Part A Role of Management Accounting in Florida Ceramic Tiles Company Florida Ceramic Tiles Company (FCTC) was founded in 2013 and is currently one of the largest marble companies in the Gulf region. For over 6 years, and while keeping pace with the Gulf Countries renaissance, FCTC has provided the unsurpassed elegance and timeless beauty of natural stone for the ever challenging and creative designs of Architects and Owners. FCTC's dedication to professionalism, outstanding craftsmanship, timely performance and customer satisfaction has eamed it an outstanding reputation. (a) Importance of Management Accounting for FCTC The top level of the company has been wondering whether they need a management accounting system set up for facilitating decision making, planning and performance evaluation functions. The top management has advised the middle level management and the finance manager to study the possibility of having a management accounting system. The company wants to implement management accounting control systems that adhere to highest ethical standards through adopting to ethical standards of IMA (USA). The following diagram best illustrates their working pattern concerning planning, controlling, decision making activities: Planning Cost Information Controlling Decision Making (b) Production and Cost Details of one of its Products (Product A) FCTC manufactures and sells product A along with other products, which has following cost and selling price structure: Sper unit 600 Information Selling Price Direct Material Cost per unit of A Direct labour cost per unit of A Fixed Costs Lumits Predmeed Sold S 800.000 (e) Multiple Product BEP for FCTC FCTC manufactures other three other major products namely B, C and D. It furnishes its estimates for the year 2020 about these products to you: Products BL Sales Mix Ratio Selling price per unit Variable Cost per unit Forecast unit sales (units) Fixed(Cost 2 STENUO S400 SOOO S200S.COS200 8.000 units 8,000 units 4.000 units S5.600.000 (d) Major Expansion Plans of FCTC FCTC wants to expand its business activities drastically and in massive manner from 2020 onwards. The management accountant of FCTC has provided some estimates about its future expansion: Estimates for the year 2020 Fixed Costs Contribution Margin S6.6KOLIKO 75% of Revenues Required (1) As the company wants to implement management accounting control systems and the systems to adhere to highest ethical standards, adopting to ethical standards of IMA (USA) would be highly recommended for management accountants of METC. In this context, Discuss the Ethical Standards prescribed by Institute of Management Accountants, USA (IMA) to be adhered to by the management accountants (20 marks) (2) Calculate operating profit earned by the Company from Product A using Contribution approach method (taking data given in (b) above) (5 marks) (3) Using data given in (b), Compute Break Even Point (BEP) (in Units and in Dollars) (5 marks) (4) Calculate breakeven point in units using weighted average contribution per unit and show the proof for your answer taking values given in (c) above) (15 marks) (5) Based on the management accountants' estimates (estimates as given above ind on the expansion: (1) Compute the breakeven sales in S) (5 marks) (ii) Calculate operating income or operating loss if its estimated revenues will be $5,300,000 and S 10,040,000 for the year 2020. (10 marks) (20+5+5+15+15-60 marks) Part B Budgeting & Performance Evaluation for Alwyn Industries The company provides some details for the period 2020 for preparing necessary budgets (a) Sales Details The Company estimates that it can get maximum profits if it charges $ 200 (selling price) for one of its products. The marketing manager of the company had indicated that at $ 200 selling price, the company would be able to sell 1,000 units in the first quarter of 2020. The company also expects that sales would go up by 100 units over previous quarter sales (like 1000, 1100 and so on....) Selling price is expected to be same throughout the year. (b) Inventory details Alwyn Industries maintains at the end of each quarter an inventory of 10% of the next quarter's sales. This allows the company to better meet its customers' needs in case the customers experience a sudden surge in demand. The opening inventory for first quarter 2020 has been estimated to be 200 units (c) Divisional Performance Alwyn Industries has to divisions (A & B) working within the company. The CEO of the company is wondering whether divisional performance evaluation will be fruitful for them since the company has two divisions operating with certain targets. The head of those divisions report the following results for the quarter ending 2019, which is given below: Particulars Operating Income Average Total Assets INct Sales Division 900.000 2300000 TASCOXOXOXO Division B 1,951,600 633COOOO L Required (1) As a Management Accountant of Alwyn Industries, you are required to prepare (1) Sales Budget (ii) Production Budget for four quarters of year 2020 (based on information given above (in a and b) (20 marks) (2) Evaluate the divisional performance (A & B) using ROI for the quarter ending 2019 (10 marks) (3) Explain any three advantages and disadvantages of ROI as a measure of performance. (10 marks) (10+10+10 + 10-40 marks) END OF TMA QUESTIONS