Reference no: EM133344249
Question 1
'For investors, "poor governance is a substantial risk factor"' (Burns, 2003).
Drawing on relevant academic literature, discuss the measures a company can take to minimise the risk of poor corporate governance.
Question 2
Maroon Ltd produces and sells a standard model of car battery, which it sells to car manufactuers for £76 each. Next year the business plans to produce and sell 5,000 batteries. The cost structure for the business is as follows:
| Direct materials |
£20 per unit |
| Direct labour |
£8 per unit per hour, it takes 2 hours to make each unit |
| Fixed costs |
£80,000 per annum |
Requirement
Calculate the number of batteries that must be sold in the next year to break-even.
The expected profit that Maroon Ltd will make next year in relation to the production of the car batteries.
Assume management set a target profit of £250,000 for the next year. Calculate the number of batteries that must be sold to achieve this target profit. Assume fixed and variable costs remain the same.
Assume management would like to achieve the target profit of £250,000 but are restricted to selling 5,000 batteries. Calculate the selling price required to achieve the target profit. Assume fixed and variable costs remain the same.
Explain the different ways in which costs are (i) classified and (ii) behave in relation to contribution analysis.
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Question 3
Fly Ltd manufactures and sells suitcases. There are two models: Basic and Luxury. Product costs are computed using a business wide overhead absorption rate. Products absorb overheads on a labour hour basis. Selling prices are set based on cost plus a 25 per cent mark-up. The following information is provided:
Basic |
Luxury |
| Direct materials (£ per unit) |
60 |
120 |
| Direct labour (£ per labour hour) |
12.50 |
12.50 |
| Direct labour hours |
160 |
320 |
| Budget production/sales (units) |
100 |
100 |
| Total production overheads |
4,800 |
Requirement
(a) Calculate the full cost to produce both Basic and Luxury. 14 Marks
(b) Calculate the selling price per unit for both Basic and Luxury. 4 Marks
(c) Using examples, explain the difference between direct and indirect costs.