Essay about Assignment Questions on Accounts

1167 Words5 Pages
ACC3015

Assignment

2014-15

ACC3015 - Assignment 2014/15

Please attempt all questions, this coursework represents 60% of your total mark for the module. Submit online only through NILE by 3rd April 2015
Maximum word count - 2,500
Case Study

You are a financial consultant employed by NENE Limited and they require you to answer the following questions. You are expected to write an academic essay of up to 2,500 words addressing these questions. You are expected to explain your calculations using detailed notes, where applicable, and carry out academic research to develop your discussion (cite references).

Question 1

The directors of NENE limited are considering two mutually exclusive investment projects. The company has
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There are three models manufactured in the factory: A, B and C. The models, their quality and their price are aimed at different markets.
Product costs are computed on a blanket (business-wide) overhead-rate business using labour hour method. Prices as a general rule are set based on cost plus 20%. The following information is provided.

A
B
C
Material cost (£/Unit)
25
62.5
105
Direct Labour Hours (per unit)
½
1
1
Budget Production / sales (units)
20,000
1,000
10,000

The budgeted overheads for the business amounted to £4,410,000. Direct Labour is costs at £8 per hour.
The business is currently facing increasing competition, especially from imported goods. As a result, the selling price of A has been reduced to a level that produces a very low profit margin. To address this problem, an activity based costing approach has been suggested. The overheads are examined and these are grouped around main business activities of machining (£2,780,000), Logistics (£590,000) and establishment (£1,040,000) costs. It is maintained that these costs should be allocated respectively on cost drivers of machine hours, material orders and space, to reflect the use of resources in each of these areas. After analysis, the following proportionate statistics are

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