- The Following Information Relates To Items Nine And Ten Tipple Company Produces A Product That Has A Regular Selling Pri 1 (45.2 KiB) Viewed 27 times
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The following information relates to Items Fourteen and Fifteen: The balance sheet of Bluebell Ltd at 31 March includes the following: Inventory 160,000 Debtors 380,000 Creditors 610,875 Additional information is provided: Sales for April and May are budgeted at €1,100,000 and €1,200,000 respectively. Sixty per cent (60%) of sales will be for cash with the balance being collected in the month following sale Purchases for each month are 55% of the following month's projected sales. Suppliers give one month's credit Item Fourteen What is the budgeted cash collection for April? Item Fifteen What are the projected payments to creditors during the month of April?
Item Eleven Kilkee Ltd. absorbs overheads on the basis of machine hours. Details of budgeted and actual figures for the latest period are as follows: Budget Actual Overheads €600,000 €550,000 Output 50,000 units 58,000 units Machine hours 20,000 hours 20,500 hours What is the under or over absorbed overhead for the period?
Question Two Raw Limited produces a range of juices, smoothies and fruit based vitamin drinks. The company is currently preparing its budget for its VITC HIT product for the first three months of next year, January to March. VITC HIT is manufactured from carbonated spring water (90%) and a blend of fresh pasteurised orange juice and fruit extracts (10%) sold in 500ml bottles. The selling price is €1.90 per bottle Projected sales for the next four months are shown below. January February March April Sales units (500ml bottles) 55,000 53,000 57,500 48,000 At 1 January the company expects to have 2,000 bottles of VITC HIT in inventory. However, the sales manager requires that at the end of each of the next six months there will be 5,000 bottles in inventory. The costs incurred to produce one 500ml bottle of VITC HIT are as follows: € Direct Materials: - Spring water (450ml @ €0.20 per litre) 0.09 - Juice blend (50ml @ el per litre) 0.05 - 500ml plastic bottle 0.06 Direct Labour (0.05hr @ €8 per hour) 0.40 Variable production overhead 0.11 0.71 At 1 January the company will have 2,000 litres of spring water, 500 litres of juice blend and 5,000 plastic bottles in inventory. To reduce the risk of disruption to manufacturing, Raw Limited has a policy of maintaining the same opening and closing monthly inventory of direct materials. The cost of material purchases has not changed in the past two years and is not expected to change for the next year.
Question Two (continued) REQUIREMENT: E. Based on the above prepare the following budgets for the first three months of next year (January, February and March): Sales Budget (in €). V. vi. Production budget (in units). (3 marks) vii. Materials purchase budget (in units and €) for each material. (3 marks) viii. Labour cost budget (in hours and €). (12 marks) F. Calculate the total budgeted gross profit from sales of VITC HIT for the three month (3 marks) period 1 January to 30 March. (5 marks) G. Explain the term 'flexible budget'. (3 marks) H. Briefly discuss the advantages of preparing a flexible budget. (6 marks)
and Question Three jungle gyms and sells these products at a price which provides a 20% mark-up on cost Moose Ltd is a playground equipment supplier. It manufactures two products, playhouses sales of the playhouses regularly surpass budget expectations. The sales volumes achieved for Although Moose operates in a highly competitive environment with intense price competition, the jungle gyms are less satisfactory and in recent years the actual sales volume achieved for this product has consistently been below the budgeted level. The company currently calculates absorption costs using a traditional volume based approach in which overheads are absorbed on the basis of direct labour hours. Moose Ltd produces 6.000 playhouses and 4,000 Jungle gyms every year. The following cost information is currently available in respect of the more recent annual reporting period: Playhouses Jungle gyms Direct material cost per unit €125 €145 Direct labour cost per unit @ €10 per hour) € 60 € 80 Budgeted fixed production overheads amount to €1,360,000 for the year. A recent examination of production overheads led to the identification of the following activities, activity costs and cost drivers. Cost Activity Cost Driver Purchasing Setting-up Machining Quality control No. of requisitions No. of set-ups No. of machine hrs No. of inspections €240,000 €360,000 €480,000 €280.000 Cost Driver Volumes Per Annum Playhouses Jungle gyms 600 200 310 140 4,200 3.800 200 150 E. F. REQUIREMENT: Calculate the cost per unit for playhouses and jungle gyms using the traditional method of direct labour hours to absorb overhead currently used within Moose Ltd. (6 marks) Calculate the cost per unit for playhouses and for jungle gyms if, on the basis of the information provided above, an Activity Based Costing (ABC) approach was adopted. (18 marks) G. Discuss why the costs are higher or lower for each product using the traditional system in part (A) compared to the ABC system in part (B). (4 marks) H. Discuss the appropriateness of introducing ABC to Moose Ltd given the company's particular circumstances. (7 marks) (Total: 35 marks)
Question Four Equip Plc is involved in the design and manufacture of customised industrial blenders and mixers. The company has just received an enquiry about the supply of 10 mixers from one of their regular clients, Terra Lid. Terra Lid has informed the company that the maximum price they are willing to pay for each mixer is €7.000. The following details relates to the production of the mixers: company. The company has 120 metres of stainless steel in stock, which originally cost , which is used regularly by the €150 per unit. The replacement cost of stainless steel is €170 per metre. 2. Each mixer would also require 5 units of a composite plastie. The company has 70 units of this material in stock, as it was purchased a few years ago for use in the production of other equipment which the company no longer produces. This material is not used regularly in any of the company's other products. The original purchase price of the plastic was €200 per unit. The replacement cost of this plastic is now €160 per unit. The net realisable value for the units in stock is €140. 3. Each mixer requires an electrical motor. These motors are only available from a supplier that Equip has never used before. The purchase cost per motor is €850. 4. 10 skilled hours, per mixer, would be required. Skilled workers are paid €20 per hour and are part of the permanent work-force. At present there are 100 paid surplus skilled hours per month 5. 20 unskilled hours, per mixer, would be required. Unskilled workers are paid €12 per hour and are employed on a casual basis. 6. A supervisor, with the necessary experience in the production of similar mixers, who is currently paid €40,000 per annum, would be transferred to the job. This would necessitate the hiring of a replacement supervisor for the duration of the contract at a cost of €7,000 a 7. Each mixer would require 15 hours processing time on the factory equipment. If the order is not accepted then Equip Ple would sub-contract the factory equipment to another company at a rate of €100 per hour. 8. The company estimates that the depreciation charge for using the factory equipment to produce the 10 mixers would be €4,000. 9. Variable overheads are absorbed at a rate of €50 per skilled labour hour. 10. Fixed production overheads are absorbed at a rate of €30 per skilled labour hour, 11. It is company policy to add 20% on to the production cost as an allowance against administration costs associated with the jobs accepted. 12. The planning department of Equip Plc estimates that they have incurred costs to date of €600. lover... 253
Question Four (continued) REQUIREMENT: A. Determine using relevant costing principles whether or not Equip Plc should undertake the contract. Your answer must include an explanation for your treatment of each piece of information from 1 to 12 above. (20 marks) B. Explain the term "sunk cost'. (3 marks) C. The Production Manager of Equip Plc has stated that it is essential that in the short-run, only projects that are generating a profit should be undertaken.” Discuss the above statement. (4 marks) D. Discuss the role of qualitative factors in short-term decision making. (8 marks) (Total: 35 marks)