Cost-Volume-Profit Analysis Explained for Umbrella Manufacturing Company

Part IRequirement
1UnitsPriceTotalsSales60,000$12.50$750,000Variable
Costs60,000$6.00$360,000.00Fixed
Costs60,000$295,525$295,525.00Net
Income$94,475.00Requirement 2Contribution Margin per Unit
in Dollars = Selling Price – Variable CostsSelling PriceVariable
Costs Contribution Margin per Unit
$12.50$6.00$6.50Contribution Margin Ratio = Contribution
Margin/Selling PriceContribution MarginSelling
PriceContribution Margin Ratio$6.50$12.5052%Requirement
3Break-Even Point = Fixed Costs / Contribution MarginFixed
Costs Contribution MarginBreak-Even Point in Units
(Rounded)$295,52552%568,317Break-Even Point in Units X
Selling Price per Unit = Break-Even Point SalesBreak-Even
Point in UnitsSelling Price per UnitBreak-Even Point in Sales
(Rounded)568,317$12.50$45,465Requirement 4AMargin of
Safety in Units = Current Unit Sales – Break-Even Point in Unit
SalesCurrent Unit SalesBreak-Even Point in SalesMargin of
Safety in Units60,000$45,46514,535Requirement 4BMargin of
Safety in Dollars = Current Sales in Dollars – Break-Even
Point Sales in DollarsCurrent Sales in DollarsBreak-Even Point
in Dollars Margin of Safety in Dollars$750,000$568,
312.50$181,688Requirement 4CMargin of Safety as a
Percentage = Margin of Sales in Units / Current Unit
SalesMargin of Safety in UnitsCurrent Unit SalesMargin of
Safety Percentage14,53560,00024%Requirement 5Degree of
Operating Leverage = Contribution Margin / Operating
IncomeContribution MarginOperating IncomeOperating
Leverage$655,525.00$750,000.000.8740Requirement 6Units$
Per UnitTotalsSales72,000$12.50$900,000Variable
Costs72,000$6.00$432,000.00Fixed
Costs72,000295,525$295,525.00Net
Income$172,475.00Operating LeverageTimes %
IncreaseIncrease would be XX%0.87445.2245.22Prior

Income$94,475.00From Part 1Increase$78,000.00Prior Income
X XX% AboveTotal$172,475.00Requirement 7Targeted
Income = (Fixed Costs + Target Income) / Contribution
MarginFixed Costs + Target IncomeDivided by Contribution
Margin# of Units (Rounded)Fixed Costs$295,525Target
Income$78,000Total$373,525$655,525.001# of Units Above X
$ Per UnitProofRevenueXX,XXX X $XX.XX$78,000Variable
CostsXX,XXX X $X.XX$432,000Contribution
Margin$655,525Fixed Costs$295,525Net
Income$360,000Requirement 8Sales
MixCurrentSpecialtyTotalExpected Sales UnitsRevenue = Sales
X Price$750,000$900,000$1,650,000Variable Costs X
Units$360,000$432,000$792,000Contribution
Margin$655,525$655,525$1,311,050Fixed
Costs$295,525$295,525$591,050Operating
Income$539,900Prior Net Income From Requirement
1$461,900.00Additional Operating Income(Operating Income
Above Less Prior Income)$166,375.00Decision With
ExplanationThe company needs to produce more of the
umbrellas so as to increase the volume of sales that it will
record in the market. Consequently, the profits realized by the
firm will also increase. However, there is need for the costs of
production to be reduced so as to increase the net revenue of the
company.
Part IIRequirement 1Hampshire CompanyVariable Costing
Income StatementUnits$SalesX$$Variable Cost of Goods Sold:
Beginning Inventory$ Direct MaterialsX$$ Direct LaborX$$
Manufacturing OverheadX$$ Total Variable Costs$ Cost of
Good Available for Sale$ Deduct Ending InventoryX$$
Variable Costs of Goods Sold$Variable Selling
CostsX$$$Contribution Margin$Fixed Costs:Fixed
Manufacturing Costs$Fixed Administrative Costs$Operating
Income$Requirement 2Hampshire CompanyAbsorption Costing
Income StatementUnits$SalesX$$Variable Cost of Goods Sold:
Beginning Inventory$ Direct MaterialsX$$ Direct LaborX$$
Manufacturing OverheadX$$ Total Variable Costs$ Allocated

