II Application Assignment (25 Marks) (to be submitted in excel only) a. 1. Identify production and support departments in your company and various cost related activities in your company 2. Pick up the expenses of your company from the most recent year's income statement and develop a support department cost allocation model, clearly giving the basis for allocation and apportionment for each item and then compute the overhead absorption rate. In case any assumptions are made, please state them clearly 3. Prepare a budget for your company, using previous year's financial statement as guideline and making adjustments for the following Additional new product lines/ new projects/ planned expansion/ changes in sales for the year b Inflationary trends Clearly explain the rationale used by you to prepare the budget. 4. Do a variance analysis (stating clearly adverse or favorable variance) from the budget prepared by you in (3) above and actual revenues & expenses from the latest financial year's information available. Specify the possible reasons for the variance. For example, if you are doing a variance analysis for the year 2019-20 (in question 4), you will have to consider the data for the year 2018-19 for preparing the budget (in question no.3) 5. What are some of the factors/considerations that make budgeting more complex in your organization? Guidelines for this application assignment a) Introduce your Industry/ Company b) For the purpose of this assignment, you will need the latest financial statement along with its previous year's data c) Give reasons for classification of departments. Give brief description of the cost related activities d) For cost allocation model, clearly state your assumptions & reasoning for the basis of allocation & apportionment. e) For variance analysis, please state specific reasons for the variance. For example, if personnel cost show an unfavorable variance, please do not mention the reason as higher costs in current year as compared to previous year. Please state specific reasons such as appointment of new staff, increase in pay levels over previous year, additional facilities/products introduced leading to appointment of new personnel etc f) Workings should be derived in MS-Excel. 16 II Application Assignment (25 Marks) (to be submitted in excel only) a. 1. Identify production and support departments in your company and various cost related activities in your company 2. Pick up the expenses of your company from the most recent year's income statement and develop a support department cost allocation model, clearly giving the basis for allocation and apportionment for each item and then compute the overhead absorption rate. In case any assumptions are made, please state them clearly 3. Prepare a budget for your company, using previous year's financial statement as guideline and making adjustments for the following Additional new product lines/ new projects/ planned expansion/ changes in sales for the year b Inflationary trends Clearly explain the rationale used by you to prepare the budget. 4. Do a variance analysis (stating clearly adverse or favorable variance) from the budget prepared by you in (3) above and actual revenues & expenses from the latest financial year's information available. Specify the possible reasons for the variance. For example, if you are doing a variance analysis for the year 2019-20 (in question 4), you will have to consider the data for the year 2018-19 for preparing the budget (in question no.3) 5. What are some of the factors/considerations that make budgeting more complex in your organization? Guidelines for this application assignment a) Introduce your Industry/ Company b) For the purpose of this assignment, you will need the latest financial statement along with its previous year's data c) Give reasons for classification of departments. Give brief description of the cost related activities d) For cost allocation model, clearly state your assumptions & reasoning for the basis of allocation & apportionment. e) For variance analysis, please state specific reasons for the variance. For example, if personnel cost show an unfavorable variance, please do not mention the reason as higher costs in current year as compared to previous year. Please state specific reasons such as appointment of new staff, increase in pay levels over previous year, additional facilities/products introduced leading to appointment of new personnel etc f) Workings should be derived in MS-Excel. 16
