Question 2 The Feathered Friends Company is a small business manufacturing products for domestic and wild birds Its best selling product is the fat ball that can be hung or placed in a garden to provide healthy nourishment for wild birds during cold winters The standard material cost per fat ball is as follows Fat 50g 6 80 kg 0 34 Nuts 30g 13 00 kg 0 39 Seeds 100g 2 50 kg 0 25 Total standard material cost per fat ball 0 98 1 kg 1,000g 5,000 fat balls were produced and sold in the second quarter of the year (April June), incurring the following material costs Fat 150kg 1,083 Nuts 220kg 2,552 Seeds 650kg 1,300 Total material cost incurred 4,935 The management accountant met with the production manager to review the variances that had been calculated The production manager observed that some of the original information on the standard cost card was out of date He specifically noted the following points A new type of fat had been introduced which required significantly less of the input, now only 25g per ball, but had a higher cost of 7 60 kg In response to published research into birds diets the quantity of nuts in a ball was increased by 20g The supplier of nuts had increased the price to 14 40 kg The new fat was able to bind together more seeds, so the quantity of seeds input rose by 20 for each fat ball The price of seeds had fallen to 2 00 kg Required Produce a reconciliation of the original standard material cost of actual production of fat balls in the second quarter to the actual material cost incurred, showing the total planning variance and all operational material variances Discuss the potential benefits and problems of calculating separate planning and operational variances (maximum word count 180 words) Question 3 Julies Cleaning Services is considering expanding its domestic cleaning operations to include the provision of carpet cleaning This will require the purchase of 20 specialised carpet cleaning machines, at a cost of 400 each, to be used by the team of cleaners The company will treat this expenditure as a fixed cost This is a large additional cost for the business, but Julie expects that the demand for this service is sufficient to warrant charging a fee of 75 per room carpet The variable costs incurred per clean are 21 which include all labour and materials costs Required Calculate the number of carpet cleans that Julies Cleaning Services needs to carry out to avoid losing money on the new carpet cleaning activity The breakeven calculation carried out in part (a) required a number of assumptions to be made regarding the carpet cleaning business proposal Discuss THREE (3) of the following assumptions, providing examples of where they may be valid, and where they may not be valid, in the situation facing Julies Cleaning Services Fixed costs remain constant regardless of activity level Variable costs vary proportionately with activity Total costs and total revenue are linear functions of output There is no uncertainty (maximum word count 300 words) Julie is considering refining the pricing model for the carpet cleaning to allow for different sized room carpets (lower prices for smaller rooms) Describe, using a numerical example, how the calculations in part (a) will be amended to allow for this pricing model (maximum word count 120 words) Question 4 Fancy Flowers Ltd is considering how many bouquets of flowers it will need at its stall at a local arts festival that is running for a few weeks Due to supplier issues, it must choose in advance whether to prepare 200, 300 or 400 bouquets per day Demand for bouquets can be 200, 300 or 400 per day at the festival Any flowers not sold on the day will have to be thrown away The price charged per bouquet is 20, and the variable cost is 8 per bouquet If the demand for bouquets exceeds the number of bouquets taken to the festival, then customers will have to be turned away Fancy Flowers Ltd estimates that if this situation arises, it would cost the company 200 in loss of goodwill, irrespective of the number of customers turned away (i e the loss would be 200 if 100 customers were disappointed or if 300 were disappointed) Required Prepare a pay off table showing the profits for Fancy Flowers Ltd at all combinations of the number of bouquets prepared and demanded in each day Showing clearly your method and calculations, recommend the number of bouquets that should be prepared in advance using the following decision making criteria Maximax Maximin Minimax regret Identify the additional information that would be required to calculate the expected demand for bouquets that Fancy Flowers Ltd may face each day, and describe how this calculation would be done Discuss TWO (2) benefits of the use of the expected value technique as a decision making basis in the situation facing Fancy Flowers Ltd (maximum word count 140 words)

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 19, 2024

Question 2 The Feathered Friends Company is a small business manufacturing products for domestic and wild birds. Its best-selling product is the fat ball that

Question 2

The Feathered Friends Company is a small business manufacturing products for domestic and wild birds. Its best-selling product is the fat ball that can be hung or placed in a garden to provide healthy nourishment for wild birds during cold winters.

