Financial and Managerial Accounting

Part 1 – Financial Analysis

Peter is a self employed music teacher and has the following trial balance:

Trial Balance as at 30 June 2013

                                                                                      Debit                                                 Credit

                                                                        £                                                          £

Note: In this case, there are no trading purchases.

Required:

1)    Prepare Peter Income Statement for the year ended 30 June 2013 and a Balance Sheet as at 30 June 2013.

(30 marks)

2)    Briefly research and discuss the changes in international regulation for reporting financial statements. In particular the changes to the names of profit and loss account.                                                                                                                 

(20 marks)

Part 2 – Performance Evaluation

The comparative condensed income statements of SPENCER Corporation are shown below.

SPENCER CORPORATION

Comparative Condensed Income Statements

For the Years Ended December 31

                                                                                                 2013                           2012             

Net sales                                                               $620,000                   $500,000

Cost of goods sold                                               450,000                      400,000

Gross profit                                                             170,000                      100,000

Operating expenses                                                54,000                        40,000

Net income                                                           $116,000                    $  60,000

Instructions

(a)   Prepare a horizontal analysis of the income statement data for SPENCER Corporation using 2013 as a base. (Show the amounts of increase or decrease.)

(b)   Prepare a vertical analysis of the income statement data for SPENCER Corporation in columnar form for both years.

 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:

                                                                                                            £

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

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. 

1. Is budgeting used primarily for scorekeeping, attention, directing or problem solving?
2. How do strategic planning, long range planning and budgeting differ?
3. Why is budgeted performance better than past performance as a basis for judging actual results?
4. What are the major benefits of budgeting?
5. Is budgeting an unnecessary burden for day to day problems? Explain your answer.
6. Why is the sales forecast the starting point for budgeting?
7. How do Spreadsheets aid the application of sensitivity analysis?

 (50 marks)

Total (100 marks)