Managerial Accounting
please answer the followinng questions clearly with a full step by step solution as soon as possible! thanks!
Group members: ACCT71260-Case Assignment #2 Group Case Assignment Marks: 5% Due Date: August 8, 2019 (To be solved by a group of two or three students.) Problem: (Marks - 40) Mr. Roy is an engineer. He completed his graduation five years before and started working with different manufacturing company. After getting some practical experience in manufacturing industries, he decided to start a business of his own and established a private company two years before and named it Kitchener Manufacturing Company. It was established to make two basic products X-1 and X-2. After first year of its operation, he realized that he should learn basic techniques of running a business. He heard about "The Centre for Entrepreneurship Development" of Conestoga College. This centre provides training to entrepreneurs on managerial, financial and technical aspects of establishing and running an enterprise. Mr. Roy took a course on financial planning during summer and learned about the importance of budgeting for financial planning and control. He learned that budget is the quantitative tool for planning and control. It provides pre- determined estimate of cost or price for a certain level of activity. It helps to forecast the cash requirements in advance. He is interested in making an arrangement with the bank a line of credit in advance and getting a lower rate of interest for his loan. He believes in participative budgeting system and gathered information about the operating levels and estimates of costs and revenues for 2018. He also gave the actual data which are different from the budgeted. Data (both budgeted and actual) that have been assembled by the managers for 2018 follow: Requirements for finished units: Raw materials -1 Raw materials - 2 Raw materials - 3 Direct labour Sales price Sales units Estimated beginning inventory (Units) Desired ending inventory (Units) X-1 10 kg - 2 units 5 hours X-2 | 8 kg 4 kg 1 Unit 8 hours $150 9,000 150 200 12.000 400 300 The standard cost of raw materials and the inventory policy of the company are given below: Raw Materials Types of Raw Materials 1 2 Cost $2 per kg $2.5 per kg $0.50 per unit Estimated beginning inventory 3,000 1,500 1,000 4,000 Desired ending inventory 1,000 1,500 The budgeted direct labour wage rate is $ 4.00 per hour. Overhead is applied on the basis of direct labour hours. The tax rate is 40%. The budgeted sales level is divided into quarters. The company estimated that 20% of the annual sales will be in the first quarter, 30% in the second, and 25% in the third and fourth quarters. The beginning inventory of finished products has the same cost per unit as the ending inventory. The work-in-process inventory is negligible. The sales forecast of the company is shown below: X-2 Total X-1 Quarters Units Units 2,400 3,600 $ 240,000 360,000 1,800 270,000 510,000 765,000 2,700 405.000 First quarter Second quarter Third Quarter Fourth Quarter Total 3,000 3,000 300,000 300,000 2,250 2,250 337,500 337,500 637,500 637,500 12,000 1,200,000 9,000 1,350,000 2,550,000 Required: Assume the role of Management Account of Kitchener Manufacturing Company and prepare Cash Budget and forecast the cash position of the company for 2018. (6) The beginning cash balance of the company was $15,000. The minimum cash balance requirement of the company was decided as $ 10,000. All sales and purchases are made in cash. All expenses are paid immediately as they incur. You are also asked to prepare the following functional budgets for 2018 for presenting budgeted Income statement: 1. Production budget. (3) 2. Direct materials purchase budget. (6) 3. Direct labour budget. (3) 4. Budgeted unit costs of X-1 and X-2.(4) 5. Cost of goods sold budget.(4) 6. Budgeted income statement. (4) Mr. Roy is also interested to know the variances of actual performance from budgeted. Identify the areas of variances and calculate the following variances. You are also required to explain the probable causes of such variances and steps that Mr. Roy can take to prevent them in future. 1. Calculate labour variances for product X-1 and X-2. (6) 2. Calculate manufacturing overhead (variable) variances. (4) Group members: ACCT71260-Case Assignment #2 Group Case Assignment Marks: 5% Due Date: August 8, 2019 (To be solved by a group of two or three students.) Problem: (Marks - 40) Mr. Roy is an engineer. He completed his graduation five years before and started working with different manufacturing company. After getting some practical experience in manufacturing industries, he decided to start a business of his own and established a private company two years before and named it Kitchener Manufacturing Company. It was established to make two basic products X-1 and X-2. After first year of its operation, he realized that he should learn basic techniques of running a business. He heard about "The Centre for Entrepreneurship Development" of Conestoga College. This centre provides training to entrepreneurs on managerial, financial and technical aspects of establishing and running an enterprise. Mr. Roy took a course on financial planning during summer and learned about the importance of budgeting for financial planning and control. He learned that budget is the quantitative tool for planning and control. It provides pre- determined estimate of cost or price for a certain level of activity. It helps to forecast the cash requirements in advance. He is interested in making an arrangement with the bank a line of credit in advance and getting a lower rate of interest for his loan. He believes in participative budgeting system and gathered information about the operating levels and estimates of costs and revenues for 2018. He also gave the actual data which are different from the budgeted. Data (both budgeted and actual) that have been assembled by the managers for 2018 follow: Requirements for finished units: Raw materials -1 Raw materials - 2 Raw materials - 3 Direct labour Sales price Sales units Estimated beginning inventory (Units) Desired ending inventory (Units) X-1 10 kg - 2 units 5 hours X-2 | 8 kg 4 kg 1 Unit 8 hours $150 9,000 150 200 12.000 400 300 The standard cost of raw materials and the inventory policy of the company are given below: Raw Materials Types of Raw Materials 1 2 Cost $2 per kg $2.5 per kg $0.50 per unit Estimated beginning inventory 3,000 1,500 1,000 4,000 Desired ending inventory 1,000 1,500 The budgeted direct labour wage rate is $ 4.00 per hour. Overhead is applied on the basis of direct labour hours. The tax rate is 40%. The budgeted sales level is divided into quarters. The company estimated that 20% of the annual sales will be in the first quarter, 30% in the second, and 25% in the third and fourth quarters. The beginning inventory of finished products has the same cost per unit as the ending inventory. The work-in-process inventory is negligible. The sales forecast of the company is shown below: X-2 Total X-1 Quarters Units Units 2,400 3,600 $ 240,000 360,000 1,800 270,000 510,000 765,000 2,700 405.000 First quarter Second quarter Third Quarter Fourth Quarter Total 3,000 3,000 300,000 300,000 2,250 2,250 337,500 337,500 637,500 637,500 12,000 1,200,000 9,000 1,350,000 2,550,000 Required: Assume the role of Management Account of Kitchener Manufacturing Company and prepare Cash Budget and forecast the cash position of the company for 2018. (6) The beginning cash balance of the company was $15,000. The minimum cash balance requirement of the company was decided as $ 10,000. All sales and purchases are made in cash. All expenses are paid immediately as they incur. You are also asked to prepare the following functional budgets for 2018 for presenting budgeted Income statement: 1. Production budget. (3) 2. Direct materials purchase budget. (6) 3. Direct labour budget. (3) 4. Budgeted unit costs of X-1 and X-2.(4) 5. Cost of goods sold budget.(4) 6. Budgeted income statement. (4) Mr. Roy is also interested to know the variances of actual performance from budgeted. Identify the areas of variances and calculate the following variances. You are also required to explain the probable causes of such variances and steps that Mr. Roy can take to prevent them in future. 1. Calculate labour variances for product X-1 and X-2. (6) 2. Calculate manufacturing overhead (variable) variances. (4)
