These questions are about Management Accounting.

The theory question in the "Management Accounting" is based on the "kilgors Group Activity s2 2016".

Need some help on the Management Accounting, this attachment.

KILGORS: A PROFIT PLANNING EXERCISE Gillian Vesty and Albie Brooks ABSTRACT Kilgors is a multi-divisional company with a focus on the wine, hospitality and entertainment industries. It commenced in 1995 as a small winery but has now grown into a multidivisional company that listed in 2006. The focus of the case is on the wine division of Kilgors. Kilgors owns several hectares of grapes which contribute to a variety of red, white and sparkling wines as highlighted in the table below. KILGORS RED, WHITE AND SPARKLING WINE VARIETIES K RED WINE VARIETIES: Pinot Noir (3 labels); Shiraz (3 labels) K SPARKLING WINE: Champagne (2 labels); K WHITE WINE VARIETIES: Pinot Grigio (4 labels); Chardonnay (1 label) and Riesling (2 labels). Within each grape/wine variety they offer several labels, depending on the grape harvest and popularity of the wine by consumers. For example, chardonnay was a very popular wine variety in the 1980-1990s but more recently pinot grigio has become more popular. Hence, Kilgors management made the decision to cut the number of labels in the Chardonnay range and use more of the chardonnay grapes to make Champagne. Champagne is largely made from Pinot Noir and Chardonnay grapes. While management are bound to the grape varieties grown in the vineyard, they can graft old vines with new varietals or make blends. Thus, there is some flexibility to alter the number of labels to suit customer preferences. However, this does come at a cost. For example, grafting new varieties is time consuming and will increase labour costs and potentially reduce yields for the first year. Marketing of new labels will increase the selling and admin costs. Currently, they only have vineyard capacity to harvest and manufacture around 4-million cases and could only increase the total volume if they purchased additional grapes from another vineyard. However, the quality of grapes would be potentially be diminished, as, in general other vineyards would be reluctant to sell their 'best' grapes. If they want premium grapes, they will have to pay higher prices. Similarly, Kilgors have the possibility to sell their grapes to other manufacturers, but are reluctant to do this as they currently utilise all available vineyard capacity in-house. They are also highly regarded in the industry for their high-quality grapes. Kilgors have been working with a profit-planning template to help guide the budgeting process for the next financial year. Some of the calculations in the spreadsheet are fixed by management and cells will automatically calculate based on the key drivers decided by the management team. There are a few key points to note: The driver for 'selling costs', 'admin costs' and 'corporate allocation' is sales revenue. The driver of 'shipping/warehousing' is the number of cases sold (sales volume) The average sales revenue is used as a measure of quality. Why? If the labels are selling well (volume and price), then they have a higher value and vice versa. o Thus, the driver for intangible assets (i.e. value of brands/trademarks) is 'quality' which is defined by the mix 30% quantity and 70% price Kilgors' 'borrowing' capacity has a direct relationship to cash flows. If cash increases, Kilgors could increase its level of borrowing, and vice versa. Property, plant and equipment (PP&E) and agricultural assets are linked to production capacity. If Kilgors sold more (by buying in additional grapes) they would need more production equipment. This may require running an additional shift, or it could mean additional investment in PP&E. BACKGROUND MATERIALS READING This case is completed using the accompanying Microsoft Excel spreadsheet: \"Kilgors student version\". You are required to complete the shaded components for each of the wine varieties in an effort to improve financial performance for the following financial year. See Blackboard for selected background readings from: Simons, R. (2000) 'Performance measurement and control systems for implementing strategy', Prentice Hall. KEY GROUP TASKS Required: Build a profit plan for the forthcoming financial year. The aim is to realistically work towards improving the financial performance of the company. Instructions are provided on the excel file. You are required to fill all blank cells and write notes to the line items indicated. Your tutor/seminar leader will guide you on the overall summary requirements. Prior year's financials are provided in Appendix 1. Individually, students are required to prepare for the assessment by working through the accompanying