Financial and Management Information Systems - Assignment Example

Financial and Management Information Systems Task Flowchart to Describe the Goods Receiving and Locating Storage Process ‘ Task 2 Task: 2 a. Kauris Ltd Prime Costs (planned – December 2014 – To max 9 marks) Prime costs: Order 2169 ‘Carom’ Order 2170 ‘Horal’ Order 2171 ‘Pecan’ Machining department Qty Price / rate £ Total £ Qty Price / rate £ Total £ Qty Price / rate £ Total £ Materials 2,230 2,300 6,200 Labor 450 12.00 5,400 350 12.00 4,200 200 12.00 2,400 Expenses 1,200 8.00 9,600 800 8.00 6,400 500 8.00 4,000 Prime cost: 17,230 Prime cost: 12900 Prime cost: 12600 Painting department Qty Price / rate £ Total £ Qty Price / rate £ Total £ Qty Price / rate £ Total £ Materials 2,140 5,710 5,460 Labor 340 9.50 3,230 660 9.50 6,270 1,000 9.50 9,500 Expenses 1,200 2.50 3,000 1,000 2.50 2,500 800 2.50 2,000 Prime cost: 8,370 Prime cost: 14,480 Prime cost: 16,960 Assembly department Qty Price / rate £ Total £ Qty Price / rate £ Total £ Qty Price / rate £ Total £ Materials 2,100 5,260 8,800 Labor 850 8.00 6,800 720 8.00 5,760 930 8.00 7,440 Expenses 750 1.00 750 350 1.00 350 400 1.00 400 Prime cost: 9,650 Prime cost: 11,370 Prime cost: 16,640 Note to workings (Prime cost (direct costs) – To max 3 marks): This table specifically comprises of the prime cost (direct cost) that will be incurred by the company as a result of producing the provided quantity of items. Here the prime cost has been calculated by adding up the expenses associated with the material cost, the labor cost and the additional expenses. The total hours of machined and labor hours have been added up with the provided cost in order to attain the cost incurred upon them in alignment with every order (Drury, 2012). To max 3 marks for accurate completion of this table: Total Prime costs £ ÷ Units produced = Prime cost / unit £ Order 2169 ‘Carom’ £35,250 1,500 £23.50 Order 2170 ‘Horal’ £38,750 2,500 £15.50 Order 2171 ‘Pecan’ £46,200 6,000 £7.70 Total ALL products: £120200 This table comprises of the total prime cost associated with each unit of goods being produces as per order. The total prime costs for each product is attained from the above table and than divided by the total number of units that will be produced (Drury, 2012). . Task: 2 b. Kauris Ltd Total (full) costs of production (planned – December 2014 – To max 4 marks) Overhead absorption rates: Total Overhead cost (given) £ ÷ Total basis hours (labor or machine hours) Overhead absorption rate £ / hour Machining department 25,000 3,500 7.1428 Painting department 32,000 5,000 6.4 Assembly department 15,000 4,000 3.75 To max 6 marks for accurate completion of this section: Indirect production overheads: Order 2169 ‘Carom’ Order 2170 ‘Horal’ Order 2171 ‘Pecan’ Basis hours Oar £ Overhead £ Basis Hours Oar £ Overhead £ Basis hours Oar £ Overhead £ Machining 1650 7.1428 11785.62 1150 7.1428 8214.22 700 7.1428 4999.96 Painting 1540 6.4 9856 1160 6.4 7424 1800 6.4 11520 Assembly 1600 3.75 6000 1070 3.75 4012.5 1130 3.75 4237.5 Note to workings (Full production costs / absorption costing – 6 marks): This section contains data regarding the overhead absorption rate per hour that has been calculated by dividing the total overhead cost of each department by the total number of working hours. In a likewise manner, the overhead absorption rate for each of the departments has been multiple with the total working hours associated against each order. The multiplications within each section helps in providing the overhead associated against each order (Atrill & McLaney, 2009). To max 4 marks for accurate completion of this section: Prime costs B/fwd £ Indirect production overheads £ Total (full) cost £ ÷ Units produced = Full cost per unit £ Order 2169 ‘Carom’ 35,250 11785.62 47035.62 1,500 31.358 Order 2170 ‘Horal’ 38,750 9856 48606 2,500 19.443 Order 2171 ‘Pecan’ 46,200 6000 52200 6,000 8.7 Totals: 120200 27641.62 147841.62 This section comprises of the summation between the prime cost and the indirect production overhead values that has been calculated in the above table. In this section, both the direct as well as the indirect cost have been added up to attain the full cost. Eventual division of the full cost with the total count of