i need help on questions, 3, 4 and 5 plz

Trading (production and sales):

You should assume that today is Monday 23^rd November 2020.

Sales:

The company has the following sales orders to be delivered during December 2020.

Order / product:

Order 1101

'Sky'

Order 1102

'Sun'

Order 1103

'Moon'

Quantity to be delivered (sales in units)

650

950

1,150

Selling price (per unit)

90

35

55

Production:

The production schedule for December 2020 (product quantities and production resources requirement) is shown below.

Order / product:

Order 1101

'Sky'

Order 1102

'Sun'

Order 1103

'Moon'

Finished goods:

Quantity to be produced

790

1,000

1,320

Note:

At 1^st December 2020 there will be no opening inventory of finished goods.

Resources requirement for production:

Direct costs (variable costs):

Order / product:

Order 1101

'Sky'

Order 1102

'Sun'

Order 1103

'Moon'

Machining department:

Totals

Incremental materials cost

1,440

720

1,150

3,310

Direct labour hours (total)

102

144

72

318 hours

Machine hours (total)

186

221

144

551 hours

Painting department:

Incremental materials cost

864

1,740

288

2,892

Direct labour hours (total)

144

114

90

348 hours

Machine hours (total)

114

60

30

204 hours

Assembly department:

Incremental materials cost

1,150

1,150

720

3,020

Direct labour hours (total)

216

258

204

678 hours

Machine hours (total)

60

72

102

234 hours

Fabien Ltd - continued:

Fixed indirect production overheads:

Indirect production overheads are fixed (unaffected by production activity levels) at 41,500 per month. This value has been allocated and apportioned to the 3 production departments as follows:

Production department:

Machining

Painting

Assembly

Total

Fixed costs (allocation / apportionment)

19,400

8,600

13,500

41,500

Bases for absorption:

• Machining department = Machine hours
• Painting department = Direct labour hours
• Assembly department = Direct labour hours

Note:

The quantity for absorption basis (for each production department) should be established using the total departmental resources requirement shown in the tables above.

Required:

Task 2:

Prepare (for each product and in total) the following planned values for December 2020:

a.Prime costs

11 Marks

b.Total (full) costs of production

14 Marks

c.Finished goods closing inventories / cost of sales

7 Marks

d.Gross profits (and gross profit margins)

3 Marks

Note to task 2:

The requirement of task 2 should be established using an absorption costing system

(as described in the production process flowchart)

The total task 2 mark above, includes marks allocated to short descriptive notes to workings

(

These notes should be 'short explanatory notes' that will serve to define the terminology used and explain the workings (and results / outcomes) to a colleague who does not work in the finance office

Fabien Ltd - continued:

Required

Task 3:

Prepare the following planned values:

a.Contribution and contribution / sales ratio (for each product and in total) and the gross profit

(in total only - see note)

7 Marks

b.Prepare a reconciliation to explain the difference between the total gross profits established using an absorption costing system (task 2 d.) and a marginal costing system (task 3 a.)

7 Marks

Note to task 3 a. & b.:

The requirement of task 3 should be established using a marginal costing system where:

All direct costs are classified as variable

All indirect production overheads are classified as fixed

The total task 3 mark above, includes marks allocated to short descriptive notes to workings

(

These notes should be 'short explanatory notes' that will serve to define the terminology used and explain the workings (and results) to a colleague who does not work in the finance office.

Catherine Smith, the company sales manager has commented that product 'Sun' (Order 1102) is not performing well and the company profits would increase if this product was removed from the range.

Task 4:

a.Re - calculate the gross profit (and gross profit margin) if product 'Sun' is removed from the production and sales schedule.

Note:

It has been established that, if product 'Sun' was removed from the catalogue, specific fixed cost savings of 12,800 would be made.

4 Marks

b.Draft a memo to Catherine Smith in reply to his comment (with clear explanatory supporting reasons to a non-accountant).

