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FINANCIAL AND MANAGERIAL ACCOUNTING – ASSIGNMENT 2

2

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:

£

Honey 20 grams at £0·02 per gram 0·40

Sugar 15 grams at £0.03 per gram 0·45

Syrup 10 grams at £0·025 per gram 0·25

––––– 1·10 –––––

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

Budget

Total number of units produced

Total number of set ups

Total set-up costs

Actual

Total number of units produced

Total number of set ups

Total set-up costs

264,000

330

£52,800

320,000

360

£60,000

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.

FINANCIAL AND MANAGERIAL ACCOUNTING – ASSIGNMENT 2

(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)