Fantastic Creamery Pte Ltd ('FC') manufactures and sells ice-cream

1. Assuming the table below shows the favourability of the variances of the company that you have chosen.

Based on the table, suggest 2 ways to improve the profitability of the business with respect to the relevant variances. State your assumptions.

Name of Variance	Favourable / Unfavourable
Sales price	Favourable
Sales volume	Unfavourable
Direct Materials price	Favourable
Direct Materials quantity	Unfavourable
Direct Labour price/rate	Unfavourable
Direct Labour efficiency	Favourable

[4 marks]

1. FC is evaluating whether to invest in a software which can help handle the company's online orders. FC's cost of capital is 10% per annum.

The table below shows the relevant cash flow and present value of the above investment.

Month	Cash Flow	Present Value
0	- $3,300	- $3,300
1	$1,210	$1,100
2	$1,452	$1,200
3	$1,283	$964
Total	$645	- $36

Determine whether FC should invest in the new software. Explain.

[2 marks]

1. Based on the decision to invest in the new software. Provide an example of a relevant and an irrelevant cost. Explain why you would classify this cost as a relevant and irrelevant cost respectively.

[4 marks]

The marking criteria for this section are shown below.

Criteria	Marks Allocated	Description
Interpretation of Variances	4 marks	Appropriate methods provided to improve profitability based on the interpretation of the variance. Appropriate and relevant explanations with examples.
Explanation	2 marks	Correct explanation of whether the company should invest in the project.
Analysis	4 marks	Able to provide rationale for the investment of the software by determining the relevant and irrelevant costs.