Assignment:
Module Overview:
In the modules, you have learned about financial reporting, where you use accounting information for external reporting to communicate the earnings and financial position of the business to external users. You also learned about management accounting that deals with using accounting information to analyze and communicate financial results to internal management for decision-making purposes.As a manager, you need to be forward-looking. Reviewing past financial information of your company is not enough because you need to be able to forecast future financial conditions or operating results. This requires planning various activities of your business.
In this module, you will learn about forecasting, budgeting, and strategic management accounting (SMA) that broadens the concept of management accounting. You will explore how to use accounting information to create a strategic business plan and develop strategies to achieve a sustainable competitive advantage using SMA concepts.
Budget represents an estimate of future costs and revenues and provides you with a plan to utilize labor and material resources. In this module, you will explore the various types of forecasting and budgeting techniques.
Module Readings and Assignment:
Complete the following readings early in the module:
•Read the online lectures for the Module
•From the textbook, Accounting for Managers: Interpreting Accounting Information for Decision Making, 5th, read the following chapters:
?Chapter : Budgeting
?Chapter : Budgetary Control
?Chapter : Strategic Management Accounting
Response to the following multiple choice questions:
Question 1 . Zero based budgeting is a technique where a department:
Is required to make a case for its budget as if its activities were new prepares a budget after taking into account current expenditure and an allowance for the next period's expenditur the difference between budget and actual results will be zero prepares budgets on the basis of no increase in unit costs from the previous period.
Question 2 . It needs to have one and three quarter's month stock at the end of each month. If opening stock is 12,000 units, the number of units to be produced in the first month of the budget year is:
12,000
13,000
10,500
15,500
Question 3 . The standard costs for a manufacturing business are £12 per unit for direct materials, £8 per unit for direct labour and £5 per unit for manufacturing overhead. The sales projection is for 5,000 units, 3,500 units need to be in stock at the end of the period and 1,500 units are in stock at the beginning of the period. The production budget will show costs for that period of:
£125,000
£150,000
£140,000
£175,000
Question 4 . Receivable increase by £15,000 and payables increase by £11,000. The effect on cash flow of the Statement of Cash Flow is a (an):
decrease of £26,000
decrease of £4,000
increase of £26,000
increase of £4,000
Question 5 . Randy Airplanes Ltd is a privately owned business. It has budgeted for profits (after deducting depreciation of £41,000) of £150,000. Debtors are expected to increase by £20,000, inventory is planned to increase by £5,000 and creditors should increase by £8,000. Capital expenditure is planned of £50,000, income tax of £35,000 has to be paid and loan repayments are due totaling £25,000. What is the forecast cash position of Randy's at the end of the budget year, assuming a current bank overdraft of £15,000?
None of the above
18,000
49,000
66,000
52,000
Question 6 . The method of adjusting the budget to reflect the actual volume of sales is called
programme budgeting
activity-based budgeting
incremental budgeting
flexible budgeting
Question 7 . A company has budgeted for materials of £170,000 but the actual costs are £164,000. The company has also budgeted for labour of £130,000 with actual costs being £133,000. The expense variance is: @
Budget for the year to date Actual for the year to date Variance
Materials 170,000 164,000 6,000 Fav
Labour 130,000 133,000 3,000 Adv
Total 300,000 297,000 3,000 Fav
£6,000 adverse
£6,000 favourable
£3,000 adverse
£3,000 favourable
Question 8 . Higher prices from material suppliers will be reflected in the:
labour rate variance
labour efficiency variance
material usage variance
material price variance
Question 9 . Poor quality materials that require greater skill to work will be reflected in the
labour rate variance
material usage variance
labour efficiency variance
material price variance
Question 10 . A concern with recognising all the costs of a product or service from the design stage through to its abandonment can be described as a process of:
throughput costing
life cycle costing
Kaizen costing
target costing
Question 11 . Trans PLC estimates that a new product will sell in sufficient quantities to justify its manufacture at a selling price of £175. The company needs to invest £5 million to produce a quantity of 10,000 of these new products per year and requires a return on that investment of 12% per annum. The current prediction is that the product will cost £140 to manufacture. To achieve the target selling price and target rate of return, the product needs to be re-engineered to reduce its cost of manufacture by:
£35
£25
£60
£40
Question 12 . SkinTan's top five customers generate sales revenue of £950,000 per annum. Each generates a different gross margin as a consequence of price negotiations that have been carried out over several years. Because of their location, each customer incurs different distribution expenses. Sales commissions are paid at the rate of 6% on all sales. Fixed costs are customer specific, covering salaries of sales and office staff who service each customer. The following table shows the information for each of the top customers for the previous year.
Sales 250,000 250,000 200,000 150,000 100,000
Gross margin % 30% 25% 21% 37% 39%
Distribution expenses 30,000 14,000 25,000 12,000 6,000
Fixed costs 30,000 25,000 16,000 15,000 10,000
Carry out a customer profitability analysis in relation to SkinTan's top customers. Then match the customer with the profitability.
Customer C 12345
Customer A 12345
Customer E 12345
Customer D 12345
Customer B 12345
1. 0
2. 8,500
3. -11,000
4. 19,500
5. 17,000