Variable costs are and monthly fixed costs are required

Decision Analysis for a way to do part (b) of this question if you wish.

(a) Distinguish between decision making under certainty and decision making under uncertainty. To

favourable or unfavourable markets are as follows:

Favourable Unfavourable

C 75,000 -18,000

(i) If Joe is an optimist which type of equipment should he buy?

over a parcel of land, for $200,000. If the lease is purchased a test well could be drilled at a cost of

give a perfect prediction as to whether the well would be a success or dry.

Required:

Charles Sturt University Subject Outline

ACC544 201530 SM I-5 February 2015-Version 1 Page 16 of 28

expects to earn $500,000, while a failure is expected to lead to a loss of $300,000.

(i) Should the product be marketed? Why?

p (favourable|success) = 0.6

p (neutral|success) = 0.3

QUESTION 3 Simulation

This is a work integrated assessment item. The tasks are similar to what would be carried out in

recycling centre and do not produce any revenue.

Records of the programs sold for each game show the following:

2600 0.25

2700 0.15

each game when (1) 2500 and (2) 2600 programs are printed. Include a calculation of the total

profit/loss for the season and the average profit/loss per game.

completing the model you can vary the results by pressing F9 (recalculate) a number of times to view

such variations resulting from changes in the random numbers generated.

ACC544 201530 SM I-5 February 2015-Version 1 Page 17 of 28

(b) To check on hour simulation conclusions use marginal analysis to determine the optimum number

The report must be dated, addressed to the Manager and signed off by you.

(Word limit: No more than 150 words)

Month Overhead DLH MH

1 $ 7,200 201 220

6 $ 8,800 400 440

7 $ 9,600 450 470

overhead cost equation?

(b) Using Excel, perform three regression analyses to regress overhead cost against DLH, then MH,

month when there were 400 DLH and 500 MH used?

QUESTION 5 CVP Analysis

ii. The required level of sales to yield a monthly profit of $25,000 before tax.

iii. The profit before tax expected in a month in which sales of $80,000 are realised.

X Y

Unit selling price $18 $15

i. Given this sales mix, how many units of each product must be sold in a period to make a profit

of $15,000 before tax?

Selling price per unit $2000

Variable costs per unit $1500

i. Calculate expected annual profit.

ii. What is the standard deviation of expected profit?

Cost-volume-profit analysis. It has been designed to ensure that you continue to engage with the

subject content on a regular basis. More specifically, it seeks to assess your ability to:

apply CVP analysis to product mix decisions