the benefits of lice cycle costing

FIND A SOLUTION AT American Essay Writers

Task 1 (LO 1)
The following estimates have been produced for a new product with an expected life of five years.
 
2021
2022
2023
2024
2025
Units made and sold
                6,000
                6,600
            7,260
            7,900
            8,700
Development Costs
        2,100,000
        1,500,000
 
 
 
Marketing Costs
     400,000.00
     300,000.00
  225,000.00
  168,750.00
  126,562.50
Production cost per unit
               60.00
               55.00
            50.00
            45.00
            40.00
Customer service cost per unit
               15.00
               13.00
            12.00
            12.00
            10.00
Delivery cost per unit
                  4.00
                  4.00
              4.00
              4.00
              4.00
Disposal Costs
 
 
 
 
  300,000.00
Required:
What is the expected life cycle per unit? (10 marks)
Explain why we should calculate life cycle costs? (5 marks)
Discuss the benefits of lice cycle costing. (5 marks)
(Total Marks: 20)
Task 2 (LO 2)
Sunny Manufacturing has five activity cost pools and two products (a Basic tape vacuum and a Luxury tape vacuum).  Information is presented below:
Cost Drivers by Product
Activity Cost Pool                  Cost Driver        Est. Overhead        Basic                Luxury
Ordering and Receiving          Orders                   £   120,000                  600                  400
Machine Setup                        Setups                        297,000                  500                  400
Machining                               Machine hours        1,000,000           150,000           100,000
Assembly                                 Parts                        1,400,000        1,200,000           800,000
Inspection                                Inspections                300,000                  550                  450
Required:
a) Compute the overhead cost per unit for each product. Production is 700,000 units of Basic and 200,000 units of Luxury. Round your answer to the nearest cent. (12 marks)
b) Discuss the merits and criticisms of the ABC system. (8 marks)
(Total Marks: 20)
Task 3 (LO 3 and LO 4)
Brian Ltd. sells standard alarm systems for residential homes. They have a standard product called “Home Security”. The demand for this product is 185 units per month. The supplier charges for the deliveries, so the fixed cost per order is £20. The holding cost per annum per unit is 12% of the purchase price. It costs £85 per unit to purchase the product.
The following information is also available.
Average usage 6 units per day
Minimum usage 3 units per day
Maximum usage 8 units per day
Lead time for replenishment 9 days–15 days
Buffer inventory 5 units
Required:
Calculate the EOQ (reorder quantity in units)? (3 marks)
Calculate the reorder level? (3 marks)
Calculate the minimum inventory level? (3 marks)
Calculate the maximum inventory level? (3 marks)
Discuss the potential problems associated with JIT with examples. (8 marks)
(Total Marks: 20)
Task 4
PART A
Netto provides primarily two lines of service: designing and consulting. Designing-related services represent 60% of its revenue and provide a contribution margin ratio of 30%. Consulting services represent 40% of its revenue and provide a 40% contribution margin ratio. The company’s fixed costs are £4,250,000.
Required:
Calculate the revenue from each type of service that the company must achieve to break even. (6 marks)
The company has a desired net income of £1,700,000. What amount of revenue would Netto earn from consulting services if it achieves this goal with the current sales mix? (4 marks)
PART B
Hector Company has developed the following standard costs for its product for 2020:
HECTOR COMPANY
Standard Cost Card
Product A
Cost Element                     Standard Quantity     ×      Standard Price         =         Standard Cost
Direct materials                      4 pounds                             £3                                         £12
Direct labour                           3 hours                                  8                                           24
Manufacturing overhead        3 hours                                  4                                           12
                                                                                                                                         £48
The company expected to produce 30,000 units of Product A in 2021 and work 90,000 direct labour hours.
Actual results for 2021 are as follows:
31,000 units of Product A were produced.
Actual direct labour costs were £746,200 for 91,000 direct labour hours worked.
Actual direct materials purchased and used during the year cost £346,500 for 126,000 pounds.
Actual variable overhead incurred was £155,000 and actual fixed overhead incurred was £205,000.
Required: Compute the following variances showing all computations to support your answers. Indicate whether the variances are favourable or unfavourable.
(a)     Materials quantity variance. (2 marks)
(b)     Total direct labour variance. (2 marks)
(c)     Direct labour quantity variance. (2 marks)
(d)     Direct materials price variance. (2 marks)
(e)     Total overhead variance. (2 marks)
(Total Marks: 20)
Task 5 (LO 4 and LO 5)
The last three years’ financial information of Bodrum PLC as follow.
Income Statement (£ millions)
2018
2019
2020
Sales
62.5
78.7
95.0
Cost of goods sold
40.1
52.6
63.2
Operating expense
5.6
7.1
8.2
Depreciation expense
3.3
4.3
6.1
EBIT
13.5
14.7
17.5
Interest expense
3.5
4.6
6.7
Pre-tax income
10.1
10.1
10.8
Taxes
4.7
5.0
5.1
Net income
5.4
5.1
5.7
Balance Sheet (£ millions)
 
 
 
ASSETS
31-Dec-18
31-Dec-19
31-Dec-20
Current assets
 
 
 
   Cash and marketable securities
5.3
6.1
7.9
   Accounts receivable
14.3
17.3
22.9
   Inventory
22.4
24.6
31.0
Total current assets
42.0
48.0
61.8
Net PPE
214.6
263.9
331.1
Total assets
256.6
311.9
392.8
LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
   Accounts payable
48.5
56.2
63.3
   Short-term debt
28.8
40.4
53.3
Total current liabilities
77.3
96.6
116.5
Long-term debt
27.4
40.6
58.8
Total liabilities
104.7
137.3
175.3
Shareholders’ equity
 
 
 
Common Stock
87.1
107.2
147.4
   Retained earnings
64.8
67.4
70.2
Total shareholders’ equity
151.9
174.6
217.6
Total liabilities and equity
256.6
311.9
392.8
Required:
Prepare proforma income statement and balance sheet for the year ending 31 December 2021 for Bodrum PLC. (8 marks)
Based on your prospective analysis, identify the company’s external funding requirements at the end of the financial year of 2021. (2 marks)
Analyses the financial performance of Bodrum PLC using profitability, efficiency, liquidity and solvency ratios. (10 marks)

YOU MAY ALSO READ ...  Redactional Paper
america-essay-wriers
Best Essay Writers

QUALITY: 100% ORIGINAL PAPERNO PLAGIARISM – CUSTOM PAPER