Task 2 (LO 2.1)
Mixed costs do make the understanding of the cost implications blurred and thus the board would like to know the distinction between the types and classification of the costs, hence the below tasks is required to clarify the Boards concern:
a)The following information relates to KBC Ltd for the Electricity and gas costs for the six months ending 30th July 2015:
MonthProduction
VolumeElectricity/ Gas
Cost
January5,20052,000
February2,50028,000
March2,10020,000
April3,90036,000
May6,10056,000
June3,20036,000
Required:
Calculate the fixed and Variable cost using the high low method and justify your reason of application
?
Task 3. (LO 2.1; 2.2 and 2.3)
Moto Ltd a subsidiary of KBC Ltd is a distribution company which handles three products, Standard, Super, and De-Luxe, in two areas, North and South.
For the first quarter of 2015 the following information is available:
StandardSuperDe-luxe
Selling price per unit 40.00 48.00 60.00
Purchase price per unit 32.00 36.00 44.00
Sales in units
North 92,000 40,000 28,000
South 30,000 40,000 40,000
Number of orders
North 40,000 20,000 10,000
South 6,000 10,000 8,000
Costs Variable Fixed Basis of apportionment
000 000
Packaging 188 376 Number of orders
Advertising 270 540 Units sold
Transport 320 256 Sales value
You are required, for the first quarter of 2015, to
a.Prepare a profit and loss statement for each area, North and South, and in total, on an absorption costing basis. (LO2.2 & 2.3)
b.Prepare a profit and loss statement for south only, using marginal costing, showing the relevant information for each product and the total profit or loss in that area. (LO2.2 & 2.3)
Task 4. (LO 2.4 and 2.5)
KBC Ltd is currently considering the implications between different departments within its manufacturing business. The board is worried that the loss making department will become a burden for the remaining profitable departments and thus it may affect the business overall performance mainly for those profit making departments.
Hence the Board wants you to clarify whether closing down the loss making department(s) is good practice and is recommended or not. The following information listed below should be considered in your report to the board clarifying their concern.
a)KBC Ltd, which manufactures four products, has forecast the following results for the forthcoming year:
ABDETOTAL
DETAILS’000’000’000’000’000
SALES750100080011003450
MATERIAL180260268270978
LABOUR2602602002801000
VARIABLE OVERHEAD190230210300930
FIXED OVERHEAD125125125125500
PROFIT/LOSS-5125-3125242
It has been proposed that production of both A and D is abandoned as both products result in a loss.
You are required to
Advise the KBC with supporting figures as to whether to cease production of A and D. (LO 2.4)
b)Based on the above figures, calculate:
(i)The contribution to sales ratio, based on the sales mix of the four products above. (LO 2.4)
(ii)The break-even point in 000. (LO 2.4)
(iii)The required sales in 000 to earn a profit of 90,000. (LO 2.4)
c)If labour is paid at a rate of 10 per hour and labour is restricted to 66,000 hours, state, with supporting figures, the combination of products (in 000) that would maximise profit for the period.
(LO 2.5)
d)If a further 6,000 hours become available, calculate the increase in profit that would arise. (LO 2.5)
Task 5 (LO 3.1,)
a)Board of KBC Ltd wants you explain the differences between these budgeting methods and to advise which one will be more appropriate to which type of business:
Incremental
Zero based
Fixed and
Flexible. (LO 3.1)
b)The following data and estimates relate to KBC Ltd for the period starting on 1 July 2016.
JulyAugustSeptember
Sales135,000150,000180,000
Wages36,00039,00043,500
Overheads24,00027,00030,000
The following information is available regarding direct materials:
JulyAugustSeptemberOctober
Opening Stock15,00010,50018,00012,000
Material Usage24,00027,00030,000
Notes:
A.20% of sales are for cash, the balance is received in the following month. The amount received in July for June’s sale is 60,000.
B.Wages are paid in the month they are incurred.
C.Overheads include 4,500 per month for depreciation. Overheads are settled in the month following. 18,000 is to be paid in July for Junes overheads.
D.Purchases of direct materials are paid for in the month purchased.
E.The opening cash balance in July is 27,000.
F.A tax bill of 75,000 is to be paid in September.
You are required to perform the below listed tasks help the board of KBC understands the cash flow and how they can be managed to improve efficiency within the Working Capital:
(i)Calculate the amount of direct materials purchases in each of the month of July, August and September. (LO 3.2)
(ii)Prepare the cash budgets for July, August and September. (LO 3.1, 3.2 and 3.3)
(iii)Describe briefly the advantages of preparing cash budgets. (LO 3.1, 3.2 and 3.3)
(iv)Assess and advise the Board for any changes which should be made to improve the cash flow variances. (LO 3.4)
Task 6 (LO 4.1, 4.2, 4.3, 4.4)
The Board of KCB Ltd is concerned about their performance management. The Board wants you to update them on the benefits of using variance analysis in reporting their performance for a given period. In other words, the Board wants you to explain (usually monthly) why the actual profit is different from the budgeted profit.
KCB Ltd has prepared the following standard cost card:
per unit
Materials (4 kg at 4.50 per kg) 18
Labour (5 hrs. at 5 per hr.) 25
Variable overheads (5 hrs. at 2 per hr.) 10
Fixed overheads (5 hrs. at 3 per hr.) 15
68
Budgeted selling price 75 per unit.
Budgeted production 8,700 units
Budgeted sales 8,000 units
There is no opening inventory
The actual results are as follows:
Sales: 8,400 units for 613,200
Production: 8,900 units with the following costs:
Materials (35,464 kg) 163,455
Labour (Paid 45,400hrs; worked 44,100 hrs.) 224,515
Variable overheads 87,348
Fixed overheads 134,074
You are required to:
(i)Prepare a flexed budget and calculate the total variances (LO 4.1, 4.4)
(ii)analyse each of the cost variances clearly identifying possible causes of these variances and recommend corrective action for the identified variances (LO 4.2, 4.3)
a.materials
b.Labour
c.Variable overheads
d.Fixed overheads
(iii)Report these findings to the board in accordance with identified responsibility centres. (LO 4.5)
?
Task 7 (LO 5.1 and 5.2)
Bata Ltd is another subsidiary of KCB Ltd which specialises in producing shoes. As the business environment is getting tougher day by day, the board want to understand systematically the implication that they may face due to increasing competition. The potential scenarios are designed to simulate the potential impacts. You are required to use these data and produce a report clarifying the implications that may present in the near future.
The following details relate to a shop which currently sells 40,000 pairs of shoes annually:
Selling price per pair of shoes 60
Buying price per pair of shoes 40
Total annual fixed costs:
Salaries and wages 200,000
Rent and rates 60,000
Other fixed costs 300,000
Required:
(a)Calculate, both in number of units sold and sales value, the:
(i)Breakeven point
(ii)Margin of safety
(LO 5.1)
Note: Required parts (b) to (d) are to be competed
Place your order now for a similar paper and have exceptional work written by our team of experts to guarantee you A Results
Why Choose US
6+ years experience on custom writing
80% Return Client
Urgent 2 Hrs Delivery
Your Privacy Guaranteed
Unlimited Free Revisions