Fixed Manufacturing CostsX$$ Cost of Good Available for
Sale$ Deduct Ending InventoryX$$ Costs of Goods
Sold$Gross Margin$Fixed Costs:Variable Selling
CostsX$$Fixed Administrative Costs$Operating Income$
Part IIIRequirement 1Price Variances:(Actual Price – Standard
Price) X Actual QuantityActualStandardActual
QuantityVarianceFavorable or UnfavorableCloth$$X$Handle
Assembly$$X$Labor Price Variance$$X$Requirement
2Efficiency Variances:(Actual Quantity of Input Used –
Standard Quantity of Input Allowed for Actual Output) X
Budgeted Price of InputActualStandardStandard
PriceVarianceFavorable or UnfavorableClothXX$$(1.5 Yards
per Unit)Handle AssemblyXX$$(1 per Unit)LaborXX$$(.20 per
Unit)
Part IVCost Information From InstructionsStickCollapsibleUnits
Sold60,0003,000Selling Price$12.50$14.00Direct Material Cost
Per Unit$3.00$3.10Direct Labor Cost Per
Hour$7.50$8.00Variable MO$0.40$0.40Variable Selling
Costs$1.10$1.10Labor Hours Per Unit0.20.2Sales
Orders1201Purchase Orders503Production Runs456Material
Moves8610Machine Setups1306Machine
Hours52532Inspections20010Shipments603Activity Information
from InstructionsActivityActivity CostActivity Cost
DriverOrder Processing$35,000Number of Sales
OrdersPurchasing$36,000Number of Purchase OrdersMaterial
Handing$28,000Material MovesMachine Setup$14,000Machine
SetupsProduction$99,000Production
RunsAssembly$80,000Machine HoursInspecting$11,000Number
of InspectionsShipping$7,500Number of ShipmentsRequirement
1ActivityTotal CostsQuantity of Cost Allocation Base Overhead
Allocation RateOrder Processing$X$Purchasing$X$Material
Handing$X$Machine
Setup$X$Production$X$Assembly$X$Inspecting$X$Shipping$
X$Requirement 2Traditional CostingStick UmbrellaCollapsible
UmbrellaTotalRevenues$$$Direct Materials$$$Direct
Labor$$$Variable Overhead$$$Variable Selling

Costs$$$Allocated Fixed Overhead$$$Total Costs$$$Operating
Income$$$Operating Income %%%Per Unit Operating
Income$$Requirement 3Activity-Based CostingStick
UmbrellaCollapsible UmbrellaTotalRevenues$$$Direct
Materials$$$Direct Labor$$$Variable Overhead$$$Variable
Selling Costs$$$Order Processing Costs$$$Purchasing
Costs$$$Material Handing Costs$$$Machine Setup
Costs$$$Production Costs$$$Assembly Costs$$$Inspecting
Costs$$$Shipping Costs$$$Total Costs$$$Operating
Income$$$Operating Income %%%Per Unit Operating
Income$$Requirement 4Costs per UnitStick
UmbrellaCollapsible
UmbrellaTraditional$$ABC$$Difference$$Requirement 5
Running head: Cost-Volume-Profit Analysis
1
Cost-Volume-Profit Analysis
4
Olawale Alimi
Southern New Hampshire University
Cost Accounting – Milestone One
Cost-Volume-Profit Analysis
October 18, 2015

