Corporate Finance Assignment: Cost Analysis and Profitability

This assignment provides a detailed analysis of corporate finance principles, focusing on cost accounting, financial statements, and profitability analysis. The solution begins by exploring the role of a management accountant in designing a new accounting system for a hospital, identifying essential information for senior managers, and discussing reporting opportunities. The core of the assignment involves preparing financial schedules and statements for Flintoff Fashions, including the schedule of cost of goods manufactured, cost of goods sold, and income statement, with adjustments for changes in raw material purchases and indirect labor. Furthermore, the assignment delves into the profitability of three corporate packages offered by Asian Adventure Holidays, comparing their financial performance, assessing the viability of overhead allocation, and recommending strategic actions. Finally, the solution calculates the cost of goods manufactured and analyzes over/under-applied overhead for a given period. The document offers a complete solution to the given assignment.

Running head: CORPORATE FINANCE
Corporate Finance
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Question 1:.................................................................................................................................3
1. Explaining how the management accountant can help contribute design and operations of
the new management accounting system for the new hospital:.................................................3
2. Identifying the types of management accounting information that senior manager requires
on daily basis:.............................................................................................................................3
3. Discussing the opportunity this may arise in which supply of weekly and monthly reports
to managers:...............................................................................................................................4
Question 2:.................................................................................................................................5
1. Preparing the schedule of goods manufactured for Flintoff Fashions:..................................5
2. Preparing the schedule of cost of goods sold for Flintoff Fashions:......................................6
3. Preparing the income statement for Flintoff Fashions:..........................................................6
4.a Changes when raw material purchase amounted to $110,400:............................................7
4.b Changes when indirect labour was $9600:...........................................................................8
Question 3:...............................................................................................................................10
1. Calculating the profit per package and total profitability of each of the three corporate
packages:..................................................................................................................................10
2. Comparing the profitability of three corporate packages:....................................................11
3. Depicting the viability of corporate department overhead to packages using actual sales:.11
4. Suggesting actions that the company could conduct regarding three corporate packages:. 12
Question 4:...............................................................................................................................12
1. Calculating the cost of goods manufactured for February:..................................................12
2. Calculating the amount of overapplied or underapplied overhead of to cost of goods sold
on 28 February:........................................................................................................................12
Reference and Bibliography:....................................................................................................13

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Question 1:
1. Explaining how the management accountant can help contribute design and
operations of the new management accounting system for the new hospital:
Being the management accountant relevant skill is needed by the individuals for
adequately conducting operations. The same skills of a management accountant can help in
designing and operating the new management accounting system for the new hospital. In
addition, the management accounting system needs to be tailored for fulfilling the specific
needs of the organisation, which reduces the burden on its operations. Moreover, the
contingent factors such as internal and external needs to be evaluated with the help of new
management accounting system. Furthermore, the new system needs to be like the
transaction-based system, which is currently being used by the company, as it helps in
reducing the excessive confusion and reduce materiality risk (Schaltegger and Burritt 2017).
The design of the new operating machine could include range of predictive
information, departments budgets, and non-financial information on the ongoing operations.
Moreover, management accounting staff is conducted to be the most viable persons for
drafting and creating management accounting software for its use. In addition, the
requirements of an adequate management accounting system can be provided by management
accountant for addressing each activities of the company.
2. Identifying the types of management accounting information that senior manager
requires on daily basis:
The different types of information that is needed on weekly and monthly basis by
senior management in hospital are depicted as follows.

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Different segment of operations Types of information
Incentive care Needs information on bed, occupancy rate, number of
patients, and average length of stay, which helps in
depicting the billing rate. This section of the hospital
needs to evaluate different cost in the departments for
conducting operation incentive care.
Radiology The x-rays, number of time consumed in radiology staff,
referrals per doctor, billing rates, insurance revenue,
medical supply, and average cost per patient.
Neurology Bed occupancy rate, number of patient waiting,
insurance revenue, medical supply, and average cost per
patient.
Accident and Emergency Number of patient treated, umber of referrals, gap
revenue, medical supply, cost per bed, insurance
revenue, medical supply, and average cost per patient.
Cardiology Medical revenue, number of patients, average length of
the stay, kitchen cost, medical supply cost, insurance
revenue, medical supply, and average cost per patient.
3. Discussing the opportunity this may arise in which supply of weekly and monthly
reports to managers:
The information can be supplied to the management electronically to the managers,
which could have all the relearnt information and details needed for their evaluation. In
addition, the new system could help in uploading the details quickly, which could be

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reviewed by all the managers. This relevantly provides the management quick information
about the condition of hospitals and its different departments (Renz and Herman 2016).
Question 2:
1. Preparing the schedule of goods manufactured for Flintoff Fashions:
Flintoff Fashions Schedule of cost of goods manufactured
For the year ended December
Particulars Amount Amount
Raw material inventory, 1 January $ 24,000
(+) Purchases of raw material $ 108,000
Raw materials $ 132,000
(-) Raw material inventory, 31 December $ 15,000
Total Raw materials available for the year $ 117,000
Direct labour $ 120,000
Depreciation: plant and equipment $ 36,000
Electricity: plant $ 24,000
Indirect labour $ 9,000
Indirect material $ 6,000
Other manufacturing overhead $ 48,000
Total Manufacturing Overhead $ 123,000
Manufacturing Costs $ 360,000
(+) Work in process inventory, 1 January $ 24,000
(-) Work in process inventory, 31 December $ 18,000
Cost of goods manufactured $ 366,000

