of 2 million? _________________
(11) If 1,500 units are sold, how much is the margin of safety? _____________; _______%;
_____________ units
(12) If 500 units are sold, what is the degree of operating leverage?(round-off to 2 decimal
places)? _________________
(13) If 500 units are sold, what is the ROI? _______%
(14) If the target contribution margin percentage is 80%, what should be the selling price?
_________________
C. Special order. An order has been received from an overseas customer for 1,000 units to be
delivered this month. This order would have no effect on the company's normal sales and would
not change the total amount of the company's fixed costs. The variable marketing cost would be
20% less per unit on this order than on normal sales.
Suppose there is ample idle capacity to produce the units required by the overseas customer
and the special discounted price on the special order is at a discounted price of 25% less than
its normal selling price per unit.
(15) By how much would this special order increase (decrease) the company's net operating
income for the month? _________________
1. REQUIRED:
a) Show calculations for the independent situations.
b) Support your answers with qualitative information. Do not forget to include your
references.
c) Write a memorandum to management on findings and recommendations.
2. Format of Written Report:
a) Paper size: 8.5 x 11
b) Margin: 1 on all sides
c) Font and Font size: Tahoma 11
d) Paragraph alignment: Justified
e) Paragraph spacing: 1.5
f) Attachments: Include (1) peer evaluation of each group member, and (2) other
attachments at the end of your report.
g) Insert the entire report in a short sliding folder with transparent cover.
h) The cover page template is shown on the next page:
In partial fulfillment
Of the course requirements
In (name of course Section___)
SUBMITTED TO:
(Name of Faculty)
SUBMITTED BY:
Surname, Given Name, M.I.*
Surname, Given Name, M.I.
Surname, Given Name, M.I.
Surname, Given Name, M.I.
5. Peer Evaluation
a) On a one-half sheet of bond paper, cross-wise, write the names of all your group mates
(in alphabetical order).
b) Give the corresponding percentage (70, 80, 90, 100) for each of your group mate. Refer
to table below. Be fair when evaluating.
c) Print your name then sign as evaluator.
d) Include this as an attachment at the end of the paper.