BMAC5203 Accounting for Business Decision Making Assignment Solutions
Assignment Details:-
Document Type: Assignment Help (any type)
Subject: Business
Number of Words: 3000
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ASSIGNMENT QUESTION
QUESTION/TASK 1
Task 1a: CLO3
OBJECTIVE:
The purpose of this assignment is to enable learners to understand an organisation’s financial goals through the preparation of operating, financial, and cash budgets that together integrate into a business plan
REQUIREMENT:
Budgets and Budgetary Controls
Question
BulatRimba Company manufactures and sells plastic tires for automated cleaning machines. It is completing its financial plans for 2021 and needs assistance in the budgeting phase. The following information is available:
BulatRimba Company
Balance Sheet
| Assets | |||
| Current assets: | |||
| Cash | $200,000 | ||
| Account Receivables (net) | 294,000 | $494,000 | |
| Property, plant and equipment: | |||
| Land | $100,500 | ||
| Buildings and equipment | $350,000 | ||
| Less accumulated equipment | (118,000) | 232,000 | |
| Total assets | 332,500 | ||
| $826,500 | |||
| Liabilities and Stockholders’ Equity Current liabilities: Accounts payable Stockholders’ equity: Capital stock Retained earnings Total liabilities and stockholders’ equity | $132,000 | ||
| $400,000 | |||
| 294,500 | 694,500 | ||
| $826,500 |
Selling price for each wheel is $30 per unit. Budgeted sales unit for 2022 are:
| First quarter | 15,000 |
| Second quarter | 16,000 |
| Third quarter | 18,000 |
BulatRimba will have no finished goods (wheel) and materials (plastic and rims) inventories at the beginning of the year. Management desires 5,000 kg of plastic at the end of the first quarter and 6,000 kg at the end of the second quarter. Each wheel takes 2kg of plastic. BulatRimba should have 2,000 rims at the end of the first quarter and 2,500 at the end of the second quarter. Finished inventory should total 1,000 wheels at the end of the first quarter and 1,500 at the end of the second quarter.
| Direct Materials | Direct Labour | |
| Plastic | 2kg @ $3 | 0.5 hour |
| Rims | 1 each @ $2 |
Variable factory overhead is applied at the rate of $3 per direct labour hour for each finished unit. Fixed factory overhead is $170,000 per quarter, including non‐cash expenditures of $54,000 and is allocated on the total number of units completed direct labour averages $20 per hour.
Required:
For the first quarter of 2022, prepare the following:
- Sales budget.
- Production budget in units.
- Direct materials usage and purchase budget (Plastic and Rims).
- Direct labour budget.
Task 1b: CLO3
Question
Additional information pertaining to BulatRimba above follows:
- All sales are on credit and are collected 30 percent in the quarter of sale and 70 percent in the quarter following the sale. The company has a history of no bad debts. The sale from the last quarter of 2021 were $420,000.
- Purchases of direct materials are paid for in the quarter acquired; direct labour costs are paid in the quarter incurred.
- Overhead expenses are paid in the next quarter.
- The accounts payable on the balance sheet is for overhead expenses from the last quarter of 2021
- Selling and administrative expenses are paid in the quarter incurred. The total are $40,000 per quarter, including $10,000 of depreciation.
Required:
Refer to the sales budget prepared in Task 1. Construct a cash budget for BulatRimba for the first and second quarter of 2022
Task 1c (CLO2)
OBJECTIVE:
To enable learners to utilise the Cost Volume Profit analysis in making informed decisions and cost‐effective actions related to the products or services the business sells.
REQUIREMENT:
Cost Volume profit analysis Question
Dalila Manufacturing Berhad (DMB) is suffering from the global economic effects for its main product. The product is sold in supermarkets throughout Malaysia. The following table shows the results of DMB’s operations for 2021.
| Sales (12,500 units @ $84) | $1,050,000 |
| Variable costs (12,500 units @ $63) | 787,500 |
| Contribution margin | 262,500 |
| Fixed costs | 296,100 |
| Operating profit (loss) | ($33,600) |
Required:
- Compute DMB’s breakeven point in both units and $.
- What would be the required sales, in units and in $, to generate a pretax profit of $30,000?
- Assume an income tax rate of 30%, what would be the required sales volume in both units and $.
- Prepare a contribution income statement showing the pretax and after tax income as per the requirement above.
- The manager believes that a $60,000 increase in advertising would result in approximately a $200,000 increase in annual sales. If the manager is right, what will the effect on the company’s operating profit or loss?
- Refer to the original data. The vice president in charge of sales feels that a 10% reduction in price in combination with a $40,000 increase in advertising will cause unit sales to increase by 25%. What effect would this strategy have on operating profit (loss)?
QUESTION/ TASK 2
Task 2a: CLO3
OBJECTIVE:
To enable learners to use variance analysis for the purpose of benchmarking when evaluating performance and to further control organisational output, efficiency and sustainability.
