MAA703 Variable & Fixed Costs

MAA703 Variable & Fixed Costs

MAA703 Variable & Fixed Costs Assignment task 2- trimester 2,
1
Assignment Task 2- case study analysis
– Marks: 30% of overall mark: 10 marks for the video recorded presentation and 20
marks for the written report
– Individual assignment
1. Assignment task and structure
This assignment is based on a case study provided below, and you are required to
complete two tasks: a video recorded presentation and a written report.
1.1 Case study: OZ Adventure Learning

MAA703 Variable & Fixed Costs
Victoria Fan, a recently graduated MPA, had been hired two months ago as an
assistant director of OZ Adventure Learning (OAL). This is her first experience in a
not for profit organization, after having worked as a junior accountant in manufacturing
firms. She had little knowledge of OAL’s programmes or the educational theories in
use by the professional staff, but had decided to accept the job since she was impressed
by OAL’s commitment to providing high quality outdoor education and experiences to
disadvantaged young adults.
Despite her lack of experience in organisations like OAL, Ms. Fan had brought
some much-needed management skills to the organisation’s operations. In just two
months, she had introduced some new management techniques, and made attempts to
educate the professional staff in the use of those techniques.
This afternoon staff meeting was no exception. In attendance would be OAL’s
director, Heather Grant, and the coordinators of OAL’s three programmes: Debbie
Bisson (Adventure Camps), Jason Huang (Rock-climbing and Trekking), and Masha
Desai (Canoeing and Kayaking). As the names suggested, each programme caters for
different activities.

MAA703 Variable & Fixed Costs
Ms. Fan planned to instruct the programme directors in the concept of
breakeven analysis; in order to do so, he had gathered some data on the revenues and
costs of the three programmes, shown in table 1 below:
1 Australian Eastern Standard Time
MAA703 Variable & Fixed Costs Assignment task 2- trimester 2, 2016
2
OZ Adventure Learning
Programme Cost Analysis1
Adventure
Camps
Rock Climbing
and Trekking
Canoeing and
Kayaking
Aggregate
Participants at full
capacity
150
Actual number of
participants
50 40 25 115
Fee per
participant
$4520 $5,320 $5,970 5,113*
Total revenue 226,000 212,800 149,250 588,050
Variable cost per
participants
480 1,040 896 765*
MAA703 Variable & Fixed Costs
Total variable
costs
24,000 41,600 22,400 88,000
Contribution to
programme to
fixed costs
202,000 171,200 126,850 500,050
Less: programme
fixed costs
130,000 118,000 80,000 328,000
Contribution to
allocated fixed
costs
72,000 53,200 46,850 172,050
Less: allocated
fixed costs2
42,675 51,210 76,815 170,700
Surplus (deficit) 29,325 1,990 (29,965) 1,350
1 All figures rounded to nearest dollar
2 Allocated fixed costs

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MAA703 Variable & Fixed Costs

*weighted average fee and weighted average cost
Using this information, she determined that each participant contributed $4,348 to fixed
costs after covering his/her variable costs. Given the fixed costs of $498,700 ($328,000
in the programmes and $170,700 for the organization overall), she had calculated that
115 (rounded to the nearest figure) participants were needed to break even.
She planned to prepare a break even chart to distribute to everyone at the
meeting prior to giving a short lecture on the concept of breakeven analysis. She wanted
to make clear to everyone that enrollment was exactly at breakeven, which did not allow
any margin of safety, and to encourage the programme directors to expand the size of
their programmes by a few participants each so as to provide a more comfortable
margin and, if all went well, a substantial surplus for the organization.
At the meeting, several issues arose that Ms. Fan had not anticipated, and a
rather hostile atmosphere developed. Ms. Bisson pointed out that 50 participants was
MAA703 Variable & Fixed Costs Assignment task 2- trimester 2, 2016
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the maximum her programme could accommodate, given current constraint in
equipment and space available at the outdoor centre, and wondered exactly how Ms.
Fan expected her to increase the programme’s size. Mr. Huang said he would be happy
to expand his programme by another 10 participants, but in order to do so, he would
need to hire another trainer, at a cost of $22,000. He wondered how Ms. fan might
include this fact in her analysis, and under the circumstances, whether the trainer should
be considered a fixed or a variable cost. Ms. Desai told Ms. Fan that she had been
planning all along to add another 15 participants to her programme, and wondered why
Ms. fan had not checked with her about this prior to preparing the figures and the chart.
She too would need to hire another trainer, however at the cost of $25,000, and also
wondered whether this was a fixed or a variable cost.
Ms. Grant seemed quite perplexed by the discussion, and began her comments
by asking Ms. Fan why she was using averages when the organization had three
separate programmes. She also indicated that $1,350 was far too low a surplus, since
she was hoping to have some extra money available during the year for painting and
some minor renovations, which would cost about $10,000. She asked Ms. Fan how she
might incorporate this need into her analysis. She also expressed some concern about
Ms. Fan’s per-participant fees, stating that in talking with people in other similar
organisations she learnt that OAL’s fees were about 10% below what others were
charging. She thought an across-the-board increase to make up the difference was
called for.

