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Case Scenario Overhead is recovered on a direct labour hour basis. C. Information for the FY 2020 of the standard material and labour usage for each product is as follows: XYZ Company manufactures and sells two different brands of electronic products, known as Pebble 101' and 'Stone 101'. "Pebble 101'is produced in department 1 and 'Stone 101' in department 2. The business has a capital investment of more than RO 700,000, with 450 employees working in manufacturing and administrative units of the company. The financial statements of last two years (FY 2019 & FY 2018) of XYZ Company has revealed an overall decline in sales, profitability and liquidity position. The directors of XYZ Company are concerned about this sudden decline in the performance and prospects of the Company. Finished product 'Stone 101' Pebble 101 20 Material 'A' in Units Material 'B' in units Direct labour in hours 10 20 25 Material 'B' You have recently joined as a trainee management Accountant in XYZ Company and are now a part of the Management Accounting team. Directors want company's management accounting team to prepare functional & master budgets for the financial year 2020, calculate relevant financial ratios considering benchmarks, key performance indicators and budgetary targets, identify variances for last two financial years, apply relevant strategic planning tools , financial governance to monitor strategy, management accounting skill sets and effective strategies and systems and compare the ways in which Company can respond to financial problems effectively and efficiently. XYZ Company's budgeted information (FY 2020) & financial statements of last two years (FY 2019 & FY 2018) are given below:- D. Information for the FY 2020 of Direct Material Material 'A' Beginning inventory (unit) 9,500 Ending inventory required (unit) 20,200 9,000 2,700 E. Factory overhead budget information for the FY 2020 Department 1 RO Department 2 RO A. Sales Budget information for FY 2020. Finished product *Pebble 101' 9,500 400 2,870 270 Forecasted Sales (Units) Selling price per unit in RO Ending inventory required (units) Beginning inventory (unit) Budgeted variable overheads rates (Per direct labour hours) Indirect materials Indirect Labour Power (Variable Portion) Maintenance (Variable Portion 'Stone 101 2600 300 100 95 0.4 0.4 0.25 0.06 L B. Information for the FY 2020 of Standard material cost per unit and labour costs per hour: Budgeted fixed overheads Depreciation Supervision Power (fixed portion) Maintenance (Fixed portion) 30,000 20,000 35.000 35,000 20,000 21,400 600 RO 2.8 899 Material A Material 'B' Direct labour F. Non-manufacturing overheads budgeted Information for the FY 2020: Stock of finished goods 136,500 Stock of Raw materials 71,600 Debtors Cash 82,250 9.500 299,850 Information of Estimated non-manufacturing overheads: Stationary etc. (Administration) Salaries sales Salaries office Commissions Car expenses (Sales) Advertising Miscellaneous (Office) TOTAL RO 2000 28,500 8,000 25,000 6,500 30.000 4.000 104.000 Less current liabilities Creditors Net assets 72,200 227,650 949,672 Equity: Represented by shareholder's interest: 700,000 ordinary shares of RO 1 each Reserves Equity 700,000 249,672 949,672 G. Opening cash balance is RO 9500 for the financial year 2020 H. Cash flows Budgeted Information for the FY 2020 are as follows: J. Actual Statements of financial position as at 31st Dec Quarter 1 RO 650,000 Quarter 2 RO 700,000 Quarter 3 RO 880.000 Quarter 4 RO 846 250 Amt in RO 2019 2018 Receipts from customers Payments: Materials Payment for wages Other costs and expenses RO000 RO^000 300,000 303,406 | 30,000 320,000 330,000 25,000 250,000 360,000 218,004 336,996 235,094 333,409 Non-current assets (carrying value) 390,000 360,000 Current assets Inventory 90,000 63,000 Receivable 102,000 53,200 I. Budgeted balance sheet for the previous year ended 2019 was as follows: RORO Non-current assets: Land | Building and equipment 523,000 Less: Depreciation 63,750 262,772 Cash 65,000 70,000 Total Assets 647,000 546,200 459,250 722,022 Current assets: Equity and Liabilities Distribution costs 7,600 5,440 Ordinary share capital ($100 per share) 389,000 356,000 Operating profit 58,640 53,920 Reserves 60,000 66,600 Interest 8,000 4,000 Profit before taxation 50,640 49,920 Non-current liabilities Taxation 2,200 1,000 10% Loan notes 120,000 60,000 Profit after taxation 48,440 48,920 Current liabilities Accruals 42,000 33,600 Other relevant information: Trade payables 36,000 30,000 L. Benchmarks - Average data for companies similar to XYZ Company Total Equity and liabilities 647,000 546,200 Ratios for financial year ended 31" Dec Benchmark Gross profit ratio 38% 15% Operating profit margin Return on Capital Employed (ROCE) K. Actual Statements of profit or loss for the year ended 30th Dec 13% Amt in RO Current ratio 2019 2018 Quick ratio 1.5:1 RO000 RO000 Inventory days 40 days Sales 320,000 224,000 Receivables days 45 days Cost of sales 204,800 140,000 Payable days 50 days Gross profit 115,200 84,000 Gearing ratio 30% Administration expenses 48,960 24,640 M. XYZ Company - Budgeted information for the financial year 2019 & 2018, no change in actual units & budgeted units produced and sold: Amt in $ 2019 2018 Sales revenue 310,000 230,000 Cost of sales 204,900 100,000 Administration expenses 48,600 24,540 Distribution costs 7,400 5,600 Interest 8,200 4,100 As a member of Management accounting team of XYZ Company, you are required to evaluate how planning tools for accounting respond appropriately to solving financial problems to lead organization