Background

Welcome to the Summer 2016 version of the comprehensive assignment prepared

specifically for Accounting 294.

Made up of 2 parts this assignment is meant to fulfill a number of objectives for you.

These include:

1) Test and apply your knowledge of the concepts of managerial accounting.

2) Increase your experience and abilities with respect to report writing.

3) Illustrate scenarios and issues you will face in the “real world”

4) Provide for an additional method of evaluation of your knowledge and skills

rather than the traditional quizzes and tests.

Please take all parts of this assignment seriously. This is an opportunity to actually apply

your knowledge rather than just memorize a textbook.

Please prepare the assignment using either Word or Excel rather than by hand. The

finished product will look more professional as well as create some consistency between

submissions.

In order to make this assignment easier and your result more successful I suggest that you

do not leave this assignment to the last day or even week. The assignment parts are

constructed to coincide with the topics that have been or will be covered in class. If you

begin working on the assignment immediately then as your lectures/seminars progress

you will be immediately reinforcing the course content that you are being exposed to and

it will make application of that content easier as well.

The 2 parts of the assignment are worth a total of 14 % of your final grade and therefore

each part will have a significant effect on your final letter grade. Making a submission on

time even if incomplete, will be more to your benefit than giving up and not making any

submission at all.

Important Notes Regarding Student Conduct

Each part of this assignment is an individual assignment. All submissions are required

to be your own words and calculations. While it is recognized that students may discuss

concepts and ideas each student is required to construct their own response. In the event

that the responses prepared by individual students appear to be the same or highly similar

the instructor will consider referring the students to the Faculty of Management

Academic Integrity Committee for consideration.

Plagiarism

  • Plagiarism refers to the practice of presenting the words of another author (it may

be a text writer or another student) as your own.  This is not permitted.  At times

you will be asked to learn about and discuss the views or theories of others.  This

should be done with appropriate acknowledgement of source materials.  In other

words, you must reference your work.  Acknowledge your sources – both direct

and indirect quotes – with in-text citations.  Refer to the Referencing section

contained below for further information.

Academic Conduct Violations

  • Any violation of the rules of Academic Conduct as described above will result in

the immediate confiscation of all related materials of all parties involved. In

addition, all parties will be immediately reported to the Faculty of Management

Academic Misconduct Committee for consideration of further actions including

(but not limited to) receiving a zero for the submission, a failure in the course and

the possibility of suspension or expulsion.

Referencing 

Faculty of Management (Business) requires the APA style of referencing for academic papers.

Resources for using APA are available from the VIU Writing Centre (Library, Room 474). You can

find their hours of operation and access to online student resources (including tutorials and a

printable Quick Guide) at: http://sites.viu.ca/writingcentre/.”

For further information please discuss with your instructor and/or refer to the

following Student Academic Code of Conduct

https://www2.viu.ca/policies/documents/Policy99.01.pdf

SxS Dune Adventures

Experience the Dunes and Sea, Side by Side

 Your Role

While you believe you are a student currently taking Accounting 294, for the

purposes of this assignment you are in fact an employee of SxS Dune

Adventures. SxS is a company located in Florence Oregon. The business has

2 focuses, rentals of Polaris Rzr’s and tours of the Oregon dunes located

between Florence, Oregon and North Bend, Oregon.

While this employment will provide you with varied experience, you are

about to be assigned work specifically related to the business. You have just

been hired by the owner, Sam Lownie(SL) of SxS because of your recently

acquired knowledge related to managerial accounting. He expects you to

write memos, perform quantitative and qualitative analysis as well as

providing conclusions or recommendations for the management and owners

of SxS Dune Adventures.

At all times, work submitted must be professional both in terms of content as

well as presentation. This is not high school or university but rather the real

world. Do the work as if your job depends on it, because it does!!

SxS Dune Adventures

 SxS Dune Adventures is a privately owned company located in Florence,

Oregon in the United States. Florence is located on the coast about 60 miles

west of Eugene Oregon. Its locations is spectacular with the rugged Pacific

Ocean and the start of the world famous Oregon sand dunes heading to the

south.

The sand dunes are what the company uses to generate its income. The

company has two separate revenue streams:

1) Rental of Polaris Side By Side (SxS) Utility Terrain Vehicles (UTV)

These are two seat vehicles meant to go off road through rough terrain

and on the sand dunes

2) Dune Tours in a 4 seat UTV.

Guided by experienced SxS staff, these tours allow people unable or

unwilling to rent and drive their own UTV to experience the thrill of

driving over the sand dunes and also speed along the beaches on the

edge of the Pacific.

 

 

Due to its location as well as the variety of activities, SxS Dune Adventures

has created a niche in the growing sand dune tourism market. The

management of SxS believe that outstanding customer service is the way to

differentiate their product from the competitors and by offering professional

guides, well planned and presented guest activities and quality experiences

SxS will continue to be recognized as the premier way to

“Experience the Dunes and Sea, Side by Side”.

