Question: Dairy Australia Ltd’s annual operating plan

> Advantage Tennis Coaching (ATC) has been engaged to provide tennis coaching services to students at a local private girls’ college. ATC has put forward a proposal to the University of Queensland’s School of Human Movem

> Mansfield Ltd has recently expanded its production facility to satisfy a new customer order that will start in six months. As a consequence, it has the opportunity to make use of the spare capacity for the next six months. Financial information on the cu

> Elm Ltd has been manufacturing its own shades for its camping chairs. The company is currently operating at 100 per cent capacity. Variable manufacturing overhead is charged to production at the rate of 50 per cent of direct labour cost. The direct mater

> Flash Pty Ltd manufactures handheld egg-beaters. For the first eight months of 2020, the company reports the following operating results while operating at 80 per cent capacity. Sales (400 000 units) ………………………….. $ 2 000 000 Cost of sales ………………………………………

> Blitz Nails has provided the following financial data for the last two financial periods. The manager, Jonie Matte, is beginning her planning for next year and requires the following information. Required (a) Calculate the break-even level of sales in

> Terrace Company currently manufactures a sub-assembly for its main product. The costs per unit are as follows. Direct materials …………………………………. $ 4.00 Direct labour ………………………………………. 30.00 Variable overhead …………………………………. 15.00 Fixed overhead (allocated) …

> Lavender Plantations Pty Ltd management plan to introduce detergents to its product range in 2022. They have provided the following information relating to the planned activities. Required (a) Calculate the break-even point in total units and units per

> Mermaid Enterprises operates a single-product entity. Data relating to the product for 2019 are as follows. Annual volume ……………………………………………………………….. 64 000 units Selling price per unit …………………………………………………………………… $ 60 Variable manufacturing cost per unit

> How does the calculation of break-even differ between single product and multi-product entities?

> Information for Harbour Industries is provided below. Average selling price per unit ……………………………. $ 10.00 Average variable costs per unit: Cost per unit ………………………………………………………… 5.00 Selling costs ………………………………………………………….. 1.40 Annual fixed costs: Selling …

> IT Equip sells IT equipment, specialising in printers and projectors. The following statement reflects the contribution margin of each activity and overall profit levels. Required (a) Calculate the contribution margin ratios for each of the two areas of

> Nicholas Cash of Advantage Tennis Coaching (ATC) has received an offer from a top-ranked Australian player, Serena Novac, who wishes to spend two months in the beautiful Queensland weather and have 50 private coaching sessions with Nicholas. If the offer

> Gotrack Company produces compasses for cross-country skiing. The production capacity is 45 000 compasses and the company is currently operating at 85 per cent capacity. Variable manufacturing costs are $10 per unit. Fixed manufacturing costs are $425 000

> Lavender Plantations Pty Ltd advertises weekly specials and makes sure that the shelf space (9 metres) at the entrance to the store showcases these specials. For the current week, its three products are being advertised at special prices. Each product mu

> In the Whine Company, it costs $30 per unit ($20 variable and $10 fixed) to make a product that normally sells for $55. A foreign wholesaler offers to buy 3000 units at $35 each. The Whine Company will incur special shipping costs of $2 per unit. Requir

> Emy Fong has been operating a single-product firm for three years. As this product is now well established in the market, Fong is thinking about adding two new products to her range. Outline the impact of her decision on the calculation of her new break-

> Discuss some possible options when the break-even unit target appears too difficult to achieve.

> Yen Rippon is about to commence operations as a beauty technician. She believes her costs can be classified as fixed or variable. (a) Distinguish between fixed and variable costs. (b) Outline how Yen could make use of CVP analysis to help guide her busin

> For each of the following independent situations, calculate the break-even point in units. (a) Variable cost per unit of $3, annual fixed costs of $42 750 and selling price per unit of $9. (b) Variable costs per unit of $10, annual fixed costs of $63 200

> Discuss the concept of operating leverage.

> Find the missing figure for each of the following independent cases. (Reconstruct the statement of profit or loss for each scenario.)

> Find the missing figures for each of the independent cases shown below. (Reconstruct the statement of profit or loss for each scenario.)

> Explain the importance of the relevant range in relation to cost behaviour when considering the costs of expanding business activities.

> Discuss how knowledge of the break-even point and the margin of safety will assist management in its risk assessment of business operations.