to sustainable success. Case Scenario Overhead is recovered on a direct labour hour basis. C. Information for the FY 2020 of the standard material and labour usage for each product is as follows: XYZ Company manufactures and sells two different brands of electronic products, known as Pebble 101' and 'Stone 101'. "Pebble 101'is produced in department 1 and 'Stone 101' in department 2. The business has a capital investment of more than RO 700,000, with 450 employees working in manufacturing and administrative units of the company. The financial statements of last two years (FY 2019 & FY 2018) of XYZ Company has revealed an overall decline in sales, profitability and liquidity position. The directors of XYZ Company are concerned about this sudden decline in the performance and prospects of the Company. Finished product 'Stone 101' Pebble 101 20 Material 'A' in Units Material 'B' in units Direct labour in hours 10 20 25 Material 'B' You have recently joined as a trainee management Accountant in XYZ Company and are now a part of the Management Accounting team. Directors want company's management accounting team to prepare functional & master budgets for the financial year 2020, calculate relevant financial ratios considering benchmarks, key performance indicators and budgetary targets, identify variances for last two financial years, apply relevant strategic planning tools , financial governance to monitor strategy, management accounting skill sets and effective strategies and systems and compare the ways in which Company can respond to financial problems effectively and efficiently. XYZ Company's budgeted information (FY 2020) & financial statements of last two years (FY 2019 & FY 2018) are given below:- D. Information for the FY 2020 of Direct Material Material 'A' Beginning inventory (unit) 9,500 Ending inventory required (unit) 20,200 9,000 2,700 E. Factory overhead budget information for the FY 2020 Department 1 RO Department 2 RO A. Sales Budget information for FY 2020. Finished product *Pebble 101' 9,500 400 2,870 270 Forecasted Sales (Units) Selling price per unit in RO Ending inventory required (units) Beginning inventory (unit) Budgeted variable overheads rates (Per direct labour hours) Indirect materials Indirect Labour Power (Variable Portion) Maintenance (Variable Portion 'Stone 101 2600 300 100 95 0.4 0.4 0.25 0.06 L B. Information for the FY 2020 of Standard material cost per unit and labour costs per hour: Budgeted fixed overheads Depreciation Supervision Power (fixed portion) Maintenance (Fixed portion) 30,000 20,000 35.000 35,000 20,000 21,400 600 RO 2.8 899 Material A Material 'B' Direct labour F. Non-manufacturing overheads budgeted Information for the FY 2020: Stock of finished goods 136,500 Stock of Raw materials 71,600 Debtors Cash 82,250 9.500 299,850 Information of Estimated non-manufacturing overheads: Stationary etc. (Administration) Salaries sales Salaries office Commissions Car expenses (Sales) Advertising Miscellaneous (Office) TOTAL RO 2000 28,500 8,000 25,000 6,500 30.000 4.000 104.000 Less current liabilities Creditors Net assets 72,200 227,650 949,672 Equity: Represented by shareholder's interest: 700,000 ordinary shares of RO 1 each Reserves Equity 700,000 249,672 949,672 G. Opening cash balance is RO 9500 for the financial year 2020 H. Cash flows Budgeted Information for the FY 2020 are as follows: J. Actual Statements of financial position as at 31st Dec Quarter 1 RO 650,000 Quarter 2 RO 700,000 Quarter 3 RO 880.000 Quarter 4 RO 846 250 Amt in RO 2019 2018 Receipts from customers Payments: Materials Payment for wages Other costs and expenses RO000 RO^000 300,000 303,406 | 30,000 320,000 330,000 25,000 250,000 360,000 218,004 336,996 235,094 333,409 Non-current assets (carrying value) 390,000 360,000 Current assets Inventory 90,000 63,000 Receivable 102,000 53,200 I. Budgeted balance sheet for the previous year ended 2019 was as follows: RORO Non-current assets: Land | Building and equipment 523,000 Less: Depreciation 63,750 262,772 Cash 65,000 70,000 Total Assets 647,000 546,200 459,250 722,022 Current assets: Equity and Liabilities Distribution costs 7,600 5,440 Ordinary share capital ($100 per share) 389,000 356,000 Operating profit 58,640 53,920 Reserves 60,000 66,600 Interest 8,000 4,000 Profit before taxation 50,640 49,920 Non-current liabilities Taxation 2,200 1,000 10% Loan notes 120,000 60,000 Profit after taxation 48,440 48,920 Current liabilities Accruals 42,000 33,600 Other relevant information: Trade payables 36,000 30,000 L. Benchmarks - Average data for companies similar to XYZ Company Total Equity and liabilities 647,000 546,200 Ratios for financial year ended 31" Dec Benchmark Gross profit ratio 38% 15% Operating profit margin Return on Capital Employed (ROCE) K. Actual Statements of profit or loss for the year ended 30th Dec 13% Amt in RO Current ratio 2019 2018 Quick ratio 1.5:1 RO000 RO000 Inventory days 40 days Sales 320,000 224,000 Receivables days 45 days Cost of sales 204,800 140,000 Payable days 50 days Gross profit 115,200 84,000 Gearing ratio 30% Administration expenses 48,960 24,640 M. XYZ Company - Budgeted information for the financial year 2019 & 2018, no change in actual units & budgeted units produced and sold: Amt in $ 2019 2018 Sales revenue 310,000 230,000 Cost of sales 204,900 100,000 Administration expenses 48,600 24,540 Distribution costs 7,400 5,600 Interest 8,200 4,100 As a member of Management accounting team of XYZ Company, you are required to evaluate how planning tools for accounting respond appropriately to solving financial problems to lead organization to sustainable success