7 Marks

Note:

Your memo should be prepared in a good style and show effective skills in written communication and 'quality of information' aspects

Fabien Ltd - continued:

The finance office (cost and management accounts) recently performed an 'activity - based' production systems analysis for the fixed production overheads. The result is the table below:

Cost

Cost driver

Total cost driver quantity per period

Indirect production overhead recovery rate

Set up costs

10,000

Set ups

140

71.43

Production scheduling

3,200

Set ups

140

22.86

Quality control

17,300

Inspections

2,500

6.92

Depreciation

9,200

Machine hours

1,000

9.20

Raw materials storage

1,800

Materials movements

1,800

1.00

Total:

41,500

A further analysis has produced the following indirect production overhead resource required for each product:

Activity - Based Resource (Cost driver quantity) Requirement (by product)

Order / product:

Order 1101

'Sky'

Order 1102

'Sun'

Order 1103

'Moon'

Total

Set ups

45

45

15

105

Inspections

1,000

800

1,190

2,990

Machine hours

320

420

250

990

Materials movements

900

400

500

1,800

Task 5:

1. Explain 'Activity - Based Costing (ABC)' as an alternative to full absorption costing and discuss the potential benefits that ABC might bring to production and information systems of Fabien Ltd

Note:

Your written explanations should be effectively communicated and should include notes on:

The reasons for the development of ABC

The 'Activity - Based' concept

The process of an ABC system development

The potential benefits (if any) you feel could be achieved by the introduction of an ABC system for Fabien Ltd

10 Marks

1. Recalculate the gross profits (by product an in total) after allocating fixed production overheads to products using an activity - based system

10 Marks

The task 5 b. mark include marks allocated to short descriptive notes to workings These should be 'short explanatory notes' that will serve to identify (observe) the effects on each product (and in total) profit caused by the ABC system allocations.

Paragraph Styles You should assume that today is Monday 23/ November 2020. The company has the following sales orders to be delivered during December 2020. Order / product: Order 1101 Order 1102 Order 1103 Sky 'Sun' Moon Quantity to be delivered (sales in units) 650 950 1,150 Selling price (per unit) 690 635 E55 Production: The production schedule for December 2020 (product quantities and production resources requirement) is shown below. Order / product: Order 1101 Order 1102 Order 1103 Sky 'Sun' 'Moon' Finished goods; Quantity to be produced 790 1,000 1,320 Note: At 1" December 2020 there will be no opening inventory of finished goods, Resources requirement for production: Direct costs (variable costs): Order / product: Order 1101 Order 1102 Order 1103 "Sky 'Sun' 'Moon' Machining department Totals Incremental materials cost E1,440 E720 E1,150 $3,310 Direct labour hours (total) 102 144 72 318 hours Machine hours (total) 186 221 144 551 hours Painting department: Incremental materials cost EB64 E1,740 280 $2,892 Direct labour hours (total) 144 114 90 348 hours Machine hours (total) 114 60 30 204 hours Assembly department: Incremental materials cost 1,150 E1,150 E720 E3,020 Direct labour hours (total) 216 258 204 678 hours Machine hours (total) 60 72 102 234 hours 6 WS Mailings Review View Help v 1= 41 AaBbCcD, AaBbCcDI AaBbCcD AaBbCcD Aal E Emphasis 1 Heading 1 1 Normal Strong Su Paragraph Styles Fabien Ltd - continued: Fixed indirect production overheads: Indirect production overheads are fixed (unaffected by production activity levels) at $41,500 per month. This value has been allocated and apportioned to the 3 production departments as follows: Production department: |Machining Painting Assembly Total Fixed costs (allocation / apportionment) E19,400 E8,600 E13,500 E41,500 Bases for absorption: Machining department = Machine hours Painting department = Direct labour hours Assembly department = Direct labour hours Note: The quantity for absorption basis (for each production department) should be established using the total departmental resources requirement shown in the tables above. Required: Task 2: Prepare (for each product and in total) the following planned values for December 2020: a. Prime costs 11 Marks b. Total (full) costs of production 14 Marks C. Finished goods dosing inventories / cost of sales 7 Marks d. Gross profits (and gross profit margins) 3 Marks Note to task 2: The requirement of task 2 should be established using an absorption costing system (as described in the production process flowchart) The total task 2 mark above, includes marks allocated to short descriptive notes to workings (