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Perfect Brands Ltd makes a special-purpose machine, Multiweaver (MW), used in the textile industry. In early 2015, Perfect Brands Ltd designed the MW machine with

Perfect Brands Ltd makes a special-purpose machine, Multiweaver (MW), used in the textile industry. In early 2015, Perfect Brands Ltd designed the MW machine with the strategic purpose of being distinct from its competitors. From the feedback received at trade shows, the MW machine has been generally regarded as a superior machine to others in the market. Perfect Brands Ltd presents the following performance for its accounting years 1 July 2015 to 30 June 2016 as well as 1 July 2016 to 30 June 2017.

Table 1 performance details for 2-year period 2016 2017
Units of MW produced and sold 200 210
Selling price $40,000 $42,000
Direct materials (kilograms) $300,000 $310,000
Direct materials cost per kilogram $8.80 $9.35
Manufacturing capacity in units of 250 250
Total conversion costs $2,000,000 $2,025,000
Conversion cost per unit of capacity $8,000 $8,100
Customer number capacity for selling and customer-service 100 95
Total selling and customer-service costs $1,000,000 $940,500
Selling and customer-service capacity cost per customer $10,000

$9,900

Details of activity levels and costs included in above figures 2016 2017
Production staff training costs $12,500 $13,500
Order and checking costs for returning materials to suppliers $1,250 $230
Late delivered penalty of MW delays caused by suppliers $1,250 $250

Measures of activity levels 2016 2017
Turnover of staff numbers 3 5
Number of staff training hours 125 135
Number of late delivered of MW 5 1
Number of times faulty materials returned to suppliers 7 2
Number of new customers 56 5
Number of repeat order purchases by existing customers 3 2
Number of suggestions from employees 16 25

Perfect Brands Ltd produces no defective machines but it did experience some material quality issues from its suppliers. It wants to reduce direct materials usage per MW machine in 2017. Conversion Costs in each year depend on production capacity defined in terms of MW units that can be produced, not the actual units produced. Selling and customer-service costs depend on the number of customers that Perfect Brands can support, not the actual number of customers it serves. Perfect Brands has 75 customers in 2016 and 80 customers in 2017

Analysis reveals the following information

Table 2 - Change in operating profit 2016 to 2017

Components of change Effects Dollar effect Totals
The growth Revenue effect on growth A$400,000F
Direct cost effect on growth A$132,000U
Admin (fixed) cost on growth A$ 0
Selling and customer services A$ 0
A$268,000F
The Price-Recovery Revenue effect on Price-Recovery A$420,000F
Direct cost effect on growth $173,250U
Manufacturing conversion costs A$25,000U
Selling and customer services A$105,000F
A$231,750F
The productivity Direct cost effect on growth A$46,750F
Admin (fixed) cost on growth A$ 0
Selling and customer services A$49,500F
A$96,250F
Change in operating profit A$596,000F

Required:

1- Identify the business strategy adopted by Perfect Brands and explain briefly how you reached your decision on the type of business strategy adopted.

2- Calculate the operating profit for Perfect Brands Ltd for the 2015-2016 and 2016-2017 accounting years.

3- Comparing the information in Table 1 above. Prepare a comparative analysis for each of Perfect Brands' four balanced scorecard perspectives using the Information in Table 1 and Table 2.

a- Provide two actual financial or non-financial measures from these two tables for each of the four perspective, and

b- Preform a 2-year trend analysis using the actual financial or non-financial measures you have provided in requirement 3a and discuss the actual performance under each perspective between the 2 years.

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