Question 1 – Costing
Cakes2Go is a company which manufactures and sells three types of cakes in packets. One of them is called HoneyCake and contains three types of sweeteners: honey, sugar and syrup. The standard materials usage and cost for one unit of HoneyCake (one packet) is as follows:
£
|
Honey |
20 grams at £0·02 per gram |
0·40
|
|
Sugar
|
15 grams at £0.03 per gram |
0·45
|
|
Syrup |
10 grams at £0·025 per gram |
0·25 |
|
|
|
––––– 1·10 –––––
|
In the three months ended 30 November 2012, Cakes2Go produced 101,000 units of HoneyCake using 2,200 kg of honey, 1,400 kg of sugar and 1,050 kg of syrup. Note: there are 1,000 grams in a kilogram (kg).
Cakes2Go has used activity-based costing to allocate its overheads for a number of years. One of its main overheads is machine set-up costs. In the three months ended 30 November 2012, the following information was available in relation to set-up costs
|
Budget Total number of units produced Total number of set ups Total set-up costs
Actual Total number of units produced Total number of set ups Total set-up costs
|
264,000 330 £52,800
320,000 360 £60,000
|
Required:
(a) Calculate the following variances for materials in HoneyCake:
(i) Total materials usage variance;
(ii) Total materials mix variance;
(iii) Total materials quantity (yield) variance.
(b) Calculate the following activity-based variances in relation to the set-up cost of the machines:
(i) The expenditure variance;
(ii) The efficiency variance.
(c) Briefly outline the steps involved in allocating overheads using activity based costing.
(50 marks)
Question 2 – Budgeting
Write an essay of 1000 words demonstrating your conceptual understanding of the following questions.
- Is budgeting used primarily for scorekeeping, attention, directing or problem solving?
- How do strategic planning, long range planning and budgeting differ?
- Why is budgeted performance better than past performance as a basis for judging actual results?
- What are the major benefits of budgeting?
- Is budgeting an unnecessary burden for day to day problems? Explain your answer.
- Why is the sales forecast the starting point for budgeting?
- How do Spreadsheets aid the application of sensitivity analysis?
(50 marks)
Total (100 marks)
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