spreadsheet before class. Bring your ideas to the tutorials and work in groups to complete the task. To get you going, here are a few hints: K Pinot Noir - number of cases per label is $165,000 (495,000/3); price per case is $110 (54,450,000 495,00); cost of goods sold per case (bottling and labelling) is $59.35 (2,970,000/495,000); marketing expense is 4% of sales (2,178,000/54,450,000) Appendix 1: Wine Division Financials Total Results for the Last Two Financial Years Kilgors Wine Division Income Statement Revenue Cost of sales Gross Profit PriorYear Year Current 201Actual $m 350,000,000 227,500,000 122,500,000 Expenses Selling Marketing Administration Corproate allocations Total expenses Divisional profit 35,000,000 14,000,000 48,000,000 16,000,000 113,000,000 9,500,000 No of cases Current Prior Year Year Per case $m 55.53 326,000,000 36.10 205,380,000 19.44 120,620,000 32,600,000 11,410,000 48,000,000 16,000,000 108,010,000 12,610,000 17.93 1.51 6,302,500 6,059,480 $m 15,000,000 10,000,000 30,000,000 55,000,000 $m 12, 500, 000 8, 500, 000 28, 000, 000 49,000,000 40,000,000 65,000,000 24,000,000 35,000,000 164,000,000 38,000,000 66,000,000 24,000,000 35,000,000 163,000,000 219,000,000 212,000,000 Kilgors Wine Division Balance Sheet Current assets Cash Inventories Receivables Non Current assets Inventories Property plant and equipment Agricultural assets Intangible assets Total assets ROI EVA RI Direct manufacturing cost per case * Acase casecontains contains bottles *A 126bottles. - 4.34 12,400,000 10,210,000 36.10 - 5.95 8,590,000 6,470,000 33.89 Per case 53.80 33.89 19.91 1. Within the relevant range, Kilgors' fixed cost per case of wine will not change according to activity level. True False 2. Vera recently acquired a company who produces day pots. She obtained the information below from the current owner. Vera has also been advised by the landlord that the rent of manufacturing site has increased by $1,000, effective from 1 June this year and it will remain at this new price until review in May next year. Before conducting any calculations, Vera wants your help to identify the \"mixed costs\" from the information provided in the list below. Production volumn Cost of fine clay Staff Salaries Rent Other Expense A. Rent B. ProductionVolume C. Staff Salaries D. Cost of the clay March 1,000 20,000 115,000 5,000 70,000 April 800 16,000 110,000 5,000 68,000 May 1,200 24,000 126,000 5,000 78,000 June 1,400 28,000 125,000 6,000 74,000 3. Vera recently acquired a company who produces day pots. She obtained the information below from the current owner. Vera has also been advised by the landlord that the rent of manufacturing site has increased by $1,000, effective from 1 June this year and it will remain at this new price until review in May next year. Before conducting any calculations, Vera wants your help to identify the \"Variable costs\" from the information provided in the list below. March April May June Production volumn 1,000 800 1,200 1,400 Cost of fine clay 20,000 16,000 24,000 28,000 Staff Salaries 115,000 110,000 126,000 125,000 Rent 5,000 5,000 5,000 6,000 Other Expense 70,000 68,000 78,000 74,000 E. Rent F. ProductionVolume G. Staff Salaries H. Cost of the clay 4. Vera believes now it's time to work out the cost function for her new business. Drawing on the information provided in the previous question, calculate the cost function for Vera, so she can identify the fixed and variable costs associated with her business. The correct cost function Vera's business is: a. 155,000 + 65*Q b. 156,000+55*Q c. 155,000 + 55*Q d. 156,000 + 65*Q 5. Using the information below, calculate the company's operating leverage. Sale volume: 10,000 Selling price per unit: $90 Variable cost per unit: $40 Fixed Cost: $100,000 Operating leverage: ____________________ 6. Gillian owns a cherry farm which supples cherries to different retailers. As her accountant, she would like you to prepare operational budgets for the first quarter of 2017. Given cherries are a perishable food item, Gillian decides only 5% of the following month's sales volume will be kept as ending inventory. Jan Feb March April Sales volume (boxes) 3,000 2,800 2,500 2,000 Selling price 120 130 140 150 Variable cost per unit 30 35 40 45 Direct material cost per unit 10 13 11 8 Direct labour hours required per unit 0.5 0.5 0.4 0.4 Direct labour cost per hour 30 28 25 26 What is the sales revenue for January? A. $300,000 B. $350,000 C. $364,000 D. $360,000 What is the sales revenue for February? A. $360,000 B. $364,000 C. $350,000 D. $300,000 What is the sales revenue for March? E. $360,000 F. $364,000 G. $350,000 H. $300,000 Using the information from the previous question (Gillian's cherry farm), calculate the production required for February. (Please