The cost-volume-profit analysis based on the cost
classifications, illustrate that the firm make a net income of
$94,475 before tax is imposed. The value of the contribution
margin per unit is $6.50 while the contribution margin ratio is
52%. CVP is essential when it comes to the aspect of assisting
in the management of the short-term economic plans. It is
because it helps the managers to make better decisions
regarding the ways through which the business can operate in a
more efficient way. One, it assists the managers to make precise
decisions especially when it comes to answering pragmatic
questions that are vital in the process of business analysis. For
instance, it helps the managers to get to know the breakeven
points of the company. Such knowledge is crucial for the short-
term economic goals of the company. It is because the manager
will be in a better position to tweak spending and seek ways to
increase the production of the firm to increase the revenue
realized in the business.
The CVP analysis is also much detailed, and it is mainly based
on the statistical models that make the decisions taken by the
management to be easily broken down into probabilities. It is a
move that helps to make the most informed decision in the
company. The analysis also provides a detailed snapshot of the
business activities of the company. It aids the managers to get
to know the variables that need alterations for the sake of the
future survival of the company (Albrecht, 2007).
The break-even point quantity for the company stands at 45,465
units. These are the quantity of products that the firm can
comfortably produce at the resources that are readily available
in the firm. When the company manufactures this quantity of
products, then it will not experience any shortage in the costs of
production. The break-even revenue for the firm stands at
$568,312.50. The company is breaking even because it can

easily produce these amount of products with the materials that
are available at the firm and still make profits. But, if it
produces more than these then it will incur more costs of
production and at the same time increase its revenue in the
economy. The amount produced by the firm at the moment is
what it can comfortably realize.
However, CVP analysis has certain implications for the
planning of the company. The projections are mainly based on
the cost estimates rather than the precise numbers. It is an
anomaly that can result in inaccurate projections in the
economy. They can make the firm take the unwanted path
towards the realization of better economic gains in future. Also,
the analysis mainly provides approximate answers to the hard
questions regarding ways to run the business. The answers are
not exact and, therefore, does not provide the real figures on the
operations of the firm. It implies that the managers have to
exercise a high level of extreme caution when it comes to the
process of making decisions regarding the changes that need to
be made on the financial positions and operations of the firm in
the economy (Cafferky et al., 2010).
For the CVP analysis to be precise, it has to be done for each
specific product, and it makes the entire process not only to be
cumbersome but also time-consuming. The judgments have to be
made regarding the results of the analysis after a very careful
and deliberations have been taken into account. Investigations
to ensure that the results from the statistical model are real may
include observing the employees’ daily activities and
interviewing them to get their opinions on the matter.
References
Albrecht, W. S. (2007). Accounting, concepts & applications.
Mason, Ohio: Thomson/South-Western.

Cafferky, M. E., & Wentworth, J. (2010). Breakeven analysis:
The conclusive guide to cost-volume-profit analysis. New York:
Business Expert Press.
ACC 550 Final Project Guidelines and Rubric
Overview
The final project for this course is the creation of a quantitative
analysis that includes an Excel spreadsheet, accompanied by a
memo to management.
Accountants provide management with the logistics of the
business that are crucial for daily operations and a company’s
overall success. In any business, it is of
the utmost importance to be aware of all finances and internal
processes. Cost accountants focus solely on the internal
processes of a business and are tasked
with eliminating any unnecessary costs in order to maximize
profits.
In this assessment, you have been tasked with conducting a
quantitative analysis that looks into the internal processes of a
company. Based on your analysis, you
will formulate recommendations to management that aim to
improve internal processes and increase profits for the
company.
The project is divided into three milestones, which will be
submitted at various points throughout the course to scaffold
learning and ensure quality final
submissions. These milestones will be submitted in Modules
Three, Five, and Seven. Your final submission will occur in

Module Nine.
In this assignment, you will demonstrate your mastery of the
following course outcomes:
-volume-profit (CVP) analysis based on cost
classification for planning and control of internal accounting
processes within an organization
relevant information to decision makers
the needs of an organization
planning tools for
their impact on business operations
Prompt
Conduct a quantitative analysis of a company’s internal
processes using the Hampshire Company Case Study document.
Your analysis will consist of completing
the Hampshire Company Spreadsheet and will be accompanied
by a memo to management.
Specifically, the following critical elements must be addressed:
I. Cost-Volume-Profit Analysis
Cost-volume-profit (CVP) analysis is a useful tool for
informing short-term economic planning within an organization.
In this section, a CVP analysis
will be conducted and used to inform business decisions and
recommendations.