REQUIREMENT:
Standard Costing & Variance Analysis
Question
Muar Fabrics Corporation manufactured 20,000 units of special multilayer fabric with the name Stailoo. The following standard costs were developed for Stailoo:
| STANDARD COST CARD PER UNIT | |
| Direct materials: 6 meter x $2 per meter | $12.00 |
| Direct labor: 5 hours x $3 per hour | 15.00 |
| Variable overhead: 5 hours x $1 per hour | 5.00 |
| Fixed overhead: 5 hours x $5 per hour | 25.00 |
| Total standard cost per unit | $57.00 |
The following information is available regarding the company’s operations for the period: Materials purchased 130,000 meters at $2.10 per meter
Materials used 110,000 meter
Direct labour 115,000 hours at $3.25 per hour Overhead incurred:
Variable $112,500
Fixed $440,000
Budgeted fixed overhead for the period is $450,000, and the standard fixed overhead rate is based on the expected capacity of 90,000 direct labour hours. The materials price variance is computed at the time of purchase.
Required:
Calculate the following variances and indicate whether they are favourable or unfavourable.
- Materials price and usage variances
- Labour rate and efficiency variances
- Variable overhead spending and efficiency variances
- Fixed overhead spending and volume variances
Task 2b: CLO4
OBJECTIVE:
To enable learners to identify the relevant costs and benefits from costs and revenue information available in the financial database to aid decision making in a timely manner.
REQUIREMENT:
Short term decision making
Question
NiceView Company manufactures custom‐made photographic equipment. NiceView received a special order enquiry from a potential client, a company in Kota Bharu, interested in photographic equipment similar to the equipment NiceView made to earlier clients. NiceView submitted a bid of $29,500. The following cost data relate to the bid submitted to the company in Kota Bharu.
| Direct Material A | $4,500 |
| Direct Material B | 6,000 |
| Direct Labour | 7,500 |
| $18,000 | |
| Manufacturing overhead | 5,600 |
| (20% direct labour costs) | $23,600 |
NiceView adds a 25% profit margin to all jobs, computed on the basis of the total cost. In this client’s case, the profit margin amounted to $5,900 (23,600 25%), producing a bid price of $29,500. Assume that 60% of manufacturing overhead is fixed, and Niceview is currently operating below its normal capacity.
Required:
The client offered to buy the equipment for $22,750. Considering that this one time offer could lead to future business with the client, should NiceView accept the client’s offer? Why?
Task 2c: CLO1
OBJECTIVE:
To enable learners to utilise financial ratios as a mechanism to evaluate firm’s financial performance and identify areas for making decisions for improvement.
REQUIREMENT:
Financial Statement Analysis
Question
The condensed financial statements of the Lavender Companies, Inc. for the years ended June 30, 2021 and 2020 are presented as follow:
Lavender Companies, Inc Balance Sheets
June 30 (in millions)
| 2021 | 2020 | |
| Assets | ||
| Current assets | ||
| Cash and cash equivalents | $546.9 | $346.7 |
| Account Receivables (net) | 624.8 | 580.6 |
| Inventories | 544.5 | 630.3 |
| Prepaid expenses and other current assets | 211.4 | 181.3 |
| Total current assets | 1,927.6 | 1,738.9 |
| Property, plant and equipment (net) | 580.7 | 528.7 |
| Investments | 30.3 | 41.0 |
| Intangibles and other assets | 877.9 | 910.2 |
| Total assets | $3,416.5 | $3,218.8 |
| Liabilities and Stockholders’ Equity | ||
| Current liabilities | $959.6 | $856.7 |
| Long‐term liabilities | 635.0 | 650.0 |
| Stockholders’ equity – common | 1,821.9 | 1,712.1 |
| Total liabilities and stockholders’ equity | $3,416.5 | $3,218.8 |
Lavender Companies, Inc Income Statements
For the year ended June 30 (in millions)
| 2021 | 2020 | |
| Revenues | $4,751.5 | $4,682.1 |
| Cost and expenses | ||
| Cost of goods sold | 1,273.4 | 1,226.4 |
| Selling and administrative expenses | 3,133.6 | 2,947.6 |
| Interest expense | 17.6 | 26.7 |
| Total costs and expenses | 4,424.6 | 4,200.7 |
| Pretax income | 326.9 | 481.4 |
| Income taxes | 114.4 | 174.0 |
| Net income | $212.5 | $307.4 |
Required:
Analyse Lavender’s financial statements. Include computation of the following ratios for 2020 and 2021 and comparisons of these ratios in your discussion.
- Current ratio
- Inventory turnover (Inventory on June 30 2019 was $546.3)
- Return on assets (Assets on June 30 2019 were $3,043.3)
- Return on common stockholders’ equity
- Debt to total asset ratio
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