> CVP analysis and break-even analysis are underpinned by a range of important assumptions. Briefly discuss four such assumptions.

> If an entity has a mixed cost function, a 10 per cent increase in sales volume should increase income by more than 10 per cent. Explain why.

> A university student, Barry Ward, plans to sell atomic alarm clocks with a music function over the internet and in person during the semester to help pay his study expenses. He buys the clocks for $35 and sells them for $55. If payment by cash accompanie

> Swinton Industries operates in the IT industry, producing and selling computer and IT equipment. It is structured along functional lines (research and design, production, marketing and so on) and, for most of its history, has operated with a fairly autho

> According to Telstra’s 2018 Remuneration report, 40 per cent of the executive variable remuneration plan (EVP) was based on customer performance measures. Discuss the reasons why the board has linked executive remuneration to customer satisfaction rating

> Best Beef Burgers operates a store in Melbourne and the following is its average monthly statement of profit or loss. The owner is currently preparing the budget for next year and is considering the following alternatives. 1. Reducing the cost of sales

> How can the margin of safety be used to assess risk associated with sales?

> Go to the website for JB Hi-Fi Ltd and examine its latest annual report. Write a report to the finance manager explaining how you would prepare the sales budget.

> John Wilson is the owner/manager of Overnight Courier Solutions, a small transport and courier company that provides logistic services to business. John is about to start the budget process for 2021. His marketing manager has contacted customers and anal

> Quality Goods Company operates antique and second-hand goods stores throughout Victoria. Such stores are currently very popular and sales are increasing each month. It has budgeted the following sales for the indicated months. Quality Goods Company&acir

> Bullen & Company makes and sells upmarket carrybags for laptop computers. John Crane is responsible for preparing Bullen & Company’s master budget and has assembled the data below for 2021. The direct labour rate includes wages,

> Willow Health provides a range of healthcare services to the local community, including home visits by nurses to elderly patients. An allied health worker, who performs a range of tasks such as housework and showering for patients, accompanies the nursin

> Glenn Stone, manager of Jarrett Car Repairers, has requested that you prepare a cash budget for the months of December and January. He has provided the following information to assist in this task. • Projected cash balance at the end of

> At a recent finance committee meeting, the Chief Operating Officer advised the marketing department that a 10 per cent increase in sales is expected for the coming year. The increase is to apply to all product lines. Required (a) How will this directive

> Realty Company prepares monthly cash budgets. Provided next is a set of relevant data extracted from existing reports and the sub-budgets for the two months of September and October 2021. All sales are on credit. Collections from accounts receivable nor

> M20 Company has presented the following estimates relating to 2021 activities. Sales in the December quarter of 2020 are $345 000. All sales are on credit, of which 55 per cent are collected in the quarter of sale and 45 per cent in the following quarte

> ‘Nobody ever seems to be able to hit our sales targets. Why is that?’ (John Lyons, Chief Accountant of Clocktower Fashions). John is showing his frustration at the failure of the company’s store managers to meet their specific targets for sales and expen

> Discuss the circumstances in which CVP analysis might be useful.

> Betty Wu is the manager of a large retail store specialising in children’s clothing and accessories. As Betty is the longest serving employee, she believes that she knows what is best for the store. She does not consult with her departmental managers in

> Veronica Shan owns and operates the Quality First printing company. Veronica and her staff do not engage in planning or budgeting, as they consider the business too small to warrant their attention to such matters. Recently, it has been necessary for the

> As a consequence of the global financial crisis, many airlines have cut back services to various locations around Australia. Identify other entities or groups of entities that might be reviewing their budget targets during the budget period due to this r

> Holiday Manor has a dining room with the capacity to seat 100 guests. It is open for breakfast and lunch seven days a week. During January 2019, management forecast the seat turnover for breakfast to be 2.5 times and for lunch 2 times, with the average b

> Holiday Manor has twenty rooms available for rent. During the month of December, its average room rate is expected to be $180 and its room occupancy 80 per cent. Due to the holiday season, the room rate is to be increased by 20 per cent and the occupancy

> Database Service’s management expressed surprise that the budgeted profit was achieved despite actual sales being under by $75 000. Give reasons why the actual profit may have been able to match the budgeted profit.