The rentals and tours operate from June to September each year.

SxS Dune Adventures Ownership

SxS Dune Adventures is owned by Sam Lownie who put in $500,000 in

capital to start the company. While Sam has long time experience in the

industry he is lacking in financial knowledge which is why he hired you. 

 SxS Dune Adventures Management  

Brian Beech (BB)

Brian is the operations manager of SxS. Brian’s previous experience

involved managing a variety of tour related businesses such as Klanawa

Nature Adventures which is an adventure facility located in British

Columbia.

Adam Farmer (AF)

Adam’s expertise is in the mechanics of utv’s and other all-terrain vehicles.

A graduate of the Recreational Power sports Mechanics program at the

Northern Alberta Institute of Technology (NAIT).  Adam and his team of

technicians keep the equipment at SxS running smoothly.

Facilities

 

The company location consists of a 6,000 square foot building with

approximately 1,500 square feet of office and administrative space, 3,000

square feet for the vehicle storage and maintenance and 1,500 square feet for

the customer service and training space.

Transcript of Meeting with Sam Lownie, Brian Beech, Adam

Farmer and Student

Student:  Thank you very much for hiring me to assist you with your

operations. I am sure that my analysis and advice will be of great benefit to

your operations. I am very eager to get started.

SL:  You came highly recommended as to both your knowledge and

problem solving skills. Our business has grown and I now realize that we

need a more professional approach to things. We still want to ensure the

quality of our services and our commitment to “Safety First” but we also

obviously want to make money. I think you can help us understand how to

do that.  I would think that the first tasks we can get you to do will be to

assist in the analysis of past operations so that Brian, Adam and I can work

on improving things.

As you know our fiscal year just ended on March 31, 2016.  Talking to Brian

the other day he thought it would be helpful to him if we took the financial

results to the end of September and provided some classification of the

amounts between types of costs. Specifically he wanted costs identified as

product/period costs, Fixed/variable, direct/indirect costs and sunk costs. I

understand what he means by each of these terms but to be honest, I have

not had the time to do it. I would like to know the total of each of these

categories as well as what makes each one up.

I have printed out a copy of the results to March 31, 2016 and also provided

a description of the costs (Exhibit 1). Would it be possible for you to look at

these costs and provide the analysis Brian wants?

Student- Definitely, in fact I have a format that I can follow in preparing this

analysis. (Exhibit 2)

BB- You are quite a knowledgeable individual so let me add 2 more

challenges.

1) In order to a proper analysis of the business I need to be able to

prepare budgets. I cannot do that with the income statement in the

format in Exhibit 1. I need an income statement in a “Contribution

Margin” format. As you know in order to do this we need to separate

all costs into either a variable or fixed category. Sam has already

asked you to categorize the costs between fixed and variable.

In addition we need to separate the product costs between the 2

products we offer to our customers.

Please prepare an income statement for me in the contribution margin

format?

See sample format in Exhibit 3

 

2) I have received a request from the Costco in Eugene asking if we can

host tours for the staff party coming up at Halloween, October 31. As

our regular business shuts down at the end of September we know that

we will have equipment available and I think the exposure that we can

get from doing this for Costco would be good marketing on our part.

 

I am not sure how much they are willing to pay but I would rather not

lose money on the deal despite the marketing benefit.

 

Using an incremental analysis approach, could you please tell me

what the lowest selling price we can offer Costco on this without

losing money on it is? I have provided additional information for you.

(Exhibit 4).

 

AF:  Seeing how all of you are getting Student to do things I might as well

put in my request.

 

In preparing for next year I have had some discussions with both staff

and some of our suppliers. Each of them is proposing a significant

change in how they are paid but there is a similar theme to all of these

requests. Could you please do a memo for me explaining the issue of

7

cost structure and also provide an example on how it would affect our

operating income in the future? I have provided notes in Exhibit 5.

 

Student: I can certainly prepare the reports that each of you require. Is there

a deadline for all of this work? What date would you like it by?

 

SL- If you have it for May 19, 2016 that would be great.

 

Required

 

1) Prepare an analysis of costs identifying product (direct materials, direct

labour, product overhead) /period costs, Fixed/variable, direct/indirect costs

and sunk costs. Provide the classification of each cost as well as a total of

each category.  Cost information is provided in Exhibit 1.

 

For the “mixed” costs please use the information provided to separate them

into their variable and fixed components.

 

See Exhibit 2

 

2) Prepare an income statement in the contribution margin format based on

the sample provided in Exhibit 3.

 

3) Using an incremental analysis approach, calculate the lowest selling price

on the Costco job which allows the company to break even on the job

specifically.  The details of the Costco proposal are in Exhibit 4

 

4) Prepare a memo to Adam explaining the issue of cost structure and

provide relevant examples on how it would potentially affect the company’s

operating income in the future? Adam’s notes are in Exhibit 5………………………………………………………………………….

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