A. Perform a CVP analysis based on cost classifications.
B. Explain how a CVP analysis can assist management with
short-term economic planning. Support your response with
examples from your
CVP analysis.
C. Accurately compute the break-even quantity and break-even
revenue.
http://snhu-
media.snhu.edu/files/course_repository/graduate/acc/acc550/acc
_550_hampshire_company_case_study.docx
http://snhu-
_550_hampshire_company_spreadsheet.xlsx
D. Determine whether the company is breaking even. What are
the CVP analysis implications on planning?
II. Inventory Management
Inventory management serves to minimize the cost to maintain
inventory and maximize returns. In this section, the company’s
financial data will be
reviewed in order to determine the optimal inventory
management system.
A. Determine an optimal cost allocation method based on the
relevant costs.
B. Describe how this method should be used by decision makers
to fulfill their responsibilities. Support your response with
examples.
C. What are the pros and cons of implementing the just-in-time

(JIT) inventory system? Do the pros outweigh the cons for this
company?
D. Explain how the just-in-time (JIT) inventory system can
benefit this organization. Defend your response.
E. Identify the inventory management method you recommend,
and explain why this method will benefit the company.
III. Benchmarking
In this section, benchmarking will be reviewed. Benchmarking
can be implemented in various ways depending on a company’s
circumstances. Your
company has decided to implement benchmarking and would
like you to research and recommend the most effective
approach.
A. What is the advantage to benchmarking in terms of
improving companies’ performance? Support your response.
B. Identify possible approaches to benchmarking. Describe
each.
C. Which benchmarking method should management adopt and
why?
IV. Alternative Costing Method
There are various costing methods available for companies to
implement. As a company grows, it may become beneficial to
consider an alternate
costing method.
A. Identify an alternative costing method that could benefit this
company, and describe the main characteristics of that method.
B. What should a company look for when trying to determine
whether they should adopt such a system?

C. Should the company adopt this alternative costing method?
Defend your response.
V. Memo to Management
Your memo to management should serve as a summary of your
quantitative analysis, reviewing the key points and
recommendations that you feel
management should be aware of.
A. Describe the overall findings of your analysis, including key
elements that management should be aware of.
B. Make a recommendation to management based on your cost
accounting analysis that will enhance business planning.
C. Recommend a performance tool to management based on
your cost accounting analysis that will improve business
operations.
You may use the following resources to help you prepare your
memo to management: Purdue OWL: Memos contains
information related to formatting a memo,
and Purdue OWL: Sample Memo presents a sample of a memo
that you can use as a guide when you format the memo for the
final project.
https://owl.english.purdue.edu/owl/resource/590/03/
https://owl.english.purdue.edu/owl/resource/590/04/
If you would like a refresher course on using various features of
Excel, sign in to Atomic Learning and type “Excel” in the
search box. This will provide you with

options to select the specific level of training that you need
(intro, intermediate, or advanced) and the specific version of
Excel that you have (e.g., 2011 or 2013).
The trainings are broken down into small, meaningful chunks.
Therefore, you should be able to find specific topics at each
level that will meet your needs.
Milestones
Milestone One: Draft of Cost-Volume-Profit Analysis
In Module Three, you will submit a draft of the cost-volume-
profit analysis (Section I of the final project), including all
critical elements as listed above. Refer to
the Hampshire Company Case Study document, as this will
provide you with details on how to complete this milestone. All
calculations for your quantitative
analysis should be completed in the Hampshire Company
Spreadsheet. You will provide a rough draft of your one- to
two-page qualitative analysis in a Word
document. The Word document must be in APA format. Once
you have completed your analysis, submit your Word and Excel
documents. This milestone will be
graded with the Milestone One Rubric.
Milestone Two: Draft of Inventory Management and
Benchmarking
In Module Five, you will submit a draft of the inventory
management and benchmarking sections of the final project
(Sections II and III, respectively), including all
critical elements as listed above. Refer to the Hampshire
Company Case Study document, as this will provide you with
details on how to complete this milestone.
All calculations for your quantitative analysis should be
completed in the Hampshire Company Spreadsheet. You will
provide a rough draft of your three- to four-

