Part A Abby Plc

Abby Plc is a manufacturing company with operations in Birmingham, UK. The company has enjoyed relative success in the past. However, in recent years, it has been reporting significant losses. As a result, it is now being suggested that the company be liquidated if there is no turn around in its fortunes in the next three years. You have just joined the company on a six-month work experience. Your first impression of the company suggests a very motivated workforce, dedicated customers and a unique brand offer. You query why such a company should be having financial problems. You glean from discussion with your new colleague, John (one of the trainee accountants), that the companys financial problem is directly related to its costing system and investment appraisal approach.

A management consultant team has now been called in to address the identified weaknesses of the firm, along with the Accounts Department. You are lucky to find a seat at the table at one of the meetings. Your role is primarily to provide the necessary data and briefing to the team of management consultants. You are excited by the opportunity to demonstrate your knowledge of (management) accounting. The following are extracts of the data you are expected to work with.

Exhibit 1: Indirect manufacturing labour costs, machine-hours and direct manufacturing labour-hours for Product N123.

	Indirect manufacturing labour cost (000)	Machine hours	Direct manufacturing hours
	y	X1	X2
1	1690	73	35
2	1711	93	40
3	1504	67	41
4	1417	77	25
5	1270	65	52
6	1956	101	50
7	1680	83	49
8	1210	51	42
9	1816	87	75
10	1820	99	35
11	1252	73	34
12	1463	53	43