SOLUTION: their relevance to pricing decisions | My Assignment Tutor

Business Finance Assignment Brief Assignment 1: Case Study (2000 words) LO1. Understand the different types of costs and their relevance to pricing decisions. LO2. Understand the role and prepare budgets to control operations. This assignment is divided into two parts: Part A and Part B. You are required to complete both the parts to achieve LO1 and LO2 of the module. Part A Maxwell Ltd. makes and sells a single product which sells for £100 per unit and which has Direct Material cost of £45 and per unit Direct Labour cost of £30. Total Fixed costs are expected to be £ 125,000 for the year. Budgeted sales for the year are 60,000 units. You are required to: · Calculate the Contribution per unit · Calculate Breakeven Point in units and Breakeven Sales. · Calculate Margin of Safety as a percentage of budgeted sales. · Calculate the Breakeven Units if Maxwell Ltd expects a profit of £100,000 during the current year. · Prepare a memo to your Financial Manager explaining the importance of classifying cost as Fixed cost, Variable cost and Semi variable cost and their relevance to pricing decisions. Further, Maxwell ltd. also produces a single product, Leather Jacket, and the following financial information are provided. Selling price/unit £75 Direct Material per unit £18 Direct labour per unit £8 Variable overhead per unit £5 Fixed overhead incurred £ 5,000. Budgeted production and sales are 2,500 units. Actual production is 2,200 units, and actual sale is only 2,100 units. Assuming that the sales prices and variable costs per unit are as budgeted and that fixed overhead expenditure is the same as budgeted, show the amount of profit, using absorption costing and marginal costing. 20 Marks Part B Star Plc is a UK based company manufacturing and selling Sweets. The company operates a standard costing system and analysis of variance is made every month. During the current period, the company produces and sells 12,000 units. Standard Cost Card DetailsQuantity Per Unit£ per kg/hrDirect material6kg3Direct wages/labour3hrs5Variable overheads2kg3 The fixed overhead expense budgeted is £15,000. Actual figures DetailsQuantity Per Unit£ per kg/hrDirect material5kg4Direct wages/labour2hrs3Variable overheads3kg3 Actual fixed overhead expense is £13,000. Using the case scenario, you are required to: · Demonstrate an understanding of the role of Budgets in controlling the operations of a business. 14 Marks · Calculate Material Price variance, Material Usage variance, Labour Rate variance, Labour Efficiency variance and Fixed Overhead Expenditure variance and comment on each variance. 22 Marks Prepare budgets for controlling operations, Direct Material budget, Direct Labour budget, Variable Overhead budget & Fixed Overhead expenditure budget. 14 Marks [Total Part A + Part B=100 Marks] A particularly good understanding answer will have the following attributes: · Exceptionally factual and conceptual understanding of the different types of costs and their relevance to pricing decisions · Exceptional understanding of the role of budget · Excellent budget preparation to control operations. · Accurate methods of calculation with correct answers · Correct use of English language · Referencing using correct Harvard Style. Helpful information Core Texts T Atrill, P., McLaney, E. (2018), Management Accounting for Decision Makers. Harlow, Pearson Drury, C. (2016), Management Accounting for Business. Andover, Cengage Learning EME Additional Texts · Brealey, R., Myers, S.C., Allen, F., and Mohanty, P. (2007) Principle of Corporate Finance, 8 the ed. New York, McGraw Companies · Drury, C. (2003) Cost & Management Accounting, An Introduction, 5th ed. London, Thomson Publishing UK · Horngren, C.T., Datar, S.M., and Foster, G. (2006) Cost Accounting: A Managerial Emphasis, 12th ed. Prentice Hall India