Reference no: EM132497736

AFE4005 Introduction to Accounting - University of Bradford

Question 1

A. Identify and discuss differences between Financial Accounting and Management Accounting.

B. Explain briefly what action management can take to manage different scarce resources. Please include at least two different scarce resources in you answer.

C. Smarty Co started operations on 1st January 2020 manufacturing and selling smart pens. They have gathered following expected information for the year 2020:

Selling price (per unit) £69
Direct materials (per unit) £9.50
Direct labour (per unit) £3.00

Other costs are estimated for the year 2020 based on the expected sales of 45,000 units. These costs are given below:

		Fixed Costs	Variable Costs
Operating Costs		190,000	550,000
Marketing Costs		270,000	600,500
Storage Costs		130,000	42,000
Administration Costs		100,000	-

For the year 2020, you are required to calculate:

a) the expected profit or loss

b) breakeven point in units and sales revenue

c) margin of safety in units and % change

d) the profit/loss if the selling price is reduced to £65 and sales quantity increases by 20%

e) the revised break-even point in units for (d)

f) explain the importance of computing break-even point for a Smarty Co.

Question 2

A. Discuss the importance, for an organisation, of preparing a cash budget and undertaking effective treasury management.

B. Alphabet Co has three production departments A, B, and C and one service department S. Alphabet Co are preparing their annual budget for the final quarter of 2020. Planned overhead costs for the quarter are as follows:

Overheads	£	Absorption basis
Supervision	12000	Direct Labour Hours
Depreciation	15000	Machine value
Insurance	5000	Machine value
Rates and Rent	30000	Floor area
Other bills	2500	Floor area

The following information is available for each department:

Absorption basis	A	B	C	S
Machine Value (£)	5000	2500	3500	1500
Budgeted Direct Labour hours	1000	500	1500	1000
Floor Area Occupied (Square metres)	1500	400	500	100

Of the total overhead costs allocated to service department S, 20% is charged to A; 40% to B; and the remainder is charged to C.

Required:

a) Prepare an overhead analysis sheet showing the total overhead cost budgeted for all four departments. You must show all your workings clearly.

b) Allocate the services department S costs to all production departments.

Attachment:- Introduction To Accounting.rar