MAA703 Variable & Fixed Costs

Finally, all three programme directors queried Ms. Fan about her variable-costper-
participant figure. They asked how she had derived these figures and whether they
included some recent price increases of about 5 percent in outdoor supplies. Ms. Fan
stated that they included both various outdoor supplies and food, divided about 75
percent/25 percent between the two, but she confessed that she had not included any
price increase in her calculations.
The meeting did not go well. Ms. Fan had not had an opportunity to give her
lecture, the programme managers felt frustrated that their concerns and plans had not
been included in her analysis, and Ms. Grant was very annoyed because the
organization appears not to have the funds necessary to pay for the much needed
painting and renovations.
MAA703 Variable & Fixed Costs Assignment task 2- trimester 2, 2016
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Ms. Fan returned to her office and wondered whether her decision to work at
OAL had been a wise one. Perhaps, life would be simpler in a manufacturing firm, she
thought.
REQUIRED:
Part 1: You are required to write a written report of 1.500 words, in which you
answer the following questions:
1. What assumptions are implicit in Ms. Fan’s determination of a break-even
point?
2. Using the data in table 1, calculate a break-even point (in units) for each of the
three programmes;
3. On the basis of the suggestions and comments made at the meeting, and making
assumptions where necessary, prepare a revision of table 1.
a. What is the new break-even point (in units) for OAL?
b. What is it for each of the three programmes?
c. Briefly explain the results obtained with the revised calculations.
4. Discuss the benefits and limitations of Cost-volume-profit analysis. Which
industries would benefit from it and why? And which industries might not
benefit from it and why? Please support your answer with relevant academic
and professional literature.

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When answering question 4, you are expected to support your arguments with
relevant literature from academic and professional journals/magazines. We would
expect at least 10 prime reference sources (blogs, Internet discussions and
Wikipedia are NOT acceptable as references. Preferably, limit the use of
textbooks as references, and use instead relevant academic and professional
journal articles). An assignment with less than 10 prime reference sources is
unlikely to have demonstrated enough research to form defendable conclusions and
will be assessed accordingly. Please be sure that you adhere strictly to the word
limit as penalties apply for failure to remain within the prescribed word limit.
A 10% tolerance will be applied to the word limit. The reference list (any
commonly used referencing style e.g. Harvard, APA, is acceptable) is not
included in the total word count. If you include tables and figures these are also
not included in the word count.
MAA703 Variable & Fixed Costs Assignment task 2- trimester 2, 2016
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Part 2: You are required to make a video-recorded presentation of maximum 10
minute. Imagine you are Victoria Fan and you are addressing OAL’s director and
the three programme directors:
1. Explain briefly what cost-volume profit analysis is;
2. Explain what the problem is with the existing surplus (based on table 1
provided in the case);
3. Explain the calculation of the revised break-even point (in units) for OAL’s
overall and for the three programmes.
It is a requirement that you are in the video. The most user friendly option for recording
your videos is Deakin Air. Guidance as to how to use Deakin Air can be found at the
following web address: http://teachassist.deakin.edu.au/resources/deakinair-guides/
You can be as creative as you like in making your video: you may deliver it by yourself,
in the role of Victoria Fan, or you may want to do a role play enlisting
friends/colleagues to play the role of the characters of the case (please note that this last
suggestion is not a compulsory one!). You can use any visual aid that you may deem
appropriate (Power point, Prezi, Keynote, etc.). Using visual aid allows you to be more
focused and to address the questions above clearly. In order to make a successful
presentation, it is important that you are engaged, clear, concise and focused, whilst
covering the points listed above.

