Analysis and Recommendation for Cool Pool's Ltd.

Answer 1: Resort Island University:
1. The revenue budget for the upcoming academic year is as below:
2. The total no. of staff needed for the upcoming academic year is 525 as
computed below:
3. Considering there is shortage of full time academic staff, five actions that the
university might take to tide over the shortage are:
 Accommodate more subjects per staff i.e. staff should take up more
than 3 subjects.
 Increase the no. of students per class from 80 currently.
 Spread the students across 4 semesters instead of 2 currently.

 Employ part-time instructors.
 Employ teaching assistants.
4. Budgeting process for a concern starts with the forecasted revenues and
then goes downwards for production, costs and other expense budget of the
same nature. The Deputy Vice Chancellor of the university is mistaken when
he assumes that the no. of staff is the key driver for the process as actually
it is the no. of students that drives the entire process. It is the students that
brings in revenues and is responsible for other costs like staff, library,
cafeteria etc.
Answer 2: Good Health Insurance Company:
1. Given the number of applications processed and the standard hours per
application, the total standard clerical hours for April is 3,825 hours.
2. Flexible budget as the name suggests is flexible and can be altered with the
operating level of the company. It is a more logical and presents a realistic
budget where every items of the budget is altered with the activity level of the
company. Good Health Insurance Company should base their budget on the
no. of hours required for processing the application rather than on
application as the effort for each application is different. Basing the budget
on application will provide misguiding results as the efforts for each
application is not same.

3. Excel formula for computing the total overhead is as under:
Based on the above, the budgeted overhead for April can be computed as under:
4. Memorandum to the management
From:
To, The Management, Good Health Insurance Company
13th May 2015
Subject: Advantages of Implementing Standard Costing
Dear Sir,
Standard costing is a branch of costing that firsts sets the standard for each of the
items of cost and then tracks the actual against the set target to help identify the
variances. With these variances in hand we can take effective remedial action in
time to minimize the variances and control overall cost of the company.
Apart from above, the various advantages of using standard costing are:
 Helps in controlling the unfavourable costs
 Better monitoring of the costs by tracking actuals against standards.
 Helps in taking informed decision regarding product pricing by making
accurate costs available.
Standard costing will help us in minimizing the unfavourable costs as once they
are identified, we will be able to take timely remedial action.