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QUESTION 2 Riverdale Ltd. produces and sells Clearwater. The following information is an extract from the production budget : Mar A111 May Production (units) 30,000
QUESTION 2 Riverdale Ltd. produces and sells \"Clearwater\". The following information is an extract from the production budget : Mar A111 May Production (units) 30,000 32,000 35,000 Riverdale Ltd. pays its employees $15 per direct labour hour. The company pays 70% of the direct labour costs in the month of production and 30% in the month following the production. Each unit of Clearwater requires 2.5 direct labour hours to produce. Required: (a) Compute the following (show workings using a direct labour budget or other means) : (i) Budgeted Direct labour hours for the month of Apr 2022. (1.5 marks) (ii) Budgeted Direct labour cost (EB) for the month of May 2022. (2.5 marks) (iii) Expected Total cash payments for the month of Apr 2022. (3.5 marks) (iv) Expected Total cash payments for the month of May 2022. (2.5 marks) (b) Assume that the management signed a rental agreement to pay factory rent of $90,000 per quarter. The company pays the factory manager a salary of $84,000 per annum. The company estimates that plant electricity is expected to be $9.00 per unit produced. Compute the following (show workings using a manufacturing overhead budget or other means) : (i) Budgeted Variable Overhead for the month Apr 2022. (1.5 marks) (ii) Budgeted Total Overhead for the month of May 2022. (3.5 marks) (c) Explain with an appropriate illustration the term 'budgetary slack'. (1 mark) (d) Riverdale markets its products mainly to various Asian countries. The company also sources materials for its products mostly from Australia. Riverdale expects that the prices of the materials it uses will increase due to production shortages at its main supplier in Australia. You have been tasked to prepare the master budget (ie. all the budgets) for the coming year 2022. (i) What information, data, assumptions and predictions would you require to prepare the budgets and explain why you need them. (ii) The management of the company is concerned that some budgets might be padded. How would this affect the company and what can the company do to overcome this problem? (8 marks) QUESTION 3 Goodnews Ltd. manufactures and sells 'Powerup' wireless phone chargers. The cost incurred to manufacture the product includes direct materials per unit amounting to $32.00 and direct labour per unit of $22.00. The company also incurs variable manufacturing overhead of $15.30 per unit. The company's variable marketing expenses was $5.70 per unit. The selling price of Powerup is $125.00 per unit. The company sold 52,000 units for the year ended 2021. The total annual xed costs for the year 2021 was $1,510,000. Ignore income tax considerations. Required: (3) (b) (C) (d) How many units must Goodnews sell in order to breakeven for the year 2022? What is the net prot of Goodnews for the year 2022? (6 marks) Goodnews is considering to invest in better manufacturing equipment that would improve efciency. This plan would cause its annual total xed costs to be $1,720,000. The company would need to increase its selling price to $130.00 per unit. The company has also set a targeted contribution margin of 45%. The management expects that increasing the selling price would cause a decrease in the demand for its product. The company estimates a decrease of 10% from the number of units sold in 2021 with the increase in selling price. What is Goodnews's new variable cost per unit? What is the number of units that Goodnews would need to sell in order to achieve a net prot equal to the net prot of 2021? Should the company proceed with this plan? Explain your answer. (Show all necessary calculations to support your answer). (6 marks) Refer to the original information (ie. ignore part (b) data). Assume now that there is a tax rate of 35%. How many units must Goodnews sell in order to achieve a target prot after tax of $900,000. (3 marks) Assume that Goodnews an electrical charging devices manufacturing company decides to sell multiple products, what information, data, assumptions and predictions would the company require to formulate its strategies? (4 marks) Explain the term 'cenrmlizatz'on ' with an appropriate illustration. How does responsibility accounting system aid a decentralized organization to meet its objectives? Explain your answer with an appropriate illustration
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