The standard material cost per fat ball is as follows:


Fat	50g @ 6.80/kg	0.34
Nuts	30g @ 13.00/kg	0.39
Seeds	100g @ 2.50/kg	0.25
Total standard material cost per fat ball		0.98

[1 kg = 1,000g]

5,000 fat balls were produced and sold in the second quarter of the year (April June), incurring the following material costs:


Fat	150kg	1,083
Nuts	220kg	2,552
Seeds	650kg	1,300
Total material cost incurred		4,935

The management accountant met with the production manager to review the variances that had been calculated. The production manager observed that some of the original information on the standard cost card was out of date. He specifically noted the following points:

A new type of fat had been introduced which required significantly less of the input, now only 25g per ball, but had a higher cost of 7.60/kg.
In response to published research into birds diets the quantity of nuts in a ball was increased by 20g. The supplier of nuts had increased the price to 14.40/kg.
The new fat was able to bind together more seeds, so the quantity of seeds input rose by 20% for each fat ball. The price of seeds had fallen to 2.00/kg.

Required:

Produce a reconciliation of the original standard material cost of actual production of fat balls in the second quarter to the actual material cost incurred, showing the total planning variance and all operational material variances.
Discuss the potential benefits and problems of calculating separate planning and operational variances. (maximum word count 180 words)

Question 3

Julies Cleaning Services is considering expanding its domestic cleaning operations to include the provision of carpet cleaning. This will require the purchase of 20 specialised carpet cleaning machines, at a cost of 400 each, to be used by the team of cleaners. The company will treat this expenditure as a fixed cost.

This is a large additional cost for the business, but Julie expects that the demand for this service is sufficient to warrant charging a fee of 75 per room carpet. The variable costs incurred per clean are 21 which include all labour and materials costs.

Required:

Calculate the number of carpet cleans that Julies Cleaning Services needs to carry out to avoid losing money on the new carpet cleaning activity.

The breakeven calculation carried out in part (a) required a number of assumptions to be made regarding the carpet cleaning business proposal. Discuss THREE (3) of the following assumptions, providing examples of where they may be valid, and where they may not be valid, in the situation facing Julies Cleaning Services.

Fixed costs remain constant regardless of activity level
Variable costs vary proportionately with activity
Total costs and total revenue are linear functions of output
There is no uncertainty

(maximum word count 300 words)

Julie is considering refining the pricing model for the carpet cleaning to allow for different sized room carpets (lower prices for smaller rooms). Describe, using a numerical example, how the calculations in part (a) will be amended to allow for this pricing model. (maximum word count 120 words)

Question 4

Fancy Flowers Ltd is considering how many bouquets of flowers it will need at its stall at a local arts festival that is running for a few weeks. Due to supplier issues, it must choose in advance whether to prepare 200, 300 or 400 bouquets per day. Demand for bouquets can be 200, 300 or 400 per day at the festival. Any flowers not sold on the day will have to be thrown away.

The price charged per bouquet is 20, and the variable cost is 8 per bouquet. If the demand for bouquets exceeds the number of bouquets taken to the festival, then customers will have to be turned away. Fancy Flowers Ltd estimates that if this situation arises, it would cost the company 200 in loss of goodwill, irrespective of the number of customers turned away (i.e. the loss would be 200 if 100 customers were disappointed or if 300 were disappointed).

Required:

Prepare a pay-off table showing the profits for Fancy Flowers Ltd at all combinations of the number of bouquets prepared and demanded in each day.

Showing clearly your method and calculations, recommend the number of bouquets that should be prepared in advance using the following decision-making criteria:

Maximax
Maximin
Minimax regret

Identify the additional information that would be required to calculate the expected demand for bouquets that Fancy Flowers Ltd may face each day, and describe how this calculation would be done.
Discuss TWO (2) benefits of the use of the expected value technique as a decision-making basis in the situation facing Fancy Flowers Ltd. (maximum word count 140 words)