management accounting applications
Paper details:
SHEFFIELD BUSINESS SCHOOL
Management Accounting Applications 25-5002-00L
REASSESSMENT WORK 2015/16
The Reassessment Task One Consists of Coursework Only
You are only required to complete the task that you are referred in (you have not attained 40%) please check My Student Record for this information.
Submission:
Referral coursework to be handed in to the Sheffield Business School Student Help and Information Point Reception Level 1 Stoddart Building by 3.30pm on Friday 15th July 2016.
Management Accounting Applications Refer / Defer Coursework 15/16
Section A is Compulsory
Answer THRE out of Four Questions from Section B
Section A
Q1.1
MX1uses absorption costing for the recovery of overheads based on budgeted machine hours. It produces one type of product only. The budget and actual performance for the month of May was as follows.
Budget Actual
Overheads £2,400,000 £2,480,000
Labour Hours 85,000 83,000
Machine Hours 40,000 42,000
Output in Units 60,000 62,000
What was the budgeted overhead absorption rate?
a) £60.00
b) £28.23
c) £72.60
d) £63,50
e) £80,00
f) None of the above
Q1.2
USING THE DATA FROM QUESTION 1
What is the amount of overhead under / over absorbed for the period
a) £80,000 under-absorbed
b) £120,000 over-absorbed
c) £0
d) £2833.33 under-absorbed
e) £15,000 over-absorbed
f) None of the above
Q 1.3
MKK Ltd produces three products, X, Y and C. Each of the products can be sold at the point of separation or further processed. The joint processing cost is £200,000 for the period. Data for the last period is as follows:
Products Output in Ltrs Selling Price per unit at Split off Further Processing Cost per unit Selling Price per unit after further processing
X 6,000 £15.00 £5.00 £21.00
Y 8,000 £15.00 £2.00 £18.00
Z 4,000 £18.00 £5.00 £22.00
If the firm uses sales revenue at separation point to apportion joint costs what would be the profit or loss for each product?
Products X Y Z
A 90,000.00 120,000.00 72,000.00
B 28,000.37 30,355.37 34,000.78
C 36,400.00 22,400.75 38,700.00
D 26,170.21 34,893.62 20,936.17
E 43,700.27 38,745.62 23,379.62
Q1.4
If the firm uses net realizable value after further processing to apportion joint costs what would be the joint cost allocated to each product? (work to 2 decimal places)
Products X Y Z
A 30,000.00 16,000.00 20,000.00
B 96,000.00 128000.00 68,000.00
C 26,378.65 39,618.74 12,893.53
D 30,246.58 40,328.77 21,424.66
E 23,737.63 62,895.04 13,367.33
Q 1.5
What is the maximum profit the company can earn in the period?
a) £82,000.00
b) £92,000.00
c) £296,000.00
d) £96,000.00
e) £358,000.00
Q1.6
TDK retailing sets a profit target for each of its retail outlets. The Bolton had the following sales and costs figures for last year.
Sales Revenue £6,000,000
Total Variable Cost £4,500,000
Total Fixed Costs £1,000,000
If the profit target for next year is £240,000 what sales revenue must the Bolton store achieve to meet this target?
a) £5,500,000
b) £4,960,000
c) £2,400,000
d) £3,500,000
e) £1,500,000
Q 1.7
PBY Ltd produces three products. The budget sales and budget costs for each product are as follows;
Product X Y Z
Revenue 40,000 35,000 80,000
Variable costs 20,000 10,000 55,000
*Fixed costs 10,000 20,000 30,000
Profit 10,000 5,000 -5,000
* 50% of the fixed costs are avoidable if a product is dropped.
If product Z is dropped the firm’s profit will be:
a) £20,000
b) £0
c) £10,000
d) £40,000
e) £15,000
Q1.8
X Ltd imports and sells one product. The management accountant is currently reviewing the sales variances for the month of August. The following data has been provided.
Standard per Unit Actual Per Unit
Selling Price £35.00 £37.00
Cost £25.00 £27.00
The budgeted sales volume for August was 3,000 units. The actual sales volume for August was 3,100 units.
What is the total sales margin variance for August?
a) £8,400 favourable
b) £6,400 adverse
c) £2,500 adverse
d) £3,700 favourable
e) £7,200 favourable
Q 1.9
USING THE DATA FROM QUESTION 1.8
What are sales price and sales volume variances for May?
Sales Price Variance Sales Volume Variance
a) £6,200 favourable £1,000 favourable
b) £7,200 adverse £0
c) £7,200 favourable £2,000 favourable
d) £2,000 favourable £1,000 adverse
e) £1,000 adverse £6,200 favourable
Q 1.10
Add the following missing words to the statement below
capacity
difference
measure
cost
resources
supplying
ABC systems are models of…………. consumption. They ……………. the cost of using resources and not the cost of …………………. resources. The ……………………… between the cost of resources supplied and the cost of resources used represents the…………………………. of unused …………………….