note: you are recommended to prepare the production budget for the first 3 months) a. 2,990 units b. 2,785 units c. 2,475 units Using the information from the previous question (Gillian's cherry farm), calculate the production required for January. (Please note: you are recommended to prepare the production budget for the first 3 months) d. 2,990 units e. 2,785 units f. 2,475 units Using the information from the previous question (Gillian's cherry farm), calculate the production required for March. (Please note: you are recommended to prepare the production budget for the first 3 months) g. 2,990 units h. 2,785 units i. 2,475 units Using the information from the previous question (Gillian's cherry farm), calculate the direct material usage for January. (Please note: you are recommended to prepare the production budget for the first 3 months) a. $36,205 b. $29,900 c. $27,225 Using the information from the previous question (Gillian's cherry farm), calculate the direct material usage for February. (Please note: you are recommended to prepare the production budget for the first 3 months) d. $36,205 e. $29,900 f. $27,225 Using the information from the previous question (Gillian's cherry farm), calculate the direct material usage for March. (Please note: you are recommended to prepare the production budget for the first 3 months) g. $36,205 h. $29,900 i. $27,225 Using the information from the previous question (Gillian's cherry farm), calculate the direct labour usage for January. (Please note: you are recommended to prepare the production budget for the first 3 months) j. $44,850 k. $24,750 l. $38,990 Using the information from the previous question (Gillian's cherry farm), calculate the direct labour usage for February. (Please note: you are recommended to prepare the production budget for the first 3 months) m. $44,850 n. $24,750 o. $38,990 Using the information from the previous question (Gillian's cherry farm), calculate the direct labour usage for March. (Please note: you are recommended to prepare the production budget for the first 3 months) p. $44,850 q. $24,750 r. $38,990 7. Using the information below, calculate the company's operating leverage. Sale volume: 20,000 Selling price per unit: $200 Variable cost per unit: $30 Fixed Cost: $3,000,000 Operating leverage: ____________________ 8. Participatory Budgeting is not: a. Prepared by managers who are responsible for meeting the budget b. Process involving expert employees working in the ifeld c. A top-down approach to budgeting d. A bottom-up approach to busgeting 9. Vera recently acquired a company who produces day pots. She obtained the information below from the current owner. Vera has also been advised by the landlord that the rent of manufacturing site has increased by $1,000, effective from 1 June this year and it will remain at this new price until review in May next year. Before conducting any calculations, Vera wants your help to identify the \"fixed costs\" from the information provided in the list below. March April May June Production volume 1,000 800 1,200 1,400 Cost of fine clay 20,000 16,000 24,000 28,000 Staff Salaries 115,000 110,000 126,000 125,000 Rent 5,000 5,000 5,000 6,000 Other Expense 70,000 68,000 78,000 74,000 A. Rent B. Production Volume C. Staff Salaries D. Cost of the clay 10. kilgors utilizes both organizational vision and operational plans. Which one of the following items would normally be considered part of organizational vision? a. Preparing an annual budget b. Maintaining the image of the company as the industry leader c. Hiring a new sales manager d. Preparing monthly reports of departmental variance analysis 11. A key influence on the nature of kilgors' management accounting system is : a. How hierarchical or flat the organizational structure is b. External influences such as environment in which business opeates c. The availability of information technology for recording information d. All of the above 12. Logan owns a Japanese teppanyaki restaurant. His restaurant offers 3 types of banquets. The estimated sales data is included in the table below. Seafood Waygu Beef Chicken Teppanyaki Teppanyaki Teppanyaki Selling volume 1,500 2,100 900 Selling price $65 $100 $45 Variable cost $40 $50 $25 Fixed staff salary $90,000 Rent $36,000 Calculate the sales mix percentage for the 3 banquets? a. 28.02%; 60.34%; 11.6% b. 33.33%; 46.67%; 20% 13. Using the information from Logan's teppanyaki restaurant and building on your calculation from the previous questions, calculate the weighted average selling price for the combined 3 teppanyaki products. __________________________ 14. Using the information from Logan's teppanyaki restaurant and building on your calculation from the previous questions, calculate the weighted