page qualitative analysis in a Word document. The Word
document must be in APA format. Once you have completed
your analysis, submit your Word and Excel
documents. This milestone will be graded with the Milestone
Two Rubric.
Milestone Three: Draft of Alternative Costing Method
In Module Seven, you will submit a draft of the alternative
costing method section of the final project (Section IV),
including all critical elements as listed above.
Refer to the Hampshire Company Case Study document, as this
will provide you with details on how to complete this milestone.
All calculations for your
quantitative analysis should be completed in the Hampshire
Company Spreadsheet. You will provide a rough draft of your
two- to three-page qualitative analysis
in a Word document. The Word document must be in APA
format. Once you have completed your analysis, submit your
Word and Excel documents. This
milestone will be graded with the Milestone Three Rubric.
Final Project Submission: Quantitative Analysis and Memo to
Management
In Module Nine, you will submit your quantitative analysis and
memo to management. It should be a complete, polished artifact
containing all of the critical
elements of the final product. It should reflect the incorporation
of feedback gained throughout the course. This submission will
be graded using the Final
Project Rubric.
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Deliverables
Milestone Deliverable Module Due Grading
One Draft of Cost-Volume-Profit Analysis Three Graded
separately; Milestone One Rubric
Two Draft of Inventory Management and
Benchmarking
Five Graded separately; Milestone Two Rubric
Three Draft of Alternative Costing Method Seven Graded
separately; Milestone Three Rubric
Final Project Submission: Quantitative
Analysis and Memo to Management
Nine Graded separately; Final Project Rubric
Final Project Rubric
Guidelines for Submission: The financial portions of your
quantitative analysis should be submitted using the Hampshire
Company Spreadsheet. The written
portions of your qualitative analysis should be submitted as a
six- to nine-page Microsoft Word document. Your memo to
management should be submitted as a
two- to three-page Microsoft Word document. Both Word
documents should use double spacing, one-inch margins, and
12-point Times New Roman font.
Sources should be cited according to APA style.

Instructor Feedback: This activity uses an integrated rubric in
Blackboard. Students can view instructor feedback in the Grade
Center. For more information,
review these instructions.
Critical Elements Exemplary Proficient Needs Improvement
Not Evident Value
Cost-Volume-Profit
Analysis: Analysis
Performs a cost-volume-profit
analysis based on cost
classifications (100%)
Performs a cost-volume-profit
analysis, but it is not based on
cost classifications (70%)
Does not perform a cost-volume-
profit analysis (0%)
5.4
Cost-Volume-Profit
Analysis: Economic
Planning
Meets “Proficient” criteria and
demonstrates a nuanced
understanding of the relationship
between CVP and short-term

planning (100%)
Explains how a CVP analysis can
assist management with short-
term economic planning and
supports response with examples
(90%)
Explains how a CVP analysis can
assist management with short-
term economic planning but does
not support response with
examples, or explanation is
cursory or inaccurate (70%)
Does not explain how a CVP
analysis can assist management
with short-term economic
planning (0%)
5.4
Cost-Volume-Profit
Analysis: Break-Even
Accurately computes the break-
even quantity and break-even
revenue (100%)
Computes the break-even
quantity and break-even revenue,
but there are issues with
accuracy (70%)
Does not compute the break-

even quantity and break-even
revenue (0%)
5.4
http://snhu-
media.snhu.edu/files/production_documentation/formatting/rubr
ic_feedback_instructions_student.pdf
Cost-Volume-Profit
Analysis: Implications
uses industry-specific language to
establish expertise (100%)
Determines whether the
company is breaking even and
identifies cost-volume-profit
analysis implications for planning
(90%)
company is breaking even but
does not identify cost-volume-
profit analysis implications on
planning, or determination or
identification contain issues with
accuracy (70%)
Does not determine whether the
company is breaking even (0%)

5.4
Inventory Management:
Relevant Costs
between optimal cost allocation
and relevant costs (100%)
Determines an optimal cost
allocation method based on the
relevant costs (90%)
Determines an optimal cost
allocation method, but
determination is not based on
the relevant costs (70%)
Does not determine an optimal
cost allocation method (0%)
5.4
Method
Meets “Proficient” criteria, and
description is exceptionally clear
and contextualized (100%)
Recommends how the method
should be used by decision

makers to fulfill their
responsibilities and supports
response with examples (90%)
Recommends how the method
should be used by decision
makers to fulfill their
responsibilities but does not
support response with examples
(70%)
Does not recommend how the
method should be used by
decision makers (0%)
5.4
Pros and Cons
description is well supported with
examples (100%)
Identifies the pros and cons of
implementing JIT and describes
whether the pros outweigh the
cons for this company (90%)
Identifies the pros and cons of
implementing JIT but does not
describe whether the pros
outweigh the cons for this
company (70%)

