bbac501 project management johnson set up valleyview playgyms company 623133

Group Assignment (Group of Four) BBAC501-Project Management Accounting Due date: Session 5.2 Total Marks 25 (18+7) Problem # 1 Marks (9+9=18) On 1 January, Johnson set up Valleyview Playgyms Company to manufacture and sell children’s outdoor playgyms. He was an engineer by profession but he understood the importance of accounting information and kept his accounting records meticulously throughout the year. At the end of the year he prepared the following income statement for the year: Valleyview Playgyms Company Income Statement for the year ended 31st December, 2012 Sales??450,000??Less Operating expenses:????Purchase of Raw Material? $200,000???Purchase of factory supplies? 10,000???Wages of the factory employees (who worked directly on the playgyms)? 75,000???Wages for other factory employees? 10,000???Managers’ salary? 40,000???Office staff salaries? 10,000???Sales Staff salaries? 22,000???Advertising? 10,000???Administrative Expenses? 8,000???Clearing costs? 5,000???Rent? 25,000???Electricity? 4,500???Purchase of factory equipment? 140,000???Purchase of Office Equipment? 10,000???Purchase of Sales vehicles? 15,000???Total Operating expenses??584,500??Net Loss??$(134,500)?? Although disappointed, Johnson was not surprised. He knew that expenses were higher than sales because, throughout the year, he had been able to generate a cash surplus. His bank overdraft had blown out and his bank manager has asked him to present his financial statements for 2012 to the bank. Required: You are the bank’s accountant and the bank manager has asked you to: Review the performance of Valleyview Playgyms in 2012 and make a recommendation as to whether Johnson’s overdraft facility should be cancelled. Prepare a report for Johnson explaining the errors he made in his income…