ACC507 Accounting for Managers and COVID 19 Crisis


Assignment should be typed. Only word docs and/or Excel converted to pdf will be acceptable. Handwritten answers will be rejected.
Question One 
Jack’s business premises were destroyed in a fire and all his records were lost apart from a recent analysis that he had made of the latest period’s results for his company Box Limited. He managed to retrieve the following:  
Sales     $375 000 
Gross profit margin      28% 
Total Expenses ratio     17% 
Tax rate      30% 
Debt to Equity      0.75:1 
Current assets as a percentage of Cost of     22% 
Current ratio     1.8:1 
Return on Equity     11% 
From the information given reconstruct a Statement of Profit or Loss and a Statement of Financial Position. (9 Marks) 
Question Two 
During the COVID-19 crisis Josh lost his job and decided to start a pop-up business selling portable camping stoves when the social distancing restrictions were lifted as a way to generate cash until had could get his old job back. The stoves cost Josh $48 and he sells them for $68.   
If his customers pay cash, which accounts for about 35% of sales, he gives them a 10% discount. 
Internet and credit card payments attract a 5% discount. These also make up about 35% of sales. 12% of credit customers normally pay in the month following the month of sale, with a further 8 % two months following , 6% in the three months following and the remaining 4% are uncollectable.   
He estimates that sales will grow as restrictions are lifted on the following basis: 
May     130 stoves 
June     240 stoves 
July     330 stoves 
August     410 stoves 
September     Back in his old job 
Josh has negotiated with his supplier that he can pay for any purchases over a two-month period with 50% of the price paid in the month of purchase and the remainder the following month. As an incentive the supplier has offered a 5% discount for payments made promptly in the month of purchase.  As Josh is just starting up his business in May he has cash flow issues and won’t be able to make any payments until June when the full invoice will be settled. 
He bought 50 stoves in April as his opening inventory, which will need to be paid for in May, and he would like to have enough inventory at the end of each month to supply 60% of the following month’s sales. 
Prepare a schedule of the monthly cash receipts budgets and a schedule of the monthly cash payments budgets to cover all of the months affected by these projected sales. Round to the nearest dollar.  
Will Josh need extra cash funds for any purchases if there are insufficient generated by sales?  
(25 Marks) 
Question Three 
Framed Limited manufactures standard window frames in its factory in Berrimah with a capacity to produce 180 000 annually. The following costings are available: 
Selling price     $190 per window 
Variable manufacturing costs     $90 per window 
Fixed manufacturing costs     $1 300 000 each year 
Fixed marketing and administrative costs     $870 000 each year Variable marketing and administrative costs     $30 per window 
a.What is the annual breakeven point? Express your answer using numbers of windows sold.  
b.If Framed Limited wished to achieve an annual profit of $910 000 how many windows would have to be sold? 
c.There was a review of their marketing and distribution costs, and it was recommended that an incentive bonus scheme should be introduced in an effort to increase sales and reduce costs. The variable marketing and administrative costs would increase by $15 a window but the fixed marketing costs would decrease by $360 500. 
i.What would the new breakeven point be if these recommendations were implemented?  
ii.Do you think that Framed limited should institute the recommendations? Provide an explanation of the possible benefits and risks. 
d.A new manager has been reading about CVP analysis and believes that it is such a useful tool because it provides management with such accurate picture of what is possible. Discuss this statement. 
(6 Marks) Question Four 
The Alice Springs furniture factory estimates that for 2022 the production activity will be as follows: 
    Projected production      35 000 chairs 
    Projected direct labour hours     35 000 hours 
    Projected manufacturing overhead     $595 000 
The manufacturing overhead is allocated to production on the basis of direct labour hours. At the end of the year the following data became available: 
    Actual direct labour hours     31 500 hours  
    Actual manufacturing overhead     $714 000 
The direct labour costs were $70 per hour with no direct labour cost variance. 
a.Calculate the predetermined manufacturing overhead rate at the beginning of the year. 
b.Calculate the actual manufacturing overhead rate for the year. 
c.Calculate an inventoriable product cost based on:  
  i. budgeted costs                ii. actual costs.  
 iii. Provide a suggested explanation why the original budgeted amounts should 
differ from the actual results.

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