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Accounting Assignment A2
\$ 60.00

INSTRUCTIONS TO STUDENTS

1.   This assignment contains question that is set in English.

3.   Your assignment should be typed using 12 point Times New Roman font and 1.5 line spacing.

4.   You must submit your hardcopy assignment to your Facilitator according to the due date.

5.   Your assignment should be prepared individually. You should not copy another person’s assignment. You should also not plagiarise another person’s work as your own.

EVALUATION

This assignment accounts for 70% of the total marks for the course and shall be assessed based on

the Rubrics attached.

ASSIGNMENT 2

Purpose

To enable students in using variance analysis for the purpose of benchmarking when evaluating

performance and to control organisational output, efficiency and sustainability.

Requirement: Standard Costing & Variance Analysis

Hungry  Jane,  a  local  restaurant,  has  been examining  the  profitability of  its set menu.  At the beginning of the year the selling price was based on the following predicted costs:

RM

Entrée : Soup of the day

100 grams of mushrooms@ RM4.00 per kg                                   0.40

Cream and other ingredients                                                          0.20

Main course : Roast turkey

Turkey 0.10 kg@ RM14.00 per kg                                                  1.40

Potatoes 0.2 kg@ RM0.25 per kg                                                   0.05

Vegetables 0.3 kg @ RM0.90 per kg                                               0.27

Other ingredients and accompaniments                                        0.23

Dessert : Fresh tropical fruit salad

Fresh fruit 0.15 kg @ RM3.00 per kg                                              0.45

The selling price was set at RM7.50, which produced an overall gross profit of 60%. During October the number of set menus sold was 860 instead of the 750 budgeted: this increase was achieved by reducing the selling price to RM7.00. During the same period an analysis of the direct costs incurred showed:

RM

90 kg of mushrooms                                                                                    300

Cream and other ingredients                                                                       160

70 kg of turkeys                                                                                           1,148

180 kg of potatoes                                                                                       40

270 kg of vegetables                                                                                    250

Other ingredients and accompaniments                                                     200

140 kg of fresh fruits                                                                                    450

There was no stock of ingredients at the beginning or end of the month.

Required:

a.   Calculate the budgeted profit for the month of October.                                                           (1)

b.   Calculate the actual profit for the month of October.                                                                 (1)

c.   Prepare a statement which reconciles your answers to (a) and (b) above, showing the variances in as much detail as possible.                                                                                                       (15)

d.   Prepare a report, addressed to the restaurant manager, which identifies the two most significant variances, and comments on their possible causes.                                                                    (3)

(Total: 20)

Purpose

To enhance the students’ ability to identify relevant costs and benefits from those that are irrelevant in decisions making.

Requirement: Short term decision making

SecurityAB Limited makes and sells three types of electronic security systems for which the following information is available.

Standard cost and selling prices per unit

 Product ‘D’ ‘N’ ‘O’ scan scan scan RM RM RM Materials 70 110 155 Manufacturing labour 40 55 70 Installation labour 24 32 44 Variable overheads 16 20 28 Selling price 250 320 460

Fixed costs for the period are RM450 000 and the installation labour, which is highly skilled, is available for 25,000 hours only in a period and is paid RM8 per hour. Both manufacturing and installation labour are variable costs. The maximum demand for the product is:

 ‘D’ scan ‘N’ scan ‘O’ scan 2,000 units 3,000 units 1,800 units

Required:

a.   Calculate the shortfall (if any) in hours of installation labour.                                                    (3)

b.   Determine the best production plan, assuming that SecurityAB Limited wishes to maximise profit.                                                                                                                                            (8)

c.   Calculate  the  maximum  profit  that  could  be  achieved  from  the  plan  in  part  (b)  above.

(2)

d.   Having carried out an investigation of the availability of installation labour, the firm thinks that

by offering RM12 per hour, additional labour would become available and thus overcome the labour shortage. Based on the results obtained above and as the accountant, advise the firm’s management team whether or not to implement the proposal.                                                (5)

e.   The management team has accused you, the accountant, of using too much jargon. Prepare a statement which explains the following terms in a way that a multidisciplinary team of managers would understand. You will use this statement as a briefing paper at the next management meeting. The terms to be explained are:

(i) relevant costs;

(ii) avoidable costs; and

(iii) incremental costs                                                                                                             (3)

(Total: 21)

Purpose

To enhance students’ ability to utilise the CVP analysis for profit planning.

Requirement: Cost-volume-profit analysis

Company Z has two products (Z1 and Z2) with the following unit costs for a period: -

 Z1 (RM/unit) Z2 (RM/unit) Direct materials 1.20 2.30 Direct labour 1.40 1.50 Variable production overheads 0.70 0.80 Fixed production overheads 1.10 1.10 Variable selling overheads 0.15 0.20 Fixed selling overheads 0.50 0.50 Selling price 5.70 6.90

Production and sales of the two products for the period were: -

 Z1 (`000 units) Z2 (`000 units) Production 250 100 Sales 225 110

Required:

a.   Explain whether, and why, absorption or marginal costing would show a higher company profit for the period, and calculate the difference in company profit depending upon which method is used.                                                                                                                                             (7)

b.   Calculate the:                                                                                                                                 (8)

i.      breakeven sales units; and

ii.      breakeven sales revenue (based on average selling price) for the period (to the nearest

RM`000) with regards to the above sales mix.

(Total: 15)

Purpose

To enable students in utilising financial ratios for the purpose of evaluating a firm’s financial performance and financial position as well as in recognising firms facing financial distress and using ratios to make decisions for improvement.

Requirement : Financial Statement Analysis

The owners of Foodhall Co., have hired you to help them diagnose and solve problems that the company has had in maintaining adequate liquidity. As a first step, you perform a liquidity analysis. You then do an analysis of the company’s short-term activity ratios. Your calculations and appropriate industry norms are listed.

 Ratio Foodhall Industry norm Current ratio 4.5 4.0 Quick ratio 2.0 3.1 Inventory turnover 6.0 10.4 Average collection period 73 days 52 days Average payment period 31 days 40 days

Required:

a.   What recommendations relative to the amount and the handling of inventory could you make to the new owners?                                                                                                                          (3)

b.   What recommendations relative to the amount and the handling of accounts receivable could you make to the new owners?                                                                                                     (3)

c.   What recommendations relative to the amount and the handling of accounts payable could you make to the new owners?                                                                                                            (3)

d.   What results, overall, would you hope your recommendations would achieve? Why might your recommendations not be effective?                                                                                            (3)

e.   Highlight   the   usefulness   as   well   as   the   drawbacks   of   conducting   ratio   analysis.

(2) (Total: 14)

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