Solved Assignments and Essays for Desklib Online Library

This article provides solved assignments and essays for Happy Day Caterers Ltd, Watson Co. Ltd, and Biker Corporation. It includes calculations of variances, break-even point analysis, and recommendations for improving financial position. The benefits and disadvantages of activity-based costing are also discussed. The subject, course code, and college/university are not mentioned.

17064 Mock Paper

Contents
Question 1: Happy day Caterers Ltd..........................................................................................3
1.Calculation of three possible variances between the projected and final outcomes:..........3
2.Explanation on possible reasons for such variances:..........................................................3
3.Explanation of Possible consequences of such variances on business along with objective
of such variances:...................................................................................................................3
4.Strategies to eliminate such variances along with suggestion to changes current model for
costing:...................................................................................................................................4
5.Benefits of Zero-Based Budgeting over incremental based budgeting:..............................4
Question 2: Watson Co. Ltd.......................................................................................................4
1. Compute the gross and net profit of Watson Co. Ltd........................................................4
2.Possible reasons for declining in the profits and increasing cash flow problems between
2019 and 2020:.......................................................................................................................5
3. Compute Gross profit and Net Profit Margin, by explaining that why these ratios are
significant for analyses of profitability..................................................................................5
4. Recommendations of any three strategies due to which the entity can improve their
financial position along with suggestion for next financial year:..........................................6
Question 3: Biker Corporation...................................................................................................6
1.Calculation of Break even point of production of Fast and Furious:..................................6
2.How break-even point analysis help the company to set profitable sales revenue targets: 7
3.Advantage and disadvantage of Activity based costing and explanation on whether
switching to ABC could help the company to ensure profitability:.......................................7
REFERENCES...........................................................................................................................9

Question 1: Happy day Caterers Ltd.
1.Calculation of three possible variances between the projected and final outcomes:
Budget Actual (outrun) Variance Variance %
£ £
Sales Turnover 1,90,000 1,63,000 -27,000 -14.21%
Direct Cost:
Material 32,000 36,500 -4,500 -14.06%
Labor 25,000 32,000 -7,000 -28.00%
Power 18,000 18,500 -500 -2.78%
Packing and1 Distribution 14,000 15,000 -1,000 -7.14%
Indirect Cost:
Administration 16,000 19,000 -3,000 -18.75%
Advertising 4500 4500 0 0.00%
Premise Cost 28,500 39,000 -10,500 -36.84%
Net Profit 52,000 -1,500 -53,500 -102.88%
The three most significant variances that the organisation currently facing is direct labour
cost, indirect cost relating to the premises and indirect administration overhead. These figures
are higher when compare to budgeted figures and must be closely monitor so that profit
volume can be increased accordingly.
2.Explanation on possible reasons for such variances:
The possible reasons for such variances are mentioned below:
 The first reason can be that the entity is facing tough competition from its competitor
and they are not able to match the demand when the demand of the product is higher.
 The company is making the baked product on the rented premises and rent of such
premises is higher that why such variance arises. The happy day must focus on
purchases the premises for its business so that such extra cost can be eliminated in
future.
 Another variance arrives towards the administration cost and the reason can be that
entity has employed excess employs due to which they are paying them extra salary
and wages that must be curtail down if they not matching the demand of the
customer.

3.Explanation of Possible consequences of such variances on business along with objective of
such variances:
The possible consequences of such variances on business could be mentioned as under: -
 On Revenue perspective the variances they are getting of around 14.21% adverse
which shows that they are not matching the demand and if they not meeting the target
sales revenue then they are not able to meet out their fixed cost on time which is
create burden on them towards higher debts.
 The labour cost variances are around 28 % which clearly shows that excess payment
to them but their productive output is not matching the demand that arises in peak
time. This needs to be monitor closely and those workers who are skilled and working
effectively must be retained & others must be eliminated.
 The entity is paying higher amount towards premise cost which is 36.84% so that
shows that extra cost has been incurred which must be curtail down accordingly by
purchase the premises so that ownership can be maintained and such cost is also fixed
which cannot be reduced, it must be compensated by enhancing the revenue itself.
4.Strategies to eliminate such variances along with suggestion to changes current model for
costing:
The strategies to eliminate such variances could be as under: -
 The changes that organisation needs to implement is to make budgets not on overall
basis but on individual department basis so that each department progress can be
easily monitored and deviation can be tackled down accordingly.
 Another suggestion that the organisation can implement is to create buffer stock in
advance if possible so that during peak time supply and demand can be matched
accordingly and it does not create excess burden on the management.
5.Benefits of Zero-Based Budgeting over incremental based budgeting:
The benefits of Zero-based budgeting over incremental based budgeting are as under:
 It provides a systematic approach for the evaluation of different activities and