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2. Preparing the schedule of cost of goods sold for Flintoff Fashions:
Flintoff Fashions Schedule of cost of goods sold
For the year ended 31 December
Finished goods inventory, 1 January $ 12,000
(+) Cost of goods manufactured $ 366,000
Goods available for sale $ 378,000
(-) Finished goods inventory, 31 December $ 30,000
Cost of goods sold $ 348,000
3. Preparing the income statement for Flintoff Fashions:
Flintoff Fashions Income Statement
For the year ended 31 December
Sales revenue $ 570,000
(-) Cost of goods sold $ 348,000
Gross profit $ 222,000
Selling and administrative expenses $ 90,000
PBT $ 132,000
Income tax expense $ 54,000
Net profit $ 78,000

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4.a Changes when raw material purchase amounted to $110,400:
Flintoff Fashions Schedule of cost of goods manufactured
For the year ended 31 December
Particulars Amount Amount
Raw material inventory, 1 January $ 24,000
(+) Purchases of raw material $ 110,400
Raw materials $ 134,400
(-) Raw material inventory, 31 December $ 15,000
Total Raw materials available for the year $ 119,400
Direct labour $ 120,000
Depreciation: plant and equipment $ 36,000
Electricity: plant $ 24,000
Indirect labour $ 9,000
Indirect material $ 6,000
Other manufacturing overhead $ 48,000
Total Manufacturing Overhead $ 123,000
Manufacturing Costs $ 362,400
(+) Work in process inventory, 1 January $ 24,000
(-) Work in process inventory, 31 December $ 18,000
Cost of goods manufactured $ 368,400
Flintoff Fashions Schedule of cost of goods sold
For the year ended 31 December
Finished goods inventory, 1 January $ 12,000
(+) Cost of goods manufactured $ 368,400

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Goods available for sale $ 380,400
(-) Finished goods inventory, 31 December $ 30,000
Cost of goods sold $ 350,400
Flintoff Fashions Income Statement
For the year ended 31 December
Sales revenue $ 570,000
(-) Cost of goods sold $ 350,400
Gross profit $ 219,600
Selling and administrative expenses $ 90,000
PBT $ 129,600
Income tax expense $ 54,000
Net profit $ 75,600
4.b Changes when indirect labour was $9600:
Flintoff Fashions Schedule of cost of goods manufactured
For the year ended 31 December
Particulars Amount Amount
Raw material inventory, 1 January $ 24,000
(+) Purchases of raw material $ 108,000
Raw materials $ 132,000
(-) Raw material inventory, 31 December $ 15,000
Total Raw materials available for the year $ 117,000

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Direct labour $ 120,000
Depreciation: plant and equipment $ 36,000
Electricity: plant $ 24,000
Indirect labour $ 9,600
Indirect material $ 6,000
Other manufacturing overhead $ 48,000
Total Manufacturing Overhead $ 123,600
Manufacturing Costs $ 360,600
(+) Work in process inventory, 1 January $ 24,000
(-) Work in process inventory, 31 December $ 18,000
Cost of goods manufactured $ 366,600
Flintoff Fashions Schedule of cost of goods sold
For the year ended 31 December
Finished goods inventory, 1 January $ 12,000
(+) Cost of goods manufactured $ 366,600
Goods available for sale $ 378,600
(-) Finished goods inventory, 31 December $ 30,000
Cost of goods sold $ 348,600
Flintoff Fashions Income Statement
For the year ended 31 December
Sales revenue $ 570,000
(-) Cost of goods sold $ 348,600

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Gross profit $ 221,400
Selling and administrative expenses $ 90,000
PBT $ 131,400
Income tax expense $ 54,000
Net profit $ 77,400
Question 3:
1. Calculating the profit per package and total profitability of each of the three
corporate packages:
Particulars Bali Adventure Thailand Discovery Malaysian Orienteering
Revenue $ 900,000 $ 1,440,000 $ 1,120,000
Direct cost per package:
Tour leader $ 50,000 $ 240,000 $ 90,000
Tour assistant $ 20,000 $ 60,000 $ 60,000
Air travel $ 280,000 $ 600,000 $ 320,000
Accommodation $ 150,000 $ 520,000 $ 240,000
Equipment hire $ 40,000 $ 0 $ 90,000
Meals $ 180,000 $ 300,000 $ 80,000
Gross profit $ 180,000 $ (280,000) $ 240,000
Overhead cost $ 59,826.59 $ 95,722.54 $ 74,450.87
Profit $ 120,173.41 $ (375,722.54) $ 165,549.13

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2. Comparing the profitability of three corporate packages:
Particulars Bali Adventure Thailand Discovery Malaysian Orienteering
Profit $ 120,173.41 $ (375,722.54) $ 165,549.13
The above table mainly depicts the overall profits that is been generated by three
different packages. In addition, from the evaluation Malaysian Orienteering is identified to be
the most viable packages, which could generate adequate profits for Asian Adventure
Holidays. Moreover, Thailand Discovery package depicts loss, which might hamper the
actual profitability of Asian Adventures Holidays. In addition, the Bali Adventure package
provides the second-best profits for the company, which helps in inclining their profitability.
Messner (2016) mentioned that with the help direct and overhead cost evaluation companies
can detect their financial capability in generating high level of returns.
3. Depicting the viability of corporate department overhead to packages using actual
sales:
The actual sales revenue is used for calculating the corporate department overhead, it
does not depict the actual cost incurred by the company during the period. In addition, the
actual sales method can be dropped by the company, while relevant direct cost evaluation
method can be used. This use of direct cost method percentage could help in depicting the
actual cost incurred from operations (Quattrone 2016). The measure could help in detecting
actual expenses that is conducted by the company on the relevant packages.