Group Assignment (Group of two) BBAC501-Project Management Accounting Due date: Session 5.2 Total Marks 20 Chandra Bebby sets up Bendigo Fencing Company to manufacture, sell and install fencing material. He was an engineer by profession but he understood the importance of accounting information and kept his accounting records meticulously throughout the year. At the end of the year he prepared the following income statement for the year: Bendigo Fencing Company Income Statement for the year ended 30 June, 2015 Sales 45,450 Less Operating expenses: Purchase of Raw Material $20,000 Purchase of factory supplies 1,000 Wages of the factory employees (who worked directly on the factory) 1,000 Wages for other factory employees 1,000 Painting department supervisor's salary 7,500 Painter 500 Managers' salary 4,000 Office staff salaries 1,000 Sales Staff salaries 2,200 Advertising 1,000 Administrative Expenses 800 Marketing and distribution costs 500 Sales commission 500 Rent 2,500 Electricity 450 Purchase of factory equipment 14,000 Purchase of Office Equipment 1,000 Purchase of Sales vehicles 1,500 Total Operating expenses 60450 Net Loss $(15000) Although disappointed, Chandra was not surprised. He knew that expenses were higher than sales because, throughout the year, he had been unable to generate a cash surplus. His bank overdraft had blown out and his bank manager has asked him to present his financial statements for 2015 to the bank. Required: You are asked to: 1. Review the performance of Bendigo Fencing Company in 2014 and make a recommendation as to whether Chandra's overdraft facility should be cancelled. Marks 12 2. Prepare a report for Chandra explaining the errors he made in his income statement. Marks 8 To perform this analysis you will need to recast Chandra's income statement. The following information may be useful: • At 30 June 2015, the following inventories existed: Raw Material $2,000 Work in Process $4,000 Finished Goods $5,150 • The factory occupies 70 per cent of the rented building, the sales area 25 per cent and the administration area 5 per cent. • All the company's fixed assets are estimated to have a useful life for 7 years and no salvage value at the end of their life. • Chandra spends 60 per cent of his time as factory manager and spends the remaining time equally on sales and general administration. • Electricity costs are consumed 70% by the factory and 30% by the office. Assignment Marking Criteria The following assignment criteria are designed to give the student a guide as to what markers are looking for in the assignment: Requirements A Evidence of analytical skills of classifying, calculating, presenting, organizing and interpreting costs in the cost of goods manufactured, cost of goods sold and General Purpose Financial Reports. 12.0 All costs are properly classified, calculated, presented, organized and interpreted in the preparation of costs of goods manufactured, cost of goods sold and income statement. Net profit is accurate. 10.0 All costs are properly classified, calculated, presented, organized and interpreted in the preparation of costs of goods manufactured, cost of goods sold and income statement. However, net profit is incorrect. 8.0 All costs are properly classified, calculated, presented, organized and interpreted in the preparation of costs of goods manufactured, cost of goods sold statement, but, not in the income statement. 6.0 Most costs are properly classified, calculated, presented, organized and interpreted in the preparation of costs of goods manufactured, cost of goods sold statement, but, not in the income statement and the profit is inaccurate. 4.0 Few costs are properly classified, calculated, presented, organized and interpreted in the preparation of costs of goods manufactured, cost of goods sold and income statement. 2.0 Very few costs are properly classified, calculated, presented, organized and interpreted in the preparation of costs of goods manufactured, cost of goods sold and income statement. 0.0 No attempt was made for classifying, calculating, presenting, organizing and interpreting costs in any of the statements. Requirement B Evidence of writing a formal report identifying key points asked. 8.0 This assessment shows a good understanding of the errors in the income statement and displays excellence in analysing, writing style and presentation. 7.0 This assessment shows some evidence of understanding of the errors in the income statement and displays excellence in analysing, writing style and presentation. 6.0 This assessment shows some evidence of understanding of the errors in the income statement and displays mediocrity in analysing, writing style and presentation. 4.0 This assessment shows few evidence of understanding of the errors in the income statement and displays mediocrity in analysing, writing style and presentation. 3.0 This assessment shows few evidence of understanding of the errors in the income statement and displays major problems in analysing, writing style and presentation. 2.0 This assessment shows poor evidence of understanding of the errors in the income statement and displays major problems in analysing, writing style and presentation. 0.0 No attempt was made to identify the errors and write the report.