Sales Office process: Fabien Ltd is a manufacturer of bespoke products for the building industry and domestic customers. Sales customers place orders either by phone directly to the sales office or through the business website. Sales staff operators well initially cheque whether the customer is an existing account holder For existing account holders, staff will examine the account to see if there are any existing problems (e.g. long outstanding accounts and / or disputed invoices). Where this is the case, the customer and order information is passed to the chief credit controller for decision-making. Existing customers, where the account is otherwise in good order, most then be checked against current credit limits. Where an order may take the account beyond the current credit limit, the customer and order information is, again, passed to the chief credit controller for decision- making. Where the sales order is acceptable, the order documentation is passed to the production manager for scheduling. Non-existing (new) customers must pay cash in advance of production, and, if this is acceptable to the customer becomes a potential' and is offered an application to the sales Ledger. The customer may accept or decline the invitation. An application form is attached to an email and sent to accepting potentials. The contact details of declining potentials will be held anyway for future promotional activities. Required: Fabien Ltd - continued: Trading (production and sales): You should assume that today is Monday 234 November 2020. Sales: The company has the following sales orders to be delivered during December 2020. Order product. Order 118 118 1183 M Quantity to be delivered ali 450 Selling Price per i Production: The production schedule for December 2020 (product quantities and production resources requirement) is shown below. Order product order 110 der 14de 1199 Moon Pished prode 790 Note: Tech 200 there will be open in de Reson requirement for productie Direct custs variable Order/product order to order order 11 "S "Men' 14 | Machining department Increment materials Direct labour hourly Machine betal 30 14 TE 38 14 11, Painting department Increase Direct labeur hon Machine bestel 11 Assembly departe incrementaria Dinast lahuta 1,150 210 2 Production: The production schedule for December 2020 (product quantities and production resources requirement) is shown below. Order/produt Order 110 der 118de 1988 "Sky mishad good Onty to be perdowed Note December 2000 will be opening of wished Rources requirement for production Direct costs variabilecek Order produtorder onder 18 order Me CLIN Machining department incrementala Director) Machine borse 40 10 15 44 Painting department Incrccal material.com Direct show busca Machine boursel) 11 104 114 30h Assembly department inctementales Direct lub house Machine house LL.IS 200 LLLS 25 LTD 24 Fabien Ltd - continued: Fixed indirect production overheads: Indirect production overheads are fixed (unaffected by production activity levels) at 41,500 per month. This value has been allocated and apportioned to the 3 production departments as follows: 1:29 -central-1-prod-fleet01-xythos.s3.eu-central-1.amazonaws.com 2861 255 204783 Direct la hotel Machine hontal Fabien Ltd - continued: Fixed indirect production overheads: Indirect production overheads are fixed (unaffected by production activity levels) at 41,500 per month. This value has been allocated and apportioned to the 3 production departments as follows: Production department: Machine Paletines That Fiseloos (allocatie/appartement 1933.02 Bases for absorption: Machining department - Machine hours .Painting department Direct labour hours Assembly department Direct labour hours Note: The quantity for absorption basis (for each production department) should be established using the total departmental resources requirement shown in the tables above. Task 4: Re-calculate the gross profit (and gross profit margin) if product 'Sun is removed from the production and sales schedule. Note: It has been established that, if product 'Sun' was removed from the catalogue, specific fixed cost savings of 12,800 would be made. 4 Marks Draft a memo to Catherine Smith in reply to his comment (with clear explanatory supporting reasons to a non-accountant). 7 Marks Note: Your memo should be prepared in a good style and show effective skills in written communication and quality of information' aspects Fabien Ltd - continued: The finance office (cost and management accounts) recently performed an activity - based production systems analysis for the fixed production overheads. The result is the table below: Cou Cost drher Total de period 10,000 Production scheduling 3.2000 Joway 17.300 De 19.200 Maine law 1.300 trailer | Marai Total 11,500 1 2.50 1.00 10 A further analysis has produced the following indirect production overhead resource required for each product: Activity - Based Resource (Cost driver quantity) Requirement (by product) Note: Your memo should be prepared in a good style and show effective skills in written communication and quality of information' aspects Fabien Ltd - continued: The finance office (cost and management accounts) recently performed an 'activity based' production systems analysis for the fixed production overheads. The result is the table below: Indirect Cost Total cost driver production Cost driver quantity per overhead recovery period rate Set up costs 10,000 Setups 140 71.43 Production scheduling 3.200 Setups 140 22.86 Quality control 17.300 Inspections 2.500 6.92 Depreciation 9,200 Machine hours 1.000 9.20 Raw materials storage 1.800 Materials movements 1.00 Total: 41,500 1.800 A further analysis has produced the following indirect production overhead resource required for each product: Activity - Based Resource (Cost driver quantity) Requirement (by product) Setupy Order/product: Order 1101 Order 1102 Order 1103 "Sky "Sun *Moon Total 45 151 103 Inspections 1.000 800 1.190/2,990 Machine hours 320 4201 250 990 Materials movements 900 400 500 1.800 Task 5: Explain Activity - Based Costing (ABC) as an alternative to full absorption costing and discuss the potential benefits that ABC might bring to production and information systems of Fabien Ltd Note: Your written explanations should be effectively communicated and should include notes on: The reasons for the development of ABC The Activity-Based concept The process of an ABC system development . The potential benefits (if any) you feel could be achieved by the introduction of an ABC system for Fabien Ltd 10 Marks Recalculate the gross profits (by product an in total) after allocating fixed production overheads to products using an activity - based system 10 Marks The task 5 b. mark include marks allocated to short descriptive notes to workings (