Project 3 Report - How much of the fixed costs were allocated

Project 3 Report

Instructions: Answer the five questions below. They focus entirely on improving the EBITDA of Largo Global Inc. (LGI) based on the information provided in the Excel workbook. Provide support for your reasoning from the readings in Project 3, Step 1, and the discussion in Project 3, Step 3. Be sure to cite your sources in APA 7th ed. style.

Provide a detailed response below each question. Use 12-point font and double spacing. Maintain the existing margins in this document. Your final Word document, including the questions, should not exceed 5 pages. Include a title page in addition to the five pages. Any tables and graphs you choose to include are excluded from the five-page limit. Name your document as follows: P3_Final_lastname_Report_date.

You must address all five questions and make full use of the information on all tabs.

You are strongly encouraged to exceed the requirements by refining your analysis. Consider other tools and techniques that were discussed in the required and recommended reading for Project 3. This means adding an in-depth explanation of what happened in the year for which data was provided to make precise recommendations to LGI.

Make sure that you look at opportunities to go the extra mile in your report through graphs , additional insights and high quality referenced sources. 

Questions:

1. How much of the fixed costs were allocated between the Standard and Deluxe Boxes based on the Lumpsum Analysis Method? Is the CEO correct that the Deluxe Box is not contributing much to company operating profit? Please elaborate on your answer and include evidence from Tab 1 of the Excel workbook.

2. The intern suggested splitting the costs, as you have done in the calculations performed in Tab 2, based on sales volumes. Explain the impact of calculation performed in Tab 2. In your discussions, please elaborate on why the answer has changed from the calculations you performed in Tab 1. Also indicate the benefit of accurate costing when trying to improve operating profit margins.

3. Based on the calculations in Tab 3 using ABC, comment on the operating profits made for each product. Explain in your report why operating profits have changed under ABC analysis. Also indicate which of the systems – that is the traditional systems (using lumpsum or volume-based cost allocation in Tab 1 and Tab 2) or the ABC systems, (Tab 3) provide the best answers for decision making to improve cost management in order to improve operating profit.

4.The sustainability manger is concerned about the Anti-Deluxe Action group’s impact on the company and suggested that materials and process of making the Deluxe Boxes should be changed. As the process of making the Sustainable Deluxe Boxes, will be less intensive, a suggestion is made that  the selling price for the Sustainable Deluxe Boxes could be $23 per unit. Discuss whether changing the price to $23 is a viable option for LGI? Provide evidence from the Excel workbook, Tab 4.

5. If Largo Global Inc. decides to sell the Sustainable Deluxe Boxes at the price the CEO demands to maintain the same profit percentage as for Standard Boxes do you think the new price calculated in Tab 4 is a viable option? Why is it important for LGI to know what their Breakeven quantity is? Also indicate which other (non-numerical information) should be considered when deciding to pursue the Sustainable Deluxe Box option.