> Mona Little, the accountant for Trailers 4 Hire, is currently preparing the budget for the coming year. One of the agenda items for next week’s finance meeting is consideration of whether an outstanding loan of $250 000 should be refinanced, paid out in

> Johnny Castles is the operational manager for Tru Blue Tours. Johnny’s bonus is dependent upon the reduction of his department’s operating expense budget by 10 per cent in the coming year. One initiative he has taken is to cut staff training expenditure.

> Michael Wallis is the marketing manager for a chain of stores specialising in electric tools for home renovators. Michael’s department is preparing a sales budget for the coming year and he has issued a memo to his staff that includes a requirement for a

> Using examples, distinguish between fixed and variable costs.

> Amy Turner is the newly appointed chief accountant at Satellite Data Components (SDC), which designs and manufactures data components for the satellite and car industries. One of Amy’s early tasks is to review the budgeting and planning system. From her

> Chalkboard was commenced by Louis Turner. Chalkboard is an innovative technology company that provides a platform for the posting of best-practice teaching videos and commentary. Its strategy is focused around being the number one enabler of teaching bes

> Lavender Plantations Pty Limited produces and sells two types of lavender-based products: soaps and candles. The 2022 sales budget for the two products is as follows. The beginning inventory on 1 January 2022 is expected to be 4200 units of soaps and 12

> Brodie Ltd has undertaken its budget planning for the coming accounting period. Budget item …………….................................………….Budget data Sales …………………………………………………. 60 000 units; selling price $120 Cost of inventory …………. Direct materials: 2 kil

> Middleton Services is preparing a master budget for the coming year. At present senior management are reviewing the inventory policies. Which budgets would be affected by policies concerning the level of inventories? Why?

> Discuss the potential issues arising for an entity if it takes a budgetary approach in which budgetary data are imposed on business unit managers by the CEO. Contrast this with an approach whereby the budgetary data are developed in a more participatory

> Golden Arbours intends to start business on the first day of January. Production plans for its first four months of operations are as follows. January ………………………………… 10 000 units February ………………………………. 25 000 units March ………………………………….. 35 000 units April

> Glenvale Furniture has projected sales of its product for the next six months as follows. January ……………………………….. 80 units February ……………………………... 180 units March …………………………………. 200 units April ……………………………………... 160 units May ………………………………………… 60 units Jun

> Hobby Gardens is a garden design and landscaping business. At 30 June 2021, it has a bank balance of $52 500. Provided below are estimates for receipts and payments for the three months ending 30 September 2021. Required (a) Prepare a monthly cash budge

> Garden Sculptures presents the following data relating to the expected operations for the months of January to March 2021. Required (a) Prepare a cash budget on a monthly basis for the three months ending March 2021. The cash balance at 31 December 2020

> Explain the difference between mixed and variable costs. Provide examples of each.

> Lavender Plantations Pty Limited produces and sells two types of lavender-based products: soaps and candles. Peta Mitchell, the manager, is implementing a new marketing strategy in 2022. Actual sales in 2021 are as follows. Due to the change in sales st

> Budget Travel plans to commence operations on 1 July 2021. The following data and estimates relate to the three months ending 30 September 2021. Required (a) Prepare a monthly cash budget for the three months ending 30 September 2021. (b) The actual num

> Twilight Enterprises has provided the following estimates relating to the first quarter of 2021. Cash sales ……………………………………………………………. $ 88 960 Credit sales ……………………………………………………………. 167 624 Receipts from accounts receivable …………………………… 130 840 Cash payment

> Watson Company makes specially designed coffee mugs. The entity has developed a website and is trying to switch customer behaviour to this medium. Sales for each quarter of 2020 are as follows. Quarter ending 31 March ……………………………… $234 000 30 June ………………

> One of the downsides of using a participative style of budgeting is the possibility of ‘budgetary slack’. Explain whether you consider the strengths of a participative style of budgeting outweigh the problems associated with budgetary slack.