Section B
Question 2:
GoExpert Ltd produces a helmet video camera for cyclists. At its current price of £150 demand is poor, last year they sold 150,000 units. The variable costs per unit are as follows:
Design £35
Casing £45
Technical Components £35
Fixed Costs are:
Marketing £300,000
Administration £1,860,000
Other Overheads £3,000,000
The capital employed in plant and equipment is £9,900,000. The firm’s target return on capital employed is 20%.
To improve sales marketing have undertaken target pricing research. They asked customers what importance and value they placed on the following three features.
The results were as follows:
Feature (see note) Importance Value
Design 0.40 £33.00
Casing 0.25 £60.00
Technical Components 0.35 £42.00
Note: the features relate to variable costs. With the correct price marketing believes they could sell 178,500 units per year.
Required
1. At the current price and costs calculate, the volume of sales required to achieve the firm’s profit target
(4 marks)
2. Using the target pricing and costing information and with revised sales of 178,500 units per year calculate:
– The target price per unit (1 mark)
– The required profit per unit (2 marks)
– The total cost per unit (1 mark)
– The fixed cost per unit (1 mark)
– The savings required on the cost of Design (2 marks)
– The savings required on the cost of Casings (2 marks)
– The savings required on the cost of Quality (2 marks)
3. Comment on your results from parts 1 and 2 (10 marks)
(Total 25 marks)
Question 3:
SAMCRO Plc produces and sells many products. The following standard selling price and standard costs relate to one unit of a product called DT.
Direct materials: 2 kg at £6.50 per kg
Direct labour: 30 minutes at £12.00 per hour
Fixed production overheads: £12.00 per direct labour hour
Selling price: £50.00
Budgeted profit for DT in period 1 was £25,000.
The actual results for period 1 were as follows:
Sales revenue of £60,000 was received from 1,500 units produced and sold
Direct materials of 4,600 kg were purchased and used at a cost of £20,240
Direct labour cost was £8,715 for 1,050 labour hours worked
Fixed costs of £16,000 were incurred
Required:
1. Produce an operating statement that reconciles budgeted profit and actual profit for period 1. The operating statement should clearly identify the following variances:
(1) Sales profit volume variance
(2) Sales price variance
(3) Direct material price and usage variances
(4) Direct labour rate and efficiency variances
(5) Fixed production overhead expenditure and volume variances
(15 marks)
2. Discuss how analysis of the existing variances into operational and planning variances might improve the usefulness of the information provided by the operating statement in part (a) above, and explain what additional information would be needed by Samcro Plc on order to prepare operational and planning variances for period 1.
(10 marks)
(Total: 25 marks)
Question 4:
Acer Ltd produces three products, P1, P2 and P3. The standard costs per unit are as follows:
Product P1 P2 P3
£ £ £ £
Materials 110 95 105
Labour Hours Machining 45 37.50 15
Labour Hours Assembly 10 30 20
Fixed Overheads 500,000
The Marketing Department has estimated that demand and selling prices for the coming year will be:
Product P1 P2 P3
Selling Price £250 £225 £200
Demand in units 4,000 6,000 5,500
The Production Department has however advised that labour hours for machining will be limited to 60,000 hours for the coming year. Labour rates of pay for the coming year are as follows, machining £7.50 assembly £5.00
Required:
1. Calculate the optimum production plan for the coming year it the firm does not use Sung Ltd
(6 marks)
2. Based on your answer from part 1calculate the total contribution per product and the firm’s total profit
(6 marks)
The production department has located a firm, Sung Ltd, to which work could be subcontracted; they have quoted the following prices for producing the three products.
Product P1 P2 P3
Purchasing Price £200 £180 £160
3. Advise the firm on how it should use the services of the subcontractor Sung Ltd to meet the expected demand for its three products. In answering the question you must show:
– if any product should be subcontracted and why
– the total contribution per product and total profit for the firm based on your revised production programme.
(7 marks)
4. From a marketing point of view what are dangers associate with subcontracting the manufacture of a firm’s products.
(6 marks)
(Total: 25 marks)
Question 5:
Spotting Ltd produces a range of ground coffee for commercial use within cafés and restaurants. The company is looking to extend its business and is considering bidding for the franchise to operate a coffee bar within a local shopping centre.
Research suggests that over the one-year period of the franchise, income and costs are likely to be:
Sales Revenue (£) Probability
40,000 0.1
60,000 0.2
80,000 0.4
100,000 0.2
120,000 0.1
Variable Costs £ Probability
25,000 0.2
30,000 0.5
40,000 0.3
The franchise licence cost will be £35,000.
Required:
1. Prepare a probability distribution table and using this table, calculate the probability of:
(1) Not making a loss;
(2) Earning a profit of at least £8,000
(15 marks)
2. Discuss the limitation of the expected value approach to assessing the risks of taking on the franchise. What other factors should be considered by Spotting Ltd?
(10 marks)
(Total 25 marks)