Referencing Styles : Harvard QUESTION 1 (7 + 3 + 3 + 7 = 20 marks) Best Real Estate Agency has opened an office in Swanston Street. It generates its revenue through charging a commission (agency revenue) of 4.5% of the ultimate sale price achieved on behalf of the customer. The average monthly property sales is \$700,000 and the Estate agent generates its revenue via charging a commission (agency revenue) of 4.5% of the gross property sales. Fixed monthly costs are office rent (\$3,400), depreciation of office furniture (\$39 … View More QUESTION 1 (7 + 3 + 3 + 7 = 20 marks) Best Real Estate Agency has opened an office in Swanston Street. It generates its revenue through charging a commission (agency revenue) of 4.5% of the ultimate sale price achieved on behalf of the customer. The average monthly property sales is \$700,000 and the Estate agent generates its revenue via charging a commission (agency revenue) of 4.5% of the gross property sales. Fixed monthly costs are office rent (\$3,400), depreciation of office furniture (\$390), electricity (\$640), a multi-line telephone system (\$380), computer cabling connection (\$480) and salary of the office manager (\$7800). Variable costs include commissions for the sales staff (50% of agency revenue), supplies and printing (10% of agency revenue), and usage costs for phone and computers (7% of agency revenue). The average property sales per month are expected to be \$700,000 and the agency takes 4.5% of gross property sales, as agency revenue. REQUIRED (a) Calculate the estate agencys monthly break even commission / agency revenue in dollars. (b) Calculate the commission / agency revenue needed to earn monthly net profit of \$10,000. (c) From your answer in (b) above what is the gross property sales required to generate commission / agency revenue to make a \$10,000 profit above breakeven. (d) When the managing partner of Best Real Estate Agency is shown your CVP calculations, he is quite dismissive. He says it is largely useless information because the reality of the real estate business is much more complex and dynamic with the model based on unrealistic assumption. Prepare a detailed response to the managing partner, identifying model assumptions and potential use of the model. (100 words limit) QUESTION 2 (12 + 5 + 3 = 20 marks) XYZ Packaging Ltd purchased equipment for \$310,750 on 1 January 2015 for use in its parcel packaging business. XYZs management estimates that the equipment will be technologically obsolete in 5 years, at which time it will have a residual value of \$26,000. The equipment will produce 60,000 batches of parcels in the first year, with annual production decreasing by 5,000 batches during each of the next 4 years (i.e., in the fifth year the equipment will be down to 40,000 batches of production capability). REQUIRED (a) For each of three depreciation methods (straight-line, units-of-production, and reducing balance), prepare a depreciation schedule from acquisition showing the following balances each year for the 5 years: asset cost, depreciation expense, accumulated depreciation and asset carrying amount. For the reducing balance method, use a depreciation rate based on 45%. (b) Depreciation is a concept used in accrual accounting. Of the depreciation methods above discuss the reasons for selecting one alternative method of depreciation over another as dictated by accrual accounting and the matching principle. (60 words limit) (c) Depreciation allocates cash to eventually replace the asset once it has reached the end of its useful life. Discuss, stating whether you agree or disagree with the statement and why? (40 words limit) QUESTION 3 (8 + 5 + 7 = 20 marks) Southern Star Company is considering replacing an existing piece of machinery with a more sophisticated machine. The existing machine was purchased 3 years ago at a cost of \$50,000 and is being depreciated to a zero residual value over 7 years. This machine has 4 years of usable life remaining and c