average unit contribution margin for the combined 3 teppanyaki products. ____________________________ 15. Using the information from Logan's teppanyaki restaurant and your previous calculation(s), estimate the weighted average contribution margin ratio. ______________________________ 16. Using the information from Logan's teppanyaki restaurant and building on your calculation from the previous questions, calculate how many banquets Logan needs to sale to reach a point where he has no profit and no lss? _________________________ 17. What is the pre-tax profit, if after the tax profit for Logan's Teppanyaki's business is $100,000. The tax rate is 30%. ______________________ 18. Using the information from Logan's teppanyaki restaurant and building on your calculation from the previous questions, calculate how much sales revenue Logan needs to generate to achieve an after tax profit of $100,000? ________________________ 19. Kilgors is gathering information about buting a new forklift to replace the company's existing forklift. Which of these items is irrelevant to the decision? a. The cost of the wine that the forklift b. the purchase price of the new forklift c. the money Kilgors will receive for selling the old forklift d. the weight the new forklift can lift when moving wine 20. Helping Kilgors to identify the non-value adding activity from list below: a. purchasing raw materials for production b. moving finished goods in the storeroom to meet first in, first out inventory accounting method c. none of the activities is regarded as non-value adding d. advertising the company's products 21. The core competencies (intangible resources) of kilgors are : a. all of the above b. highly specialized equipment that is better than competitors c. ability to beat competitors because of a clever marketing campaign d. none of the above e. team effort to ensure they are recongised as number one in prduct offerings 22. Gillian would like to know how much cash she could receive from selling cherries. She informs you that accounts receivable at the end of the prior year (sales made during December) is $100,000. Payments from customers are usually receives .... Follow. Paying during the month goods are received 50% Pay the next month 47% Bad debts (can not be collected) 3% The sales figures are provided in the table below. Sales revenue Jan $360,000 Feb $364,000 March $350,000 April $300,000 May $200,000 June $100,000 July $80,000 August Sep. Sales $50,000 $50,000 revenue What should be the total receipts for the first quarter? (Please note: you are recommended to prepare the cash receipts budget for 3 quarters ) a. $971,280 b. $198,100 c. $699,500 What should be the total receipts for the second quarter? (Please note: you are recommended to prepare the cash receipts budget for 3 quarters ) d. $971,280 e. $198,100 f. $699,500 What should be the total receipts for the third quarter? (Please note: you are recommended to prepare the cash receipts budget for 3 quarters ) g. $971,280 h. $198,100 i. $699,500 23. A way in which value chain analysis can benefit Kilgors is : a. it externalizes thinking by incorporating suppliers and customers b. it divides activities into value-added and non-value-added activities c. it encourages a wider perspective d. all of the above 24. Budgeting is harder in departments, such as human resources(HR), because: a. HR managers are involved with recruitment and training and do not under stand accounting concepts b. HR departments are part of the value chain and similar to manufacturing departments are classified as engineered cost centres c. HR departments are not classified as cost centres and therefore not normally part of the budgeting process d. the relationship between the individual service offering or manufactured production output is hard to trace to HR costs 25. Theory Question 1. Would budget variances be likely occur at Kilgors? Explain drawing on specific examples from the case. 2. What qualitative information might be useful for Kilgors management team to consider? Provide two examples and explain why. 3. What does it mean to be innovative at Kilgors? Is this important for the budgeting process? Explain why and why not? 4. Using the case information on Kilgors, provide an example of an important cause-and-effect relationship that needs to be considered when preparing the budgets. Explain why. 5. Using the case information on Kilgor, provide an example of an important trade-off that needs to be considered when preparing the budgets. Explain why. 6. Would zero-based budgeting be suitable for Kilgors? Explain the positive and negative implications with reference to the Kilgors case. 7. what do you think are the core competences (intangible resources) of Kilgors. Provide an example