MAA703 Variable & Fixed Costs

Please note: The marking rubrics for the written report and the presentation are
provided in a separate document.
3. Assignment submission
The due date for submitting the assignment, both the presentation and the written report,
is Wednesday 7 September, 11:59pm (AEST). There will be no extensions of time
granted unless there are exceptional and most unusual circumstances outside the
students’ control. Students who require a time extension in relation to this assignment
should submit a written request to the Unit Chair, supported with documentation (for
example, medical certificate). Such requests should be e-mailed to the Unit Chair.
Requests for time extensions will not be considered after 12 noon, Wednesday 24
August 2016.
MAA703 Variable & Fixed Costs Assignment task 2- trimester 2, 2016
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The written report should have a title page, which is should be the first page of your
written report and it must include the following information:
• Title: Oz Adventure Learning – Case study Analysis
• Unit code and unit name: MAA703 Variable & Fixed Costs
• Name of the Unit Chair: Dr. Simona Scarparo.
• Your full name and Deakin student ID number.
• Due date: Wednesday 7 September 2016, by 11:59pm (AEST). If granted a time
extension, then insert the following:
o Revised date approved by the unit-chair (show approved date).
• The following statement: “I certify that the attached work is entirely my own,
except where material quoted or paraphrased is acknowledged in the text. I also
declare that it has not been submitted for assessment in any other unit or
course.” Assignments that do not contain this statement will not be
assessed.

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MAA703 Variable & Fixed Costs

• Each page must be numbered and must show the total number of pages (e.g.,
Page 1 of 10), and every page must have a header that identifies your full name,
your Deakin student ID number, and the unit code MAA703.
Students are NOT required to complete an ‘Assignment Attachment Sheet’ for this
assignment. Tables or figures are acceptable in this assignment and they should be fully
discussed and analysed. Tables or figures should be numbered sequentially, given
appropriate captions and placed in the main body of this assignment at suitable points.
Use of footnotes and Appendices are not permissible in this assignment.
Both the presentation and the written report must be submitted electronically by the due
date by uploading it to the assignment Dropboxes, via the MAA703 site on
CloudDeakin. The written report has to be submitted as a Microsoft Word document.
When uploading your assignment, give the document a name using the following
syntax: <your surname_your first name_your Deakin student ID
number_MAA703.doc (or ‘.docx’), For example,
‘Jones_Barry_123456789_MAA703.doc’. Submitting a hard copy of this assignment
is not required.
MAA703 Variable & Fixed Costs Assignment task 2- trimester 2, 2016
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You need to check that your written report does not contain plagiarism. This is done
automatically when submitting your written report to the ‘Dropbox’, which uses
Turnitin. Turnitin checks your assignment for plagiarism and generates an originality
report that you can use to be confident that your assignment does not contain
plagiarism. Turnitin will tell us (but tells you first) the extent to which your work has
copied material from others without appropriate recognition through referencing. If this
is excessive you will lose marks or you may not receive any marks, or you may have
some form of disciplinary action taken if the issue is severe. Take appropriate action to
amend your report to avoid this from happening.
Note that uploading your assignment to Turnitin via the prescribed link in the
CloudDeakin site for this unit constitutes a declaration regarding the contents of the
assignment being all your own work, except where appropriate references to the work
of others has been acknowledged. You can upload your assignment to Dropbox as many
times as you like up to the due date. In order to avoid a late submission penalty, you
must upload your assignment to Dropbox by the due date. A penalty of 30% of the mark
achieved will be imposed if assignments are submitted after the due date without a valid
extension.

MAA703 Variable & Fixed Costs
Instructions on how to upload videos on CloudDeakin are provided in the separate
document titled “How do I submit a Deakin Air video into an assignment folder”
available on CloudDeakin, in the section of assessment task 2.
If you have any issues with the technology, please contact the IT Service Desk:
http://www.deakin.edu.au/about-deakin/administrative-divisions/esolutions/it-help
and/or the CloudDeakin support:
http://www.deakin.edu.au/students/clouddeakin/help-with-clouddeakin?d2l=default
Any material used in this assignment (both presentation and report) must be
acknowledged and appropriately referenced. You can find information about
plagiarism and other study support resources at the following website:
http://www.deakin.edu.au/students/study-support
Some marks are awarded for report format, structure, spelling, grammar, punctuation
etc. The Division of Student Life (see link below)
MAA703 Variable & Fixed Costs task 2- trimester 2,
http://www.deakin.edu.au/about-deakin/administrative-divisions/student-life
provides all students with editing assistance. Students who wish to take advantage of
this service should plan ahead and contact the Division of Student Life in order to
schedule a booking, well in advance of the due date of this assignment.

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