rank them in order of preference for the allocation of scarce resources.
 It ensures that the various functions undertaken by the organization are critical for
the achievement of its objectives and are being performed in the best possible way.
 It provides an opportunity to the management to allocate resources for various
activities only after having a thorough cost-benefit-analysis. The chances of
arbitrary cuts and enhancement are thus avoided.
Question 2: Watson Co. Ltd.
1. Compute the gross and net profit of Watson Co. Ltd.
Particulars 2019 2020
Sales Turnover 63500 46500
Less: Opening Stock - 17000
Less: Cost of Sales 33000 22800
Add: Closing Stock 17000 24000
Gross Profit 47500 30700
Less: Direct Labour Costs 15000 21000
Less: Other overhead Costs 7000 6000
Warehousing Costs 3000 4000
Net Profit 22500 -300
2.Possible reasons for declining in the profits and increasing cash flow problems between
2019 and 2020:
The possible reason for such decline in the profits will be as under: -
 The one of the obvious reasons is decline is sales revenue from 2019 to 2020 by £
17000 which creates the difference in profits between the two years.
 The direct labour cost of the entity has been increased by £7000 which also affects the
profitability and such cost must be curtain down by monitoring the working
performance of the employees and labour.
 The cash flow problem they are facing due to not receiving the amount on timely
manner from the debtors as it is shows that payment are sometimes receives beyond
90 days that directly affect the profitability of the corporation. It will also affect the

working capital cycle of the organisation and if payment receives on timely manner,
then payment made to creditor accordingly.
3. Compute Gross profit and Net Profit Margin, by explaining that why these ratios are
significant for analyses of profitability.
 Gross Profit Margin: (Gross Profit / Sales) * 100
Year 2019
= (47500 / 63500) * 100
= 75.80 %
Year 2019
= (30700 / 46500) * 100
= 66.02 %
 Net Profit Margin: (Net Profit Margin / Sales turnover) * 100
Year 2019
= (22500 / 63500) * 100
= 35.43 %
Year 2019
= (-300 / 46500) * 100
= -6.45 %
Importance of the above ratio in analysing the performance of the company:
 Gross Profit Margin:
The figures which are obtained by calculating the gross profit will be helpful in
budgeting tool. The entity gets the base on the figures of gross profit margin that the
amount of inventory they have to maintain so that estimated sales volume can be
achieved. They can also evaluate the estimated value of their closing stock on the
given level of sales, purchase and opening stock. They are also helpful in indicating
that how well the corporation management is generating profits during the relevant
accounting period. Further it is helpful in comparing the margins of multiple years

and with companies which are engages in same industry so that performance can be
measured accordingly.
 Net Profit Margin:
The net profit margin helps the investor to assess that whether the entity is generating
enough profits from the revenue they are making and whether the operating cost are
being covered properly. They are the most important indicators of overall financial
health of the company.
4. Recommendations of any three strategies due to which the entity can improve their
financial position along with suggestion for next financial year:
 One of the strategies must be lowering the expenses. They are dependent on only one
supplier and they have to look into other suppliers too that provides the goods at
cheaper rates that ultimately curtail down the expenses.
 The outstanding payment must be recovered on timely manner as it directly affects
the cash flow statement of the organisation. Is important for them to give timely
reminder to the debtors to make payment in credit period allowed by company.
 The assets which are not contributing to the business must be sold out as soon as
possible as disposing of them will immediately inject cash flow in the business.
If the above suggestion has been implemented by the entity, then next year’s profitability will
gets improved subsequently.
Question 3: Biker Corporation
1.Calculation of Break even point of production of Fast and Furious:
The formula of calculating the break-even point is: Fixed cost / (Revenue per unit + Variable
cost per unit) Therefore the break even points for selling the bike will be: -
Fixed cost £ 123200, selling price is £ 300 and variable cost is £ 80 per unit. Therefore,
break-even point will be 123200 / (300+ 80) = 324 Units of bike of Fast and furious.

