MiceAreUs Limited manufactures two types of computer mouse; traditional wired (TW), traditional bluetooth (TB). These are in continuous production at the company's factory in Dunbar, Scotland. Each mouse incorporates around 25 component parts that are bought from outside suppliers. Sales have recently been declining and the Board of Directors is considering a proposal to discontinue TW and TB and replace them by a large range of ergonomically designed computer mice. These new mice would be highly customised for individual corporate customers and would be frequently renewed to adopt the latest technologies and allow for market changes. They would be produced in short, discontinuous batches with production lines switching frequently from one product to another. The CEO claims that the adoption of activity-based costing will bring benefits to the business, but the CFO is keener on a lifecycle costing approach.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
The budgeted distribution costs for next year comprise transport costs of £568,000
and customer order
8,300 orders will be processed and that the delivery vehicles will travel 400,000
kilometres.
One of the company’s customers has indicated that it will place 50 orders in the next
year, each of which will involve a journey of 130 kilometres by delivery vehicle.
What is the distribution cost for this customer? Show all workings
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