Reference no: EM131820859

Assessment Task Part: A

US Bright produces a list of the activities performed at Cravings for cakes and their annual costs. In addition, Bright identifies an activity driver for each activity and the annual quantity of each activity driver. A partial list of activity costs and quantities of activity drivers is shown below:

Cravings for Cakes list of Activities
Activity	Activity Cost ($)	Activity Driver	Annual Quantity of Activity driver
Prepare Annual Accounts	5000	None Available
Process receivables	15000	No. of Invoices	5000 Invoices
Process payables	25000	No. of purchase orders	2500 Purchase orders
Program production	28000	No. of production schedules	1000 schedules
Process Sales order	40000	No. of sales orders	4000 sales orders
Dispatch sales order	30000	No. of dispatches	2500 dispatches
Develop and test products	60000	Assigned directly to products
Load mixers	14050	No. of batches	1000 batches
Operate mbters	45900	No. of kilograms	200000 kilograms
Clean mixers	6900	No. of trays	1000 batches
Move mixture to filling	3450	No. of cakes/pastries	200 000 kilograms
Clean trays	20000	No. of trays	16000 trays
Fill trays	16000	No. of cakes/pastries	800,000 cakes/pastries
Move to baking	8000	No. of trays	16,000 trays
Set up ovens	50000	No. of batches	1000 batches
Bake Cakes/Pastries	130000	No. of batches	1000 batches
Move to packing	40000	No. of trays	16,000 trays
Pack cakes/pastries	80000	No. of cakes/pastries	800,000 cakes/pastries
Inspect pastries	2500	No. of pastries	50,000 pastries

Required:

Construct an Excel spreadsheet to
a. Calculate the cost per unit of activity driver for the activities listed
b. Based on the information in the following table, prepare a bill of activities and determine the cost per unit for Lamington
c. What other costs must be added to calculate the product cost for Lamington?

Lamington (Batch Size 1000; Annual Volume 100,000)
Activity Consumed	Annual Quantity of Activity Driver
Process Receivables	500 Invoices
Process Payables	200 Purchase Orders
Program Production	100 Production Schedules
Process Sales Order	400 Sales Orders
Load Mixers	100 Batches
Operate Mixers	30 000 Kilograms
Clean Mixers	100 Batches
Move mixture to filling	30 000 Kilograms
Clean trays	2000 trays
Fill trays	100 000 cakes
Move to baking	2000 trays
Set up ovens	100 Batches
Bake cakes/pastries	100 Batches
Move to packing	2000 trays
Pack Cakes/Pastries	100 000 cakes
Dispatch Sales Order	500 Sales orders
Develop and Test product	$600 assigned directly to this product

Assessment Task Part B (Budgeting)

Using Budgets to Evaluate easiness cession:

Hawthorn Leisure Works (HLW) offers tenth courts and other physical fitness facilities to its members. The club has 2000 members Revenue is derived from annual membership fees and hourly court fees. The annual membership lees arm

Individual	$45
Mode.	$30
family	$100

Approximately half the members are family and the remaining Membership are split equally between individuals and students. For the next two financial years, the hourly court fee are $8 Sit and $11, depending On the sewer and the time of the day (prime verse non- prime time). There are to courts each club. The cowls are available for 12 hours per day, from 9am to9pm.

The peak tennis season runs from October to April (181 days). During this period, court usage averages from 90 t0 100 per cent of capacity during prime time (5pm to 9pm) and 50 to 60 percent of capacity during the remaining hours (9 am to 4 pm). Daily court usage during the off season averages from 20 to 40 per cent of capacity, and is charged at $6 per hour. All of HLW's memberships expire at the end of September. A substantial amount of cash receipts is collected during the eddy part of the tennis season due to renewal of annual membership fees and heavy court usage. However, sash receipts are not as large in autumn and drop significantly in the winter months.
For the start of the new financial year on 1 October, HLW is considering introducing a new membership and fee structure in an attempt to improve its cash flow planning. Under the new membership plan, only an annual membership fee would be charged rather than a membership fee plus hourly court fees. There would he two classes of membership, with annual fees as follows:

Individual                                                  $300

Family                                                      $500

The annual fee would be collected in advance at the time the membership application was completed. Members would be allowed to use the tennis courts as often as they wished during the year under the new plan. All future membership would be sold under these new terms. A special promotional campaign would be instituted to attract new members and to encourage current members to remain with the club. The annual fees for individual and family memberships would be reduced to $250 and $450 respectively if members pay for their yearly memberships in advance during the two month promotional campaign.

HLW's management estimate that 70% of the current members will continue with the club and student members would convert to Individual membership. The most active members 145% of current members) would pay the yearly fee in advance and remise the special fee reduction, while the remaining members who continued would renew memberships in October. Those members who could not re-join are not considered active (that is, they live lines or less was a year). Management estimates that the loss of members would be offset fully by new members within six months of instituting the new plan. These new members would pay a proportional amount of the yearly fee on joining. Furthermore, many of the new members would be individuals would pay during non-prime time. Management estimates the adequate court time will be available for all members under the new plan.

If the new membership plan is adopted, It would be instituted at the start of the financial year (1 October), which is the start of the tennis season. The special promotional campaign would be conduced during August and September, prior to the start of the new financial year.

Required:

Pour consulting firm has been hired to help HLW to evaluate its new fee structure. Explain the following issues to report to your managing director:

a) Will HLW's new membership plan and fee structure improve its ability to plan its cash receipts? Explain.

b) Estimate the effect on sales revenue resulting from the planned change in fee structure for the next financial year, which starts 1 October and ends on 30 September. State any assumptions that you need to make.

c) HLW should evaluate the new membership plan and fee structure completely before decides to adopt or reject it Identify the key factors that HLW should consider in its evaluation.