R2 – Accounting – Case study – Resolve

The assignment was completed previously; however, it did not fully meet the required criteria.

Attached are the assignment file and the instructors feedback/comments.
Kindly review and revise it as soon as possible.

The assignment requires answering Question 1, Question 2, and Question 4 only, so the selected questions are correct. However, the solution needs major revisions in the calculations and presentation.

Required corrections:

1. Question 1 Cost Classification

– The cost classification needs to be clearer and more accurate.

– Costs should be separated into:

– Fixed costs

– Variable costs

– Lab service costs

– Scan service costs

– The 40% payment to Manna Healthcare should be treated as a variable cost, because it depends on revenue.

– The ultrasonographer commission should be calculated as 6% of scan revenue. For 180 scan patients:

– Scan revenue = 180 $9 = $1,620

– Commission = 6% $1,620 = $97.20

– The current answer uses $194.40, which appears to double-count the commission.

– Depreciation is included more than once. The depreciation amounts should be calculated once only.

– Items such as furniture, computer/printer, lab equipment, and scan equipment depreciation should not be repeated under another depreciating costs section.

– Tissues are missing from the fixed consumables and should be included.

– Shared costs such as A4 paper, envelopes, gloves, toner, tissues, furniture, and computer/printer should be allocated clearly and consistently.

– The operating income figures should be recalculated after fixing the above errors.

2. Question 2 Break-even for Scan Services Only

– The break-even calculation is incorrect.

– The formula should be:

– Break-even units = Fixed Costs Contribution Margin per Unit

– Break-even sales = Break-even units Selling Price

– The contribution margin per scan should be calculated after including all variable costs:

– Selling price per scan = $9

– Manna Healthcare share = 40% $9 = $3.60

– Gel = $1.25

– Thermal print paper = $2.50

– Ultrasonographer commission = 6% $9 = $0.54

– Total variable cost per scan = $7.89

– Contribution margin per scan = $9 $7.89 = $1.11

– The answer currently states that the break-even point is around 99 or 100 patients, but this does not match the correct contribution margin calculation.

– The fixed costs also need to be recalculated after removing duplicated depreciation.

3. Question 2 Break-even for Lab Services Only

– The lab services section has inconsistent variable cost numbers.

– In one table, variable costs are shown as $892.20, but later they are shown as $352.20. This needs to be corrected.

– The 40% Manna Healthcare share must be included as a variable cost for lab services.

– The CEO/lab technician salary appears to be double-counted in the fixed cost section. Please remove any duplicated salary items.

– The break-even units and sales for lab services should be recalculated using the correct fixed costs and contribution margin per unit.

– Also, the statement $11.25 per scan is incorrect in the lab section. It should say $11.25 per lab service, not per scan.

4. Question 4 Multiproduct Break-even

– This section needs to be recalculated.

– The current break-even result of 161 patients appears to be too low because the calculation seems to exclude the 40% Manna Healthcare share from variable costs.

– The correct sales mix should be:

– Scan services: 60%

– Lab services: 40%

– The weighted-average contribution margin should be calculated using the correct contribution margin per unit for both services.

– The break-even should then be calculated as:

– Break-even total patients = Total Fixed Costs Weighted-Average Contribution Margin

– After that, the total patients should be split based on the sales mix:

– 60% scan patients

– 40% lab patients

– The break-even revenue should also be recalculated.

– Please avoid saying recoup the initial investment in Question 4 because this question is about monthly break-even, not recovering the original investment.

5. Wording and Presentation Issues

– Replace administration with services or patients where appropriate.

– Replace filter administration with scan services.

– Use consistent terminology throughout:

– Lab services

– Scan services

– Patients

– Break-even units

– Break-even sales

– Make sure all tables have clear headings and that the calculation steps are shown clearly.

– The final answer should include a short explanation of what each result implies, especially in Question 2 and Question 4.

Overall, the structure is acceptable, but the calculations need to be corrected before submission. The most important parts to fix are Question 2 and Question 4, because the current break-even results are not reliable.

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