Does not identify the pros and
cons of implementing JIT (0%)
5.4
Inventory System
explanation is exceptionally clear
Explains how the JIT inventory
system can benefit the
organization and defends
response (90%)
Explains how the JIT inventory
system can benefit the
organization but does not defend
response (70%)
Does not explain how the JIT
inventory system can benefit the
organization (0%)
5.4
Inventory
uses specific examples to support
description (100%)

Identifies the inventory
management method
recommended and explains why
this method will benefit the
company (90%)
Identifies the inventory
management method
recommended but does not
explain why this method will
benefit the company (70%)
Does not identify the inventory
management method that is
recommended (0%)
5.4
Benchmarking:
Advantage
support includes specific
examples (100%)
Identifies an advantage of
benchmarking and supports
response (90%)
Identifies an advantage of
benchmarking but does not
support response (70%)
Does not identify an advantage of

benchmarking (0%)
5.4
Benchmarking:
Approaches
shows a keen insight into the
variety of benchmarking
approaches (100%)
Identifies different approaches to
benchmarking and describes each
(90%)
benchmarking but does not
describe each (70%)
Does not identify different
approaches to benchmarking
(0%)
5.4
Benchmarking:
Benchmarking Method
determination is well supported

and plausible (100%)
Determines which benchmarking
method management should
adopt and justifies response
(90%)
Determines which benchmarking
method management should
adopt but does not justify
response (70%)
Does not determine which
benchmarking method
management should adopt (0%)
5.4
Alternative Costing
Method: Main
Characteristics
displays a keen insight into the
variety of alternative costing
systems (100%)
Identifies alternative costing
systems and describes the main
characteristics of each (90%)
Identifies alternative costing
systems but does not describe
the main characteristics of each,
or identification or description

contain inaccuracies (70%)
Does not identify alternative
costing systems (0%)
5.4
Alternative Costing
Method: Adopt
of the needs of a company and an
alternative costing system (100%)
Determines what the company
should look for when deciding to
adopt an alternative costing
system and supports response
with examples (90%)
Determines what the company
should look for when deciding to
adopt an alternative costing
system but does not support
response with examples (70%)
Does not determine what the
company should look for when
deciding to adopt an alternative
costing system (0%)
5.4

Alternative Costing
Method: Method
determination is well supported
and plausible (100%)
company should adopt the
alternative costing method and
defends response (90%)
alternative costing method but
does not defend response (70%)
Does not determine whether the
alternative costing method (0%)
5.4
Memo to Management:
Findings
description is exceptionally clear
Describes the overall findings of
analysis and identifies key
elements that management
should be aware of (90%)

Describes the overall findings of
analysis but does not identify key
elements that management
should be aware of (70%)
Does not describe the overall
findings of analysis (0%)
5.4
Memo to Management:
Business Planning
recommendation is well
supported and plausible (100%)
Makes recommendation to
enhance business planning based
on cost accounting analysis (90%)
Makes recommendation to
enhance business planning, but
recommendation is not based on
cost accounting analysis (70%)
Does not make recommendation
to enhance planning (0%)
5.4
Memo to Management:
Business Operations

recommendation uses industry-
specific language to establish
expertise (100%)
Recommends a performance tool
to improve business operations
based on cost accounting analysis
(90%)
Recommends a performance tool
to improve business operations,
but recommendation is not based
on cost accounting analysis (70%)
Does not recommend a
performance tool to improve
business operations (0%)
5.4
Articulation of Response Submission is free of errors
related to citations, grammar,
spelling, syntax, and organization
and is presented in a professional
and easy to read format (100%)
Submission has no major errors
spelling, syntax, or organization
(90%)
Submission has major errors

that negatively impact readability
and articulation of main ideas
(70%)
Submission has critical errors
that prevent understanding of
ideas (0%)
2.8
Earned Total 100%
ACC 550 Milestone Three Guidelines and Rubric
Overview: The final project for this course is the creation of a
quantitative analysis that includes an Excel spreadsheet
accompanied by a memo to management.
profits.
For the final project, you have been tasked with conducting a

