MotoMart Income Statement

Requirements
The project requires five steps to be presented.
Step 1 – Provide comments on a 5-year Income Statement.
Step 2 – Discuss patterns in expense items.
Step 3 – Identify High/Low activity levels.
Step 4 – Compute cost equations.
Step 5 – Summarize your findings.
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In one Word document, provide individual sections for each Step. This Word document along with the Excel file (described below) will be uploaded when you click on the Take Exam button on your Student Portal to submit your project (described under “Submitting YourAssignment” later in the instructions).
This Senior Capstone project highlights your knowledge and the skills you have developed over the course of your education. There is  nothing “new” to be learned here. The knowledge and skills required for this project include English Composition, Financial Accounting, Managerial Accounting, Business Statistics and the abilities to think critically and to present your work in a professional manner. If you are unsure or don’t understand something about the project, then go back to your previous subjects to review. For example, if you don’t remember how to use the High/Low Method, the revisit your Managerial Accounting to refresh your memory on how to use the High/Low Method

Remember, there is nothing “new” here. Everything about this project you should already know how to do. At the beginning of the assignment, on the right-hand side under "Optional Study Materials" select the "PPMC Excel Spreadsheet" menu item to download the required Excel spreadsheet. The Excel file provides a detailed example of what needs to be  Copyright Penn Foster, Inc. 2019
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Page 19 done for one of the expenses in order to fill out the figures required in Steps 3 & 4. You will include this Excel file as part of your project submission along with the Word document you create to present this project. There is a “60 Months” worksheet that has the 60 months of data already entered. There is also a “Sample” worksheet that an example of how to calculate the R-sq. There is a “PLOT – SALARY” worksheet that shows how the FC, VC and R-sq figures are calculated for Salary. There is also a “high&low” worksheet for help with the high/low method in Step 3. Complete and include the Excel spreadsheet. You will need to create new worksheets for each of the other expenses following the example to calculate the figures needed for Table 5.
Operating Profits and Semi-Fixed Expenses
Step 1
First, using Tables 2–4, note the pattern of operating profits (or losses) over the five-year period. Then focus only on the semi-fixed expenses contained in Table 2. Do any amounts appear to be odd? (Think about whether the figures are right or wrong. What is it about the individual numbers that is not “right”?) Next, briefly comment on the five-year pattern or trend for operating profit/loss measures. You should be able to respond to this step in a few well-written sentences. Copyright Penn Foster, Inc. 2019
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Step 2
Focus only on the detailed semi-fixed expense contained in Table 3. Are there any unusual or odd patterns you might note in this detailedfinancial data? There are 5 expenses that have an oddity about them which doesn’t make sense. Similar to Step 1, what is it about the individual numbers that are not “right”? There are 4 expenses that “stick out” as not being correct and one that has an unusual pattern. attention. You should be able to respond to this requirement in a few well-written sentences. Briefly comment on only the most obvious or apparent measures or patterns, by expense item.
Step 3
Identify the high and low measures in each column, just as you would in preparation for the application of the high-low method or technique For example, in Table 3 the high measure for the cost driver (NRVS is 280 NRVS in month 13 and the low measure is 31 NRVS in month 12. Repeat this process for each of the eight separate semi-fixed expense columns and also for the total expense column. Insert a table for Step 3 to present your findings. The table should have thre columns;
1. Expense
2. High Figure
3. Low Figure
After the high and low measures have been identified in each column, Copyright Penn Foster, Inc. 2019
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try to match each expense column’s high and low measure, separately, to the highs and lows identified in the NRVS column. They won’t match. Don’t try to correct the data, but comment on the potential for application of the high-low technique. What happens when the high and low activity level doesn’t match the high and low expense measure? Does this prevent you from correctly applying the high-low technique? Don’t overanalyze this data, because there’s a problem with it and you don’t have sufficient information to correct it. Merely summarize your observations and unsuccessful attempts to match the high and low NRVS months (identified above), separately, with each of the high and low expense measure months. You should be able to do this in a very few well-written sentences.
Step 4
Using the Excel file "Exam 500896 - Motomart Excel Spreadsheet" as per the instructions found above under the "Project Requirements", reproduce and complete the following Table 5 and answer the four questions. The Excel file provides an example of how to arrive at the figures that need to be entered into the Table. You will create new worksheets for each of the remaining expenses. Do the work to arrive at the figures for each expense. Be sure to include the Excel file as part of your submission to "backup" the data presented in the Table in the Word document being submitted. The Excel spreadsheet, while it will be included in your submission for Copyright Penn Foster, Inc. 2019
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the project, will not be graded. It is supporting documentation for what is being presented in the Word document. Only the information that i in the Word document will be graded. The FC and VC should be rounded to the nearest dollar. The R-sq is a percentage figure carried out to 2 decimal places.
Table 5
Column
Expense
1Salaries
2Vacation
3Advertising and training
4Supplies/tools/laundry
5Freight
6Vehicles
7Demonstrators
8Floor planning
FCVCR-sq
$106,866–$1104.10%
Computed total
9
Total
Complete the cost equations for the table. Use the R-squared as the single measure of “goodness of fit.” Don’t attempt to improve your  results with the elimination of “outliers” or “influential outliers.” As you complete Table 5, answer the following questions:
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1. What problems did you encounter?
2. Are the R-squared measures high or low?
3. Are the slopes negative or positive?
4. Are your conclusions consistent with those from the high-low effort?
Step 5
Summarize your findings by answering the following questions:
1. Can the Motomart data be used to prepare a reliable financial forecast? Why or why not?
2. If Motomart is included in the very large database used to prepar the financial forecast that supports the relocation of Motomart closer to Existing Dealer, what concerns might present themselves with respect to the remainder of the database used for this forecast?
3. Would you rely on this forecast?
Writing Guidelines
Refer to the “Submitting Your Work” section at the end of this book for details on submission requirements for the Motomart Case assignment.