> During late 2019, Ski Lifters commenced a new business in the Alpine region to rent ski gear to tourists. A budget has been prepared for the coming financial year. Prepare a brief report to management on how the budget can be used as a control device to

> Ski Lifters is a business that provides a chairlift for tourists in the Alpine region. The peak season is in winter, with the low season during the summer months. Sales are high during the ski season and then taper off once the season closes. Explain why

> From the following data for Starlight Enterprises, calculate the receipts from accounts receivable for June, July and August of 2021. Credit sales are normally settled according to the following pattern: 70 per cent in the month following sale and 25 pe

> From the following data for Fantastic Sales, calculate the receipts from accounts receivable for September, October and November of 2021. Credit sales are normally settled according to the following pattern: 20 per cent in the month of the sale, 50 per

> Arthur Thomson Lawyers operates in the local neighbourhood and has six solicitors who work on client briefs. For the coming year, each solicitor is budgeted to work 2400 billable hours. The main areas of law work that Arthur Thomson Lawyers specialises i

> The financial controller of Seats R Us has established indirect cost pools and cost drivers for the coming year as follows. The sales team has received an order for 1500 seats and produced them. The order requires the following. Machine set-ups â&

> Explain the meaning of the term ‘budgetary slack’.

> Discuss the typical role of the accountant in the budget process.

> Explain the difference between planning and control.

> Explain the similarities and differences between the cash budget and the statement of cash flows discussed in the statement of cash flows chapter.

> An organisation is currently operating at full capacity. Should it accept a request for a special order based on variable costs plus 40 per cent? Explain.

> When is it necessary to calculate the contribution margin per limiting factor?

> Cost drivers can be based on either volume or activity. Provide an example of each.

> Explain market-based pricing and give an example that shows how prices would be determined using this method.

> Explain cost-based pricing and give an example that shows how prices would be determined using this method.

> Discuss the importance of selecting an appropriate cost driver in the cost allocation process.

> Explain the difference between a full product cost and an inventoriable product cost.

> Explain the difference between a direct cost and an indirect cost.

> Regional Animal Services is located in rural Queensland and treats farm animals and domestic pets. Providing veterinary care to farm animals requires travel to the individual farms in the area, while veterinary care to domestic pets is usually conducted

> What is a cost object? Give three examples.

> Aluminium Industries manufactures two products: Delta and Gamma. Both products are produced on the same assembly lines and packaged with 20 units of product per package. The predicted sales are 320 000 packs of Delta and 400 000 packs of Gamma. The budge

> Transrapid is a magnetically levitated train that connects Shanghai to its Pudong International Airport at a speed of 268 miles per hour. Engineers developed a system with trains departing every 15 to 20 minutes. Suppose Transrapid asked you to research

> ‘Fixed costs are always irrelevant in decision making.’ Discuss.

> Just Windows manufactures two product ranges: the standard range and the special range. During July, 300 standard windows and 50 special windows were manufactured and indirect production costs of $73 000 were incurred. An analysis of indirect costs revea

> Winton Produce package and distribute three grades of animal feed. The material cost per tonne and estimated annual sales for each of the products are as follows. The indirect cost of operating the machinery used to package all three products is $40 000

> Richards Manufacturing estimates the following activity for the coming year. • Expected production 20 000 units • Expected direct labour hours 20 000 hours • Expected manufacturing overhead $200 000. Manufacturing overhead is allocated on the basis of di

> Mercy Hospital uses a costing system to determine the cost of patients who have surgery. The hospital uses a budgeted indirect cost rate for allocating indirect costs to patient stays. In March, the operating theatre had a budgeted allocation base of 100

> A housekeeping support department budgets its costs at $20 000 per month plus $18 per hour. The estimated and actual hours for November provided by the housekeeping support department to three operating departments are as follows. Required (a) Draw a di

> During 2022, Lavender Plantations Pty Ltd continued to grow. The manager decided to add detergents to its existing range of soap and candles. The management accountant, Nick Gee, expressed concern regarding the accuracy of the product costing system now

> Refer to exercise 11.20. Benson Manufacturing’s total direct labour cost was $470 000 (2350 hours × $100 per hour). There was no direct labour cost variance. In exercise 11.20 Benson Manufacturing estimates the following activity for the coming year. •

> Benson Manufacturing estimates the following activity for the coming year. • Expected production 23 000 units • Expected direct labour hours 1750 hours • Expected manufacturing overhead $92 000. Manufacturing overhead is allocated on the basis of direct

> Megan Mitchell has recently graduated from a business school and joined the family business as an accountant. At the first management meeting with production, marketing and sales, a great deal of time is spent discussing the unit cost of products. What k