units produced will provide the full cost per unit (Atrill & McLaney, 2009). . Task: 2 c. Kauris Ltd Finished goods closing inventories / cost of sales (Planned December 2014 – To max 6 marks) Cost of sales and closing inventory: Unit production less Unit sales = Closing inventory (units) Cost of sales £ Closing inventory £ Order 2169 ‘Carom’ 1,500 1,350 150 42333.3 4703.7 Order 2170 ‘Horal’ 2,500 2,000 500 38886 9721.5 Order 2171 ‘Pecan’ 6,000 5,400 600 46980 5220 Totals: 128199.3 19645.2 This table illustrates about the difference in the quantity of goods being storied in the inventory along with the amount of closing inventory. The cost of sales as provide in this table also illustrates about the actual cost that has been incurred for manufacturing the required quantity of goods (Atrill & McLaney, 2009). . Task: 2 d. Kauris Ltd Trading accounts (Gross profits and gross profit margins) (Planned December 2014 – To max 6 marks) Gross profits and margins: Order 2169 ‘Carom’ £ Order 2170 ‘Horal’ £ Order 2171 ‘Pecan’ £ Totals £ Sales £97,200 £90,000 £59,400 £246600 Less cost of sales £42333.3 £38886 £46980 £128199.3 Gross profit (Absorption system): £54866.7 £51114 £12 420 £142,295 Gross profit margin: £65495 £59000 £17820 £350925 This section illustrates about the necessary gross profit rate that has been attained by subtracting the cost of total quantity of goods sold from the total amount of sales revenue. The third column of this table also illustrates about the gross profit absorption rate (Gowthorpe, 2008). Task: 3 a Kauris Ltd Contribution and C/S ratio (Planned December 2014 – To max 5 marks) Contributions and profits Order 2169 ‘Carom’ £ Order 2170 ‘Horal’ £ Order 2171 ‘Pecan’ £ Selling price £72 £45 £11 Less variable / prime cost per unit £23.50 £15.50 £7.70 = Unit contribution: £48.5 £29.5 £3.3 C/S ratio: 0.673611111 0.655555556 0.3 Total Units sold 1350 2000 5400 £ Total contribution: £ 65475 £ 59000 £ 17820 £142295 Less total fixed costs: (£72,000) Gross profit (marginal system): £70295 This table illustrates about the values of the C/s ration that has been calculated based on the formula that [(sales revenue - cost of sales) / sales revenue x 100]. Moreover, it has also been multiplied with the total number of units that has been sold so as to attain the total contribution. The summation of the total contribution has been calculated against the provided fixed cost in order to attain the gross profit margin (Gowthorpe, 2008). Task: 3 b. Kauris Ltd Reconciliation of profits – (To max 6 marks) Difference in profits: £ Gross profit (absorption system) £142,295 Gross profit (marginal system) £702950 Difference (to be reconciled) £-560,655 Reconciliation: Order 2169 ‘Carom’ Order 2170 ‘Horal’ Order 2171 ‘Pecan’ Total overhead £ 11785.6 £9856 £6000 ÷ Total production (units) 1500 2500 6000 = Overhead per unit £7.85708 £3.9424 £ 1 Total (as above) X closing inventory (units) 150 500 600 £ = Overhead held in inventory: £ 1178.562 £ 1971.2 £ 600 £ 3749.762 The first table in section 3b illustrated about the difference between the gross profit values of both the absorption system and the marginal system. It also projects about the value of overhead that has been stored within the inventory as a result of the difference between the total quantity of produced goods and the total quantity that has been decided to be delivered. The formula for calculating the inventory levels has already been provided in the table column (Gowthorpe, 2008). Task: 4 a. Kauris Ltd Recalculate gross profit (and margin) if product ‘Pecan’ is removed (deleted) from the product range – (To max 6 marks) Contributions: Order 2169 ‘Carom’ £ Order 2170 ‘Horal’ £ Order 2171 ‘Pecan’ £ Total £ Contribution B/fwd £ 65475 £ 59000 £ 17820 £ 142295 Less Contribution lost (deleted) £10000 £10000 Contribution c/fwd: £65475 £59000 £7820 £ 132295 A Fixed costs: Total £ Fixed costs B/fwd £72,000 Less fixed costs savings £10,000 Fixed costs c/fwd: £62,000 B Adjusted profit (after deletion): £ Adjusted profit after deletion (A – B) £70,295 Reconciliation: Total £ Profit (marginal basis) B/fwd £350925 Less contribution lost £10000 Add fixed costs savings £10000 Adjusted profit (as above) c/fwd: £370925 This section illustrated a whole lot of