2.How break-even point analysis help the company to set profitable sales revenue targets:
The benefits of break-even analysis have been mentioned under:
 It will help in measuring the profit and losses that an entity may earn at different level
of output of production and sales that enables the corporate to push their working
accordingly so that business does not gets hampered.
 It helps in predicting the effect of changes that has been taken place due to changes
made in output and selling prices.
 The organisation will be benefited from this method as it helps them to understand the
relationship between the fixed cost and variable cost, they incurred during the
financial year so that revenues targets can be made accordingly to cope up with the
cost.
 It helps in predicting the effect that has been taken place on the cost of making the
goods and services and efficiency changes that has been taken place on profitability of
the company.
3.Advantage and disadvantage of Activity based costing and explanation on whether
switching to ABC could help the company to ensure profitability:
Advantage of Activity based costing:
 The overheads are related to activities and are grouped into activity cost pools.
 Cost is related to activities therefore they are more realistic.
 The activity-based cost drivers are easily determined therefore cost allocation will be
made easier.
 Cost will be assigned to cost objects. For e.g., customers, products, services,
departments etc.
 Essential activities can be simplified and unnecessary activities can be eliminated.
Thus, the corresponding costs are reduced or minimized and we can say that ABC
aids cost control.
Disadvantage of Activity based costing:
 Setting up ABC system is time consuming and cost has to be incurred to maintain the
same.

 The final reports generated from this approach are not in line with generally accepted
accounting principles.
 Information generated may conflict with management performance standards as they
are traditional costing methods.
 It is not suitable for those entities where overhead expenses are in less volume in
comparison to overall operating costs.
Switch to ABC method would be helpful for the company to ensure all lines are priced
profitably:
Switching towards these techniques is helpful for the company as with this they can take
decision on which products or customers to cut or to retain for their business. The problem
with this system is that mangers don’t often think that it is the major organisational change
program and due to this approach, it often not accepted in the business. However, if properly
implemented then it will ensure the business to generate profit as all the activities and their
cost involved are clearly visible in the business structure and elimination of unnecessary cost
will become easier. As biker corporation in switching to new product lines named as Fast and
Furious and if ABC method has been implemented then cost involved in their production can
be easily measurable and deviation in cost can be resolved accordingly. ABC method of
costing also helpful in calculating the base for all the cost activities carried out by the
organisation therefore this technique contributes all product lines to allocate cost equally.
This will help the management in ensuring that all product lines are earning the profit as per
their capability and not affected by over absorption of cost involved.

REFERENCES
Books and Journals
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financial management behavior pada pegawai direktorat jenderal
perbendaharaan (Doctoral dissertation, Universitas Brawijaya).
Aprilia, Z., 2021. Pengaruh locus of control, financial knowledge, dan personal income
terhadap financial management behavior pada karyawan KPP Pratama
Blitar. SKRIPSI Mahasiswa UM.
Baker, H.K., Kumar, S. and Pandey, N., 2020. A bibliometric analysis of European Financial
Managementʼs first 25 years. European Financial Management, 26(5), pp.1224-1260.
Bara, A. and Pradesyah, R., 2021, January. Mosque Financial Management In The Pandemic
Covid 19. In Proceeding International Seminar Of Islamic Studies (Vol. 2, No. 1, pp.
21-27).
Barroy, H. and Gupta, S., 2020. From overall fiscal space to budgetary space for health:
connecting public financial management to resource mobilization in the era of
COVID-19.
Dandago, K.I., 2018. Transparency and Accountability in Public Financial Management: A
Stewardship Account at Kano State Ministry of Finance, Nigeria. International
Journal of Financial Research, 9(2), pp.76-89.
Kostini, N. and Raharja, S.U.J., 2019. Financial strategy of small and medium businesses on the
creative industry in Bandung, Indonesia. International Journal of Economic Policy in
Emerging Economies, 12(2), pp.130-139.
Levy, A., Bouheni, F.B. and Ammi, C., 2018. Financial Management: USGAAP and IFRS
Standards, Volume 6. John Wiley & Sons.
Okanazu, O.O., 2018. Financial management decision practices for ensuring business
solvency by small and medium scale enterprises. Acta Oeconomica Universitatis
Selye, 7(2), pp.109-121.
Sakwa, D. and Maiga, G., 2018, May. Implementing financial management information
systems in local governments: a model of success factors. In 2018 IST-Africa Week
Conference (IST-Africa) (pp. Page-1). IEEE.