Reference no: EM132372680

Assessment 1

Question 1.16

Suppose you are responsible for ordering a replacement for your office photocopy machine. Part of your job is to decide whether to buy it or lease it.

Required

(a) Describe something that could be considered relevant information in this decision and explain why it is relevant.

(b) Describe something that could be considered irrelevant information in this decision and explain why it is irrelevant.

(c) Explain why it was important to distinguish between relevant and irrelevant information in this problem.

Question 3.21

Direct method using estimated costs, benchmarking LO6 Devon Ltd allocates support department costs using the direct method and estimated costs.

The support department costs are budgeted at $88 000 for department A, $63 000 for department B and $40 000 for department C. These costs are allocated using the proportion of total cost the fi rm would pay to an outside service provider.

	Support			operating
	Dept. A	Dept. B	Dept. C	Casting	Machine
Direct costs	$88,000	$63,000	$40,000	-	-
Labour hours				6,000	4,000
Machine hours				2,000	10,000
Costs if support services were purchased outside:
Department A				$50,000	$60,000
Department B				$40,000	$30,000
Department C				$20,000	$30,000

Required

(a) Allocate budgeted support department costs using the direct method, first using labour hours and then with the outside cost proportions as the allocation bases.

(b) Could Devon Ltd use the cost of purchasing outside as an efficiency benchmark for the cost of both the support departments and the operating departments? List several advantages and disadvantages of this approach.

Assessment – 2 Quiz-1

The following information has been extracted from the financial statements and the notes of X Ltd.

	2017	2016
Cash assets Marketable securities Receivables Inventories Prepaid expenses Property, plant and equipment Current liabilities Revenue (sales on credit) Cost of sales	$33100 107 000 72 500 182 000 4 200 300 000 178 200 950 600 570 700	$35 100 73 166 6 258 160 902 532	900 300 900 800 300 700 500 900 800

Required

1. Calculate the following for 2017 to one decimal place:

• current ratio
• quick ratio
• receivables turnover ratio
• average collection period of accounts receivable
• inventory turnover ratio
• average period for inventory turnover

2. Analyse X’s liquidity