Question 1
Company XYZ operates a chain of bakeries in Canberra that specialises in supplying a range of cakes to restaurants and coffee shops. Major products include lamingtons, scones, and custard tarts. Until last year, sales levels fairly stable. However, sales have been decreasing for the last 18 months. John Brown, the marketing manager of Company XYZ, is worried, and has visited major customers to find out the reasons for their decreasing sales orders. The comments of the owner of one of the most popular Canberra Coffee shops sum up the general response: ‘John, your style of cakes is old- fashioned. They are not what people want any more. Our customers prefer lighter, tastier food. They want variety and are willing to pay more for high quality innovative creations'.
At a recent meeting, Brown stated that the company should expand its product offerings, or there may be no future for the company. Specifically, he believes that there are untapped markets for gourmet pies. The managing director is uncertain; he states: ‘I really don't think that we can afford to invest time and money into fads. We sell cakes, we are not a gourmet caterer!' Brown points out that it is these new items that customers are asking for, so it makes sense from a strategic point of view to develop these products. However, the managing director is till uncertain: ‘I have no idea whether we are going to make a profit this year, and cash is always tight. We don't need strategies, I prefer to just sell good products'.
Slick understands why the managing director is resisting his plea to be more innovative with products-the bakery has been producing the same line of cakes for 30 years. Brown also knows that there has never been any formal planning undertaken within the company, or consideration of objective or strategies.
Required:
1. John Brown has asked for your help. As the new management accountant, prepare a report for the managing director outlining the advantages of implementing process to determine organisational objectives, strategies and planning systems.
2. What types of information do you think may be of interest to Brown and the managing director? Consider both financial and non-financial.
Question 2 Cost of Goods manufactured
The following data refer to Maximus Manufacturing Ltd for the current year:
|
SALES REVENUE
|
2526000
|
|
RAW MATERIAL INVENTORY, 1 JANUARY
|
106800
|
|
PURCHASES OF RAW MATERIAL
|
877200
|
|
RAW MATERIAL INVENTORY, 31 DECEMBER
|
70800
|
|
DIRECT LABOUR COST INCURRED
|
568800
|
|
SELLING AND ADMINISTRATIVE EXPENSES
|
322800
|
|
INDIRECT LABOUR COST INCURRED
|
180000
|
|
COUNCIL RATES
|
108000
|
|
DEPRECIATION ON FACTORY BUILDING
|
150000
|
|
INCOME TAX EXPENSE
|
30000
|
|
INDIRECT MATERIAL USED
|
54000
|
|
DEPRECIATION ON FACTORY EQUIPMENT
|
72000
|
|
INSURANCE ON FACTORY AND EQUIPMENT
|
48000
|
|
ELECTRICITY FOR FACTORY
|
84000
|
|
WORK IN PROCESS INVENTORY, 1 JANUARY
|
0
|
|
WORK IN PROCESS INVENTORY. 31 DECEMBER
|
48000
|
|
FINISHED GOODS INVENTORY, 1 JANUARY
|
42000
|
|
FINISHED GOODS INVENTORY, 31 DECEMBER
|
48000
|
Required:
Prepare Maximus Manufacturing's:
1. Schedule of cost of goods manufactured
2. Schedule of cost of goods sold
3. Income statement
Question 3 Cost per equivalent unit; Weighted average and FIFO
Woodchuck Timber Pty Ltd grows, harvest and processes timber for use in the building industry. The following date relate to the company's sawmill during June:
Work in Process, 1 June Direct material 130 000
Conversion 360 000
Cost incurred during June
Direct material 850 000
Conversion 1380 000
The equivalent units for June were as follows:
Required:
1. Calculate the cost per equivalent for both direct material and conversion during June. Use weighted average process costing.
2. Repeat requirement 1 using the FIFO method.
Question 4 Service industry
What are the distinguishing features of service organisations? Consider the extent to which these features are present in the following industries:
(a) Electricity, gas and water supply
(b) Information media and telecommunication
(c) Education and training