company. Based on your analysis,
you will formulate recommendations to management that aim to
company.
Prompt: For this milestone, submit a draft of the alternative
costing method section of the final project (Section IV),
including all of critical elements listed below.
Refer to the Hampshire Company Case Study document, as this
provides details on how to complete this milestone. All
calculations for your quantitative analysis
should be completed in the Hampshire Company Spreadsheet.
You will provide a rough draft of your qualitative analysis in a
Word document.
IV. Alternative Costing Method
There are various costing methods available for companies to
implement. As a company grows, it may become beneficial to
consider an alternate costing
method.
A. Identify an alternative costing method that could benefit this
company, and describe the main characteristics of that method.
B. What should a company look for when trying to determine
whether they should adopt such a system?
C. Should the company adopt this alternative costing method?
Defend your response.

Guidelines for Submission: The written portion of this
submission must be a two- to three-page Word document with
12-point Times New Roman font, double
spacing, and one-inch margins. Sources should be cited
according to APA style. Use the Hampshire Company
Spreadsheet to submit your calculations as an Excel file.
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Rubric
Critical Elements Proficient (100%) Needs Improvement (75%)
Not Evident (0%) Value

Alternative Costing
Method: Main
Characteristics
Identifies alternative costing systems and
describes the main characteristics of each
Identifies alternative costing systems but
does not describe the main characteristics of
each, or identification or description contain
inaccuracies
Does not identify alternative costing systems 30
Alternative Costing
Method: Adopt
Determines what the company should look
for when deciding to adopt an alternative
costing system and supports response with
examples
Determines what the company should look
for when deciding to adopt an alternative
costing system but does not support
response with examples
Does not determine what the company
should look for when deciding to adopt an
alternative costing system
30
Alternative Costing
Method: Method

Determines whether the company should
adopt the alternative costing method and
defends response
Determines whether the company should
adopt the alternative costing method but
does not defend response
Does not determine whether the company
should adopt the alternative costing method
30
Articulation of
Response
Submission has no major errors related to
citations, grammar, spelling, syntax, or
organization
Submission has major errors related to
organization that negatively impact
readability and articulation of main ideas
Submission has critical errors related to
organization that prevent understanding of
ideas
10
Earned Total 100%

ACC 550 Milestone Two Guidelines and Rubric
profits.
company.
Prompt: For this milestone, submit a draft of the inventory
management and benchmarking sections of the final project
(Sections II and III, respectively),
including all the critical elements listed below. Refer to the
Hampshire Company Case Study document, as this provides
details on how to complete this
milestone. All calculations for your quantitative analysis should
be completed in the Hampshire Company Spreadsheet. You will
provide a rough draft of your
qualitative analysis in a Word document.

II. Inventory Management
Inventory management serves to minimize the cost to maintain
inventory and maximize returns. In this section, the company’s
financial data will be
reviewed in order to determine the optimal inventory
management system.
A. Determine an optimal cost allocation method based on the
relevant costs.
B. Describe how this method should be used by decision makers
to fulfill their responsibilities. Support your response with
examples.
C. What are the pros and cons of implementing the just-in-time
(JIT) inventory system? Do the pros outweigh the cons for this
company?
D. Explain how the just-in-time (JIT) inventory system can
benefit this organization. Defend your response.
E. Identify the inventory management method you recommend,
and explain why this method will benefit the company.
III. Benchmarking
In this section, benchmarking will be reviewed. Benchmarking
can be implemented in various ways depending on a company’s
circumstances. Your
company has decided to implement benchmarking and would
like you to research and recommend the most effective
approach.
A. What is the advantage to benchmarking in terms of
improving companies’ performance? Support your response.

