Accounting Assignment

Accounting Assignment

Question 2: Decision making process (15 marks)

Decision making is the choice of the possible courses of action. The solution is a product of managerial work. Management solution refers only to the completion of a complex multi-step process in which first describes the problem situation, and then generated and evaluated different methods of action. Principles of effective construction processes for developing solutions in various fields and at different levels of government is one. This allows the particular scheme of the algorithm to find a solution. To problem situations can give you three reasons: the deviation of the actual parameters of the target, the possibility of such a deviation in the future and change management needs (Campanella J., 1999).

The problem that Andrew is facing is the choice between the three machines that are available in the market for manufacturing medals. The decision making models initially process is to identify the problem which has been identified and generating solution has also been recognized. The third step is the selection of the alternative solution. The following calculation will determined which machine is beneficial for Andrew and will offer him the highest profit (Davis C., Davis E., 2011).

Machine

Type

Machine Cost

Sale Price per Medal

Cost Per Medal

Predicted Monthly Sales of Medals

1. Machine I

25, 000

50.00

35.00

95 = 70%, 55 = 30%

2. Machine II

20, 000

42.00

30.00

110 = 65%, 60 = 35%

3. Machine III

18, 000

35.00

25.00

120 = 75%, 90 = 25%

1. Machine I

95 = 70%

55 = 30%

Income statement

Income statement

Revenue (95 medals at $50)

4, 750

Revenue (55 medals at $50)

2, 750

Cost of Medal

3, 325

Cost of Medal

1, 925

Gross income

1, 425

 

Gross income

825

2. Machine II

110 = 65%

60 = 35%

Income statement

Income statement

Revenue (110 medals at $42)

4, 620

Revenue (60 medals at $42)

2, 520

Cost of Medal

3, 300

Cost of Medal

1, 800

Gross income

1, 320

 

Gross income

720

3. Machine III

120 = 75%

90 = 25%

Income statement

Income statement

Revenue (120 medals at $35)

4, 200

Revenue (90 medals at $35)

3, 150

Cost of Medal

3, 000

Cost of Medal

2, 250

Gross income

1, 200

 

Gross income

900

After reviewing the machines, machine 1 Gross income would be $1425 which has 70% chances while 30% chances are that $825 income will be generated in a month. However, Machine II represent that 65% chances are there that income would be generated with the sale of 110 medial at cost $42 is $1320 while 35% chances are there that income would be $720. Machine III, costing $ 18, 000 with sales price of $35 and cost $25, 75% are chances that income would be $1200 while 25% chances are there that income $900. Now the decision will be based on the yearly base (Don R., Maryanne M., & Guan L., 2007).

Machine Type

Initial amount

Machine Cost

Revenue per month

Revenue per year

Profit

Amount left after Investment

Interest on investment

Total profit

1. Machine I

$35, 000

25, 000

825

9, 900

-15,100

10, 000

600

-14, 500

 

2. Machine II

$35, 000

20, 000

720

8, 640

-11360

15, 000

900

-10, 460

 

3. Machine III

$35, 000

18, 000

900

10, 800

-7200

17, 000

1, 020

-6, 180

Machine Type

Initial amount

Machine Cost

Revenue per month

Revenue per year

Profit

Amount left after Investment

Interest on investment

Total profit

 

 

1. Machine I

35, 000

25, 000

1, 425

17, 100

-7, 900

10, 000

600

-7, 300

 

2. Machine II

35, 000

20, 000

1, 320

15, 840

-4, 160

15, 000

900

-3, 260

 

3. Machine III

$35, 000

18, 000

1, 200

14, 400

-3, 600

17, 000

1, 020

-2, 580

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