Blunkham plc sells a range of computerised accounting software solutions to small businesses in the UK. Sales are recorded in the month in which the software is installed on the clients' machines and Blunkham plc provides three months of telephone-based customer support from that date. You are the management accountant of the company and have been asked to examine a number of issues relating to costs in the business. You have collected the following data related to the operations of the business for the year to 30th September 2021; Month Sales Sales commission costs Electricity costs Customer support costs ( millions) ('000) ('000s) ('000s) October 2020 7.25 23 23 66 November 2020 8.76 29 25 78 December 2020 8.64 26 26 93 January 2021 10.17 39 28 93 February 2021 13.92 45 24 111 March 2021 15.62 49 22 128 April 2021 8.14 28 17 163 May 2021 4.93 11 16 72 June 2021 4.98 12 13 40 July 2021 5.13 13 10 43 August 2021 6.02 17 12 48 September 2021 6.16 18 2 21 52 Blunkham plc is currently preparing its budget for the year to 30th September 2022 and wishes to produce an equation that describes the behaviour of each of its costs. Each of the three equations will take the form y = a + bx, where y is the total cost at an activity level of x invoiced sales, a is the fixed cost and b is the rate of variable cost. The company has asked you to make a presentation to the staff liaison committee which consists of a wide range of employees from the business, most of whom have little understanding of accounting terminology or practices. What do your findings tell you about the cost behaviours at Blunkham plc (12 marks)? You should give specific suggestions about why the costs behave as they do and discuss any significant variations that you have found between the data and your equation. You should produce one slide for each cost (three slides in total). You may make whatever assumptions you feel necessary in your discussions but you should state clearly what these assumptions are. Blunkham plc sells a range of computerised accounting software solutions to small businesses in the UK. Sales are recorded in the month in which the software is installed on the clients' machines and Blunkham plc provides three months of telephone-based customer support from that date. You are the management accountant of the company and have been asked to examine a number of issues relating to costs in the business. You have collected the following data related to the operations of the business for the year to 30th September 2021; Month Sales Sales commission costs Electricity costs Customer support costs ( millions) ('000) ('000s) ('000s) October 2020 7.25 23 23 66 November 2020 8.76 29 25 78 December 2020 8.64 26 26 93 January 2021 10.17 39 28 93 February 2021 13.92 45 24 111 March 2021 15.62 49 22 128 April 2021 8.14 28 17 163 May 2021 4.93 11 16 72 June 2021 4.98 12 13 40 July 2021 5.13 13 10 43 August 2021 6.02 17 12 48 September 2021 6.16 18 2 21 52 Blunkham plc is currently preparing its budget for the year to 30th September 2022 and wishes to produce an equation that describes the behaviour of each of its costs. Each of the three equations will take the form y = a + bx, where y is the total cost at an activity level of x invoiced sales, a is the fixed cost and b is the rate of variable cost. The company has asked you to make a presentation to the staff liaison committee which consists of a wide range of employees from the business, most of whom have little understanding of accounting terminology or practices. What do your findings tell you about the cost behaviours at Blunkham plc (12 marks)? You should give specific suggestions about why the costs behave as they do and discuss any significant variations that you have found between the data and your equation. You should produce one slide for each cost (three slides in total). You may make whatever assumptions you feel necessary in your discussions but you should state clearly what these assumptions are