B. Identify possible approaches to benchmarking. Describe
each.
C. Which benchmarking method should management adopt and
why?
http://snhu-
http://snhu-
submission must be a three- to four-page Word document with
12-point Times New Roman font, double

Inventory
Management:
Relevant Costs
Determines an optimal cost allocation method
based on the relevant costs
Determines an optimal cost allocation method,
but determination is not based on the relevant
costs
Does not determine an optimal cost allocation
method
11
Inventory
Management:
Method
Recommends how the method should be used
by decision makers to fulfill their
responsibilities and supports response with
examples
Recommends how the method should be used
by decision makers to fulfill their

responsibilities but does not support response
with examples
Does not recommend how the method should
be used by decision makers
11
Inventory
Management:
Pros and Cons
Identifies the pros and cons of implementing
JIT and describes whether the pros outweigh
the cons for this company
Identifies the pros and cons of implementing
JIT but does not describe whether the pros
outweigh the cons for this company
Does not identify the pros and cons of
implementing JIT
11
Inventory
Management:
Inventory
System
Explains how the JIT inventory system can
benefit the organization and defends response
Explains how the JIT inventory system can
benefit the organization but does not defend

response
Does not explain how the JIT inventory system
can benefit the organization
11
Inventory
Management:
Inventory
Identifies the inventory management method
recommended and explains why this method
will benefit the company
Identifies the inventory management method
recommended but does not explain why this
method will benefit the company
Does not identify the inventory management
method that is recommended
11
Benchmarking:
Advantage
Identifies an advantage of benchmarking and
supports response
Identifies an advantage of benchmarking but
does not support response
Does not identify an advantage of
benchmarking

11
Benchmarking:
Approaches
benchmarking and describes each
benchmarking but does not describe each
Does not identify different approaches to
benchmarking
11
Benchmarking:
Benchmarking
Method
Determines which benchmarking method
management should adopt and justifies
response
Determines which benchmarking method
management should adopt but does not justify
response
Does not determine which benchmarking
method management should adopt
11
Articulation of

Response
organization
organization that negatively impact readability
and articulation of main ideas
ideas
12
Earned Total 100%
http://snhu-
ACC 550 Milestone One Guidelines and Rubric

profits.
company.
Prompt: For this milestone, submit a draft of the cost-volume-
profit analysis (Section I of the final project), including all of
the critical elements listed below. Refer
to the Hampshire Company Case Study document, as this
provides details on how to complete this milestone. All
calculations for your quantitative analysis
should be completed in the Hampshire Company Spreadsheet.
You will provide a rough draft of your qualitative analysis in a
Word document. Once you have
completed your analysis, submit your Word and Excel
documents.
I. Cost-Volume-Profit Analysis
Cost-volume-profit (CVP) analysis is a useful tool for
informing short-term economic planning within an organization.
In this section, a CVP analysis will be
conducted and used to inform business decisions and
recommendations.

A. Perform a CVP analysis based on cost classifications.
B. Explain how a CVP analysis can assist management with
short-term economic planning. Support your response with
examples from your CVP
analysis.
C. Accurately compute the break-even quantity and break-even
revenue.
D. Determine whether the company is breaking even. What are
the CVP analysis implications on planning?
submission must be a one- to two-page Word document with 12-
point Times New Roman font, double
http://snhu-

http://snhu-
http://snhu-
Rubric
Cost-Volume-Profit
Analysis: Analysis
Performs a cost-volume-profit analysis based
on cost classifications
Performs a cost-volume-profit analysis, but it
is not based on cost classifications
Does not perform a cost-volume-profit
analysis
22
Cost-Volume-Profit
Analysis: Economic

Planning
Explains how a CVP analysis can assist
management with short-term economic
planning and supports response with
examples
Explains how a CVP analysis can assist
management with short-term economic
planning but does not support response with
examples, or explanation is cursory or
inaccurate
Does not explain how a CVP analysis can
assist management with short-term economic
planning
22
Cost-Volume-Profit
Analysis: Break-
Even
Accurately computes the break-even quantity
and break-even revenue
Computes the break-even quantity and
break-even revenue, but there are issues with
accuracy
Does not compute the break-even quantity
and break-even revenue
22

Cost-Volume-Profit
Analysis:
Implications
Determines whether the company is breaking
even and identifies cost-volume-profit
analysis implications for planning
Determines whether the company is breaking
even but does not identify cost-volume-profit
analysis implications on planning, or
determination or identification contain issues
with accuracy
Does not determine whether the company is
breaking even
22
Articulation of
Response
organization
organization that negatively impact
readability and articulation of main ideas
ideas

Cost-Volume-Profit Analysis Explained for Umbrella Manufacturing Company

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