Question A

Bath Products Ltd manufactures a variety of bath and beauty products for specialty stores.The company has recently introduced the concept of identifying cost of quality and has identified the following costs for the month:

Rework time $6,000

Cost of defective products that cannot be reused $7,000

Laboratory testing for safety $9,000

Training of quality control supervisors $10,500

Customer complaints $5,800

Inspection of purchased ingredients $3,800

Product liability $500

Sales Revenue for the month was $20500.

Required:

1. Prepare a cost of quality report. The report should include the following information:

Classification of the above costs as internal failure, external failure, appraisal andprevention costs.

Calculation of each cost with respect to percentage of sales.

Calculation of each cost with respect to percentage of total quality costs.

2. Prepare a report for the management of Bath Products Ltd, based on the above analysis.

Question B

Hyde Company has set the following standards for one unit of product:

Direct material: $32 per unit

Quantity 4 kg per unit

Price $8 per kg

Direct labour $52.50 per unit

Quantity 2.5 hours per unit

Rate $21 per hour

Actual costs incurred in the production of 2,500 units were as follows:

Direct material $72,540 ($9.30 per kg)

Direct labour $115,206 ($21.10 per hour)

Required:

1. Calculate the direct material price and quantity variances and the direct labour rate and efficiency variances.

2. Indicate whether each variance is favourable or unfavourable.

Question C

Five-Star Pizza delivers pizzas to the residential halls and units near a major university. The companys annual fixed expenses are $40,000. The sales price of a pizza is $16, and it costs the company $8 to make and deliver each pizza.

Required:

1. Calculate the companys break-even point in units (pizzas).

2. What is the contribution margin ratio?

3. Calculate the break-even sales revenue. Use the contribution margin ratio in your calculation.

4. Explain the concept of break-even point and justify your answers in 1 & 3 above, with the calculation using contribution margin format of income statement.

5. How many pizzas must the company sell to earn a target net profit of $50,000? (Ignore income taxes.)

6. How many pizzas should Five-Star Pizza sell in order to make a $60000 net profit after tax? Assume that the tax rate is 25%.

7. What is the Five-Star Pizzas total profit or loss when 5200 pizzas are sold?

8. What is the Five-Star Pizzas total profit or loss when 4800 pizzas are sold?

Question D

Using your imagination and creativity, develop a contemporary performance measurement system for a local university, with the use of objectives, lead and lag indicators in various perspectives.