Question 01
FNSACC503 Manage Budgets and Forecasts Assessment Task 02 – Assignment
Sandrine Ltd manufactures two types of motor vehicle tyres: standard which sells for $150 and deluxe which sells for $210. They anticipate selling 8,500 standard tyres and 3,500 deluxe tyres during 2017.
The tyres have the following materials and labour requirements:
|
Direct materials: Rubber ($10 per kg) Steel ($90 per kg) Direct labour ($15 per hour) |
Standard | Deluxe |
|
5 kg 0.4 kg 0.7 hrs |
6 kg 0.5 kg 0.9 hrs |
The following factory overhead costs are anticipated for the coming year. The predetermined overhead rate is based on a total estimated direct labour time of 11,000 hours. The applied overhead cost is used in the valuation of finished goods. Any amount over- or under-applied for the year is shown separately in the income statement.
|
Indirect materials Indirect labour Power and lighting Rates and taxes Insurance Depreciation of equipment |
$ |
| 8,500
15,000 12,500 8,500 4,500 17,500 |
The following inventory information is available:
| Inventory | Actual stock
1-Jan-17 |
Desired stock
31-Dec-17 |
|
|
Finished goods: Standard tyres Deluxe tyres Direct materials: Rubber Steel |
|||
|
1,000 |
500 |
||
| 1,500 | 1,200 | ||
| 5,000 kg | 2,000 kg | ||
| 200 kg | 300 kg |
Cost of production per unit of finished goods in 2016 was $100 for the standard tyres and $120 for the deluxe tyres.
Other operating expenses are estimated as follows:
|
Sales salaries Advertising Office salaries Office expenses |
$ |
| 50,000
12,000 85,000 13,000 |
Prepare a master budget using excel spreadsheet for Sandrine Ltd for the year ending 31 December 2017. Include the following budget schedules:
- Sales budget
- Production budget (in units)
- Direct materials budget
- Direct labour budget
- Factory overhead budget
- Cost of goods sold budget
- Income Statement budget
The following estimates have been provided for Martin’s Bicycle Shop:
Costs and expenses, classified according to their behaviour in relation to sales as either Variable or Fixed are as follows:
| Variable Costs Cost of Sales Freight Costs Sales Commissions Sales Discounts |
60% of sales revenue 2% of sales revenue 3% of sales revenue 5% of sales revenue |
|
| Fixed Costs
Depreciation |
$8,200 |
|
| Insurance | $1,600 | |
| Office Supplies | $4,800 | |
| Power (Gas & Electricity) | $6,000 | |
| Rent of Shop Premises | $10,400 | |
| Salaries & Wages | $40,000 | |
| Sales Promotion Expenses | $12,000 |
Required: Prepare a detailed Statement of Financial Performance budget using flexible budgeting techniques. The task should be completed using excel spreadsheet.
Cassini Pty Ltd Variance Report YTD 31.3.2017
| Account | Year to date | Budget | Company’s recommendation | Variance $ | % Variance U/F |
| Motor Vehicle Expense | $5,000 | $6,000 | Major service in March will appear in April to correct. | ||
| Print, post and Stationery | $500 | $550 | Not material if less than
$500. |
||
| Telephone | $6,800 | $7000 | Not material if less than 5%. | ||
|
Entertainment |
$3,000 |
$1,000 |
Recommend controls as per request for assumption revision. |
Required:
- Prepare a report comparing Year to date to Budget to disclose relevant variances for the four accounts in the Variance Report and signify whether the Variance is Favourable or
- Make recommendations of the four accounts based on the Variance What can be done about the entertainment expense account? (Discuss in 150 – 200 Words).
