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Question 4 You have been assigned for a Customer Due Diligence (CDD), more specifically, for reviewing the actual and budgeted figures of variable manufacturing overhead of Nowheresville Pty Ltod, a manufacturer of umbrellas. Jules De Martino is concerned whether this potential corporate customer is sticking to its variable manufacturing overhead budget or not. The analysis is for a specific month of the year, comparing the budgeted and actual figures. The variable manufacturing overhead cost is allocated to each umbrella based on budgeted direct manufacturing labour-hours per umbrella. For the specific month of the year, each umbrella is budgeted to take 4 labour-hours. Budgeted variable manufacturing overhead cost per labour-hour is $18. The budgeted number of umbrellas to be manufactured in this given month is 300. Actual variable manufacturing overhead costs in the given month were $20,000 for 280 umbrellas started and completed. There was no opening or closing stock of umbrellas. Actual direct manufacturing labour-hours for this given month were 1,200. Required a) Calculate the static-budget variance, the flexible-budget variance, and the sales-volume variance for variable manufacturing overhead. (e.g., Exercise 16.11, Chapter 16, 5 marks) b) Based on the above answer, comment on whether Nowheresville Pty Lid. is sticking to its variable manufacturing overhead budget or not. (e-g., Exercise 16.11, Chapter 16, 10 marks) c) Calculate the spending and efficiency variances for the given month and identify what has caused the flexible-budget variance for Nowheresville Pty Ltd. (e.g., Exercise 16.11, Chapter 16, 5 marks) Question 5 Currently, Katie White (retail customers manager) and Jules De Martino (corporate customers manager) have their performance assessed based on how much profit/loss is made with their customers' loans and savings activities, but this has led to many disagreements. Based on figures from the previous year, the corporate customers' loans and savings activities have generated a profit of $124 million whereas the retail customers' loans and savings activities have generated a loss of $84 million. Jules is very happy with this outcome, but Katie argues Jules is lending money from her retail customers to his corporate customers. Table 5 - RRB loans and savings activities Values in million dollars Retail Customers Corporate Customers All Customers Assets Loans to customers $75 $ 1.925 $2.000 Liabilities Deposit from customers $1,500 $500 $2.000 Interest income Loans (8%%] SE $154 $ 160 Interest expense Deposits (6%] $90 530 $ 120 Profit/Loss with customers $841 $124 RAB board is discussing implementing fund transfer pricing (FTP) for addressing Katie's concern about her customers funding Jules' activities. However, Jules argues implementing an arbitrary FTP rate will make the retail and customer managers performance evaluation too subjective. There has been some discussion in RRB board regarding implementing a Balanced Scorecard (BSC). Required a) Based on the figures from the previous year, what would be the adjusted profit/loss with retail customers and corporate customers if RRB set an FTP rate of 8%% and which manager would benefit from this decision and why? (FTP , 10 marks) b) is Jules correct on his statement that implementing an FTP rate will make the retail and customer managers performance evaluation too subjective? (Subjective performance evaluation, 10 marks) c) If the RRB board implements a BSC, recommend a measure for each one of the four perspectives and justify why you have selected such measures. (Chapter 20, 10 marks)