data between the contributions of the overall sold products after the removal of ‘Order 2171 ‘Pecan’. Details regarding the saving of £10,000 to the fixed cost as a result of the removal have also been provided in the above table. The second table projects about the ‘Fixed costs c/fwd’ rate that has been attained after the deduction of the contribution made by the ‘Order 2171 ‘Pecan’. The third stage illustrates about the ‘Adjusted profit after deletion’ that has been attained by deducting the values mentioned within the tables A and B (Gowthorpe, 2008). Task: 4 b. Memo (To max 10 marks) To: Carol Redbug From: Costing Department Date: 18th November 2014 Subject: Explanation regarding the removal of Pecan from the production line The perception regarding elimination of ‘Order 2171 ‘Pecan’ from the production line appears justifies based upon the fact that it has been projecting considerable amount of loss in comparison to that of the other two orders. The estimation regarding the benefit attainment within the fixed cost as a result of the deduction of ‘Order 2171 ‘Pecan’ also holds potentiality. Justification regarding this can be attained by evaluating the data in the above provided table. Moreover, the adjusted profit attainability even after the education of this order still appears to be favorable. Tthe fixed cost incurrence as a result of the order elimination also appears favorable due to its decreasing rate (Baker, 1998). With due regards Costing department Task: 5 a. Kauris Ltd Explanation of activity – based costing (ABC) (To max 15 marks) Task: 5.b. Kauris Ltd The prime intention of developing the activity based costing is to mitigate the potential flaws that existed within the traditional absorption basic costing. The functionality of the absorption costing was previously based upon the assumptions that the production level is the major driving that estimates the values of the production overheads. The selection of activities within the overall absorption rate specifically illustrates about such assumptions (Baker, 1998). The development of an activity based costing techniques occurs in a manner that it takes consideration of all the activities and specifically assigns a cost for every activity in alignment with the resources consumption rate of the products and services on daily basis. The reflection of such an occurrence can be projected within the calculation tables that has been provided in this question regarding the segregation of the activities necessary for accomplishing all three orders undertaken by the firm (Baker, 1998) Recalculate gross profit (and margin) after allocating fixed production overheads using an ABC system– (To max 10 marks) Overhead recovery (ABC System) Order 2169 ‘Carom’ Order 2170 ‘Horal’ Order 2171 ‘Pecan’ Driver Qty Recovery rate £ Overhead £ Driver Qty Recovery rate £ Overhead £ Driver Qty Recovery rate £ Overhead £ Set – Ups 100 135 13500 50 135 6750 50 135 6750 Inspections 1,750 7.50 13125 250 7.50 1875 400 7.50 3000 Machine hours 3,150 1.50 4725 2150 1.50 3225 1700 1.50 2550 Materials movements 1,450 2.00 2900 800 2.00 1600 1000 2.00 2000 Total overheads: 34250 Total overheads: 13450 Total overheads: 14300 Profits (Marginal / ABC): Order 2169 ‘Carom’ £ Order 2170 ‘Horal’ £ Order 2171 ‘Pecan’ £ Total £ Contribution B/fwd 65475 59000 17820 142295 Less Fixed costs (ABC) 34250 13450 14300 62000 Profits (Marginal / ABC): 31225 45550 3520 80295 Profit margin (%) 47.69 77.20 19.75 56.43 Notes to Marginal / ABC profits (Workings / Observations – To max 8 marks): The two provided table illustrates about the activity based analysis that has been done within all the three orders. The primary table in this section illustrates about the total overhead cost that has been deducted from the fixed cost of all activities within every order in order to calculate the profit margin (Baker, 1998). References Atrill, P. & McLaney, E. (2009). Management accounting for decision makers.UK: Pearson Education, Limited Baker, J. J. (1998). Activity-based costing and activity-based management for health care. US: Jones & Bartlett Learning Drury, C. (2012). Management and cost accounting. US: Cengage Learning. Gowthorpe, C. (2008). Management accounting. UK. Cengage Learning Read More