Guidelines for Business Analysis
A Case of CSL Limited: A Managerial Accounting Analysis
F. Use the figures in the consolidated income statement of the company annual report and prepare the followings on an Excel Spreadsheet:
(i) Summarized absorption costing income statement for 2019 showing operating profit of the company (Hint: You may need to ignore some revenue and expense items presented in the current consolidated income statement and consider 2,504.0 operating profit as the bottom-line profit).
(ii) Summarized contribution margin income statement for 2019. You may need to use appropriate cost classification methods and assumptions for this purpose. Assume all expenses are either variable or fixed except for cost of sales and selling and marketing expenses which should be classified as mixed costs. Cost of sales can be separated out to fixed and variables costs assuming that 40% of the total cost of sales in 2019 consist of fixed manufacturing overhead costs while selling expenses could be separated using high low method with annual sales units as the measure of unit level. You may consider sales for 2018 and 2019 as a measure of level of activity for estimating cost function.
(iii) Budgeted income statement for 2020. This statement should be prepared using the contribution margin income statement you prepared in requirement (F.ii) above and making realistic and logical assumptions about the trends. You are not required to prepare operational budgets such as sales budget, production budget, to prepare a budgeted income statement. The excel file used for preparing the above three statements should consist of two sheets. The first sheet should be used to record any input data and assumptions that you use for your calculations. For example, data used with high-low in F(ii) above should be shown here. The second sheet of your excel file should show the output of the analysis (i.e. the three statements mentioned in (i) to (iii) above. Input and output sheets should be linked by formulas. In other words, the excel file should be readily available for sensitivity analysis (“what if analysis”) i.e. if the manager change the input data or an assumption in the input sheet, he/she should be able to see the impact of the changes on the output sheet immediately.
While only the three statements you prepare should be presented in the body of the report, the printouts of both sheets of the excel file should be submitted in appendices. The soft copy of the excel file should also be submitted through the link on the Moodle site. Please make sure to use as many formulas (cost functions) as possible to obtain required estimates and to clearly state the assumptions you make for calculating your estimated figures for the 2020. (500 words maximum -20 marks).
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