Finance and Management

Exploring Financial Management in Business Operations

28 April 2024 10:43 AM | UPDATED 3 weeks ago

Exploring Financial Management in Business Operations:

Exploring Financial Management in Business Operations

Group Assessment information:

There are two parts to this assessment. In Part A, you are required to complete the following questions in your allocated groups. Your group answers must be provided in a word document and be submitted to the assessment link in the assessment section of the moodle page by the due date. Ensure that there is only one submission per group. You are required to include student names and numbers of your group members on the first page of your document.

In Part B, you are required to prepare a presentation based on the topic provided. All group members are expected to present in class. The presentation slides must be submitted to the link provided in Moodle by the due date. The presentation will be done in class. The duration of your presentation should not exceed 20 MINUTES.

Part A:

Question 1: (10 marks)

Furniture-Up Ltd produces high-quality furniture that pass through two production processes.

Data for June for the first process follow:

Work in process inventory, June 1                                                                       53,000 units

(Direct material 75% completed and conversion 40% completed)

Work in process inventory, June 30          

(Direct material 60% completed and conversion 30% completed)

Direct material costs in work in process inventory, June 1                                       $56,000

Conversion costs in work in process inventory, June 1                                            $14,900

Units started into production                                                                                280,000 units

Units completed and transferred out                                                                    320,000 units

Direct materials costs added during June                                                                 $385,000

Conversion costs added during June                                                                        $214,500

Required:  Using the weighted-average method

  1. Calculate the physical units in ending work in process inventory (2.5 marks)

[Answer and show workings here]

           
  • Calculate the total equivalent units for direct material and conversion. (2.5 marks)

[Answer and show workings here]

             
  • Calculate the cost per equivalent unit for direct material and conversion. (2.5 marks)

[Answer and show workings here]

             
  • Calculate the cost of units completed and transferred out, and the cost of ending work in process inventory. (2.5 marks)

[Answer and show workings here]

             

Question 2 (10 marks)

Hotel Sydney Ltd is a hotel located near Sydney NSW. For one night accommodation per person, the hotel charges $95. The hotel estimates that the variable cost per person is $45, which includes food and room services. The fixed cost is estimated to be $65,000 per year.

Required: Calculate

  1. The annual breakeven point in dollars (5 marks)

[Answer and show workings here]

             
  • Assuming the motel targets a net profit of $65,000 a year before tax, calculate the number of units of service required to reach this target. (5 marks)

[Answer and show workings here]

             

Question 3 (20 Marks)

Toys Ltd. manufactures two products called Lasertag and Transporter. The transporter is a more complex product, requiring 0.80 hours of direct labour time per unit to manufacture and extensive machining support. The Lasertag requires only 0.40 hours of direct labour time per unit and only a small amount of machining support. Manufacturing overhead costs are currently assigned to products on the basis of direct labour hours. Direct material and direct labour costs per unit are as follows:

 LasertagTransporter
Direct Material$35$60
Direct Labour$6 (0.4 hours at $15 per hour)$12 (0.8 hours at $15 per hour)

Management estimates that the company will incur $912,000 in manufacturing overhead costs during the current year and 50,000 units of the Lasertag and 25,000 units of the transporter will be produced and sold.

Required:

  1. Compute the predetermined manufacturing overhead rate assuming that the company continues to apply manufacturing overhead cost on the basis of direct labour hours and the unit product cost of each product (10 Marks).

[Answer and show workings here]

                                               
  • This part is connected to question 5 on the page before. (10 Marks)

Management is considering using activity-based costing to assign manufacturing overhead cost to products. The activity-based costing system would have the following four activity cost pools:

 Expected Annual Activity
Activity driversLasertagTransporter
Number of part types5001000
Number of purchase orders2000500
Number of test runs5001500
Machine hours20008000
Activity cost poolActivity driversEstimated overhead costs
Maintaining parts inventoryNumber of part types$225,000
Processing purchase ordersNumber of purchase orders$182,000
Quality controlNumber of test runs$45,000
Machine relatedMachine hours$460,000

Required: Using activity- based costing compute the unit product cost of each product.

[Answer and show workings here]

                                                   

Part B (20 marks)

You are required to prepare a presentation based on question 3 in Part A. You are required to:

  1. Explain the key differences between conventional and contemporary costing system
  2. Explain how conventional costing system might cause cost distortions
  3. Discuss the issues business organizations might encounter when designing and implementing contemporary costing systems such as ABC.

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