Reference no: EM13832262

Here is my assignment. there is a similar version available in your website relating to last year assignment!

Question 1 Manufacturing Cost Schedule and Income Statement.

This question relates to learning material and objectives from Online Topics 1, 2 and 3.

As part of your graduate training at Jupiter Australia you are required to work on and in different Jupiter businesses to develop your accounting and management skills. You have been asked to finalise the reporting for a company which is part of the pet food division of Jupiter. BirdSong Limited is a wholly owned subsidiary of Jupiter Australia and manufactures a range of specialist foods for pet birds under several different brands. For internal and external reporting purposes BirdSong uses a traditional manufacturing cost flow accounting system. The BirdSong factory is located in Bathurst, New South Wales.

As you are based in Albury Wodonga you have been emailed the following information about BirdSong Ltd trading for the 2015 financial year.
On June 30, 2015 BirdSong inventory account balances were as follows:

Details from the 2015 Revenue and Expenditure accounts were as follows:

Account:	$
Factory Managers Salary	145,000
Factory Managers Salary (Car and other benefits)	26,500
Factory Direct Labour Cost	2,124,000
Factory Indirect Labour Cost	524,500
Office Staff Wages	203,500
Inwards Freight	16,000
Accounting Fees	66,500
Interest & other finance charges	124,000
Depreciation of Manufacturing Equipment	500,000
Depreciation of Office Equipment	12,500
Purchases of Raw Materials & Packaging	2,789,000
Repairs & Maintenance of Manufacturing Equipment	765,000
Heat Light & Power Costs (Factory)	1,116,000
Heat Light & Power Costs (Office)	62,500
Marketing Expenses (including salaries)	2,725,000
Outwards Freight	342,000
Sales Revenue	15,675,000

Opening balances for the Inventory accounts of BirdSong on July 1, 2014 were as follows:

Inventory Account:	30/06/2015	30/06/2015
Work in Process (WIP) Inventory:	Stock on Hand:	$ Closing
Raw Materials	2,750	1,500
Direct Labour	2,250	35,000
Manufacturing Overhead	11,750	146,000
	Jul 1, 2014	Jun 30, 2015
Raw Material Inventory	57,000	72,500
Finished Goods Inventory	116,500	146,000

Required:

Using Excel, from the information provided prepare the following financial reports:

Schedule of Cost of Goods Manufactured, Schedule of Cost of Goods Sold, and an after tax Income Statement for BirdSong Limited for the 2015 financial year.

Note: Your Excel model should include a data input section and appropriate formulae. An example of the Manufacturing reports required can be found in the text book on p. 52 (6th edn. p.58) and an Excel example is available in Resources on the subject Interact site.

Question 2: Comprehensive Manufacturing Budget-

This question builds on prior studies and relates to learning material and objectives from Online Modules 1, 2 and 3. Links to specific resources provided for this question relating to Manufacturing Budgets and Excel spreadsheets can be found in the Online Topic Modules.

As a market leader in the FMCG sector Jupiter Australia is always on the lookout for opportunities to expand their product range. The Strategic Management Committee has identified the boutique beer market as a FMCG sector experiencing rapid growth and recently purchased a small brewery named Medium Creatures. The Medium Creatures beer is sold by the dozen to hotels, bars and retail outlets across Australia.

The Jupiter Australia Strategic Management Committee have asked you to develop a five year Manufacturing budget for the Medium Creatures Brewery covering 2016 to 2020 financial years (inclusive). You have been provided with the following 2015 data and key assumptions to use when developing the 5 year budget commencing in the 2016 financial year:

Medium Creatures 2015 data
2015 Sales (dozen bottles)	967,170
Wholesale Selling Price (average price per dozen bottles)	$24.00
Expenses:
Administration and Finance costs	$1,065,000
Sales and Marketing Costs	$3,585,000
Sales Commission	1.5% of $ Sales Product Costs
Raw Materials:
Ingredients (Hops, Yeast, Sugars, etc)	$2.20
Bottle Cost	$1.80
Packaging & Labelling Costs	$1.20

Production and Brewing Costs:
Direct Labour		$0.75
Process & Manufacturing Overhead		$5.60

Medium Creatures maintains target Raw Material and Finished Goods safety stock inventory levels at the equivalent of one (1) week of the current year budgeted sales. Medium Creatures does not utilise a Work in Process inventory account.

At June 30th, 2015 Medium Creatures had in stock the Raw Materials necessary to produce 18,250 dozen bottles of beer and had a further 21,750 dozen bottles completed and stored in Finished Goods inventory with the following values:

Medium Creatures Inventory (June30, 2015)

$

Raw Materials Inventory:

Ingredients (Hops, Yeast, Sugars, etc)

40,000

Bottle Cost

33,000

Packaging & Labelling Costs

22,000

Finished Goods Inventory

225,000

The Sales & Marketing team at Medium Creatures are very confident that unit sales of their product will grow at approximately 8% pa over the budget period. They also expect that they will be able to achieve price increases of 1.5% pa above the annual projected inflation rate. The management team at Medium Creatures are also interested in diversifying their operations to leverage off the strength of their brand name.

All Medium Creatures product costs including raw materials, bottles, packaging, direct labour and all other expenses including administration and finance are expected to increase on a per annum basis at the rate of inflation. It is expected that sales commission paid to the firm's sales representatives will remain at 1.5% of $ sales. Tax is paid at the Australian Corporate tax rate of 30%. The Australian Treasury forecasts estimate inflation will average at 3.25% pa over each of the next 5 years. Medium Creatures financial reports are prepared on a financial year basis.

The Medium Creatures manufacturing facility has an estimated practical capacity of 1.2 million dozen bottles a year. A neighbouring manufacturing plant is closing down and Medium Creatures will have the opportunity to lease the extra space and some existing equipment. It is estimated that Medium Creatures will be able to increase its production capacity by 40% but the additional building and equipment lease costs will equal $500,000 per annum. This extra cost will be a fixed per annum cost and will not be subject to inflation. The property is available for lease now for the commencement of the 2016 financial year and must be taken up or else the landlord will simply rent the space to another business. If this offer is taken up the extra costs and the production increase would effectively commence on July 1st, 2015 (commencement of the 2016 financial year).

(i) Using Excel develop a Sales, Production and Purchases budget as well as a budgeted Schedule of Cost of Goods Manufactured, Schedule of Cost of Goods Sold, and an Income Statement for each of the 5 years in the budget period (commencing 2016) (advice on the form of these budgets will be provided on the subject Interact site and is also available in the Appendix to Chapter 9 of the text book). This budget must be based on the 2015 data and other budget estimates and take into account the brewery capacity production constraint prior to taking up the extra production option. Your spreadsheet must include a data section which enables inputs to be simply altered and ‘what if' analysis to be undertaken. (Excel resources are provided on the Interact site to guide students on the use of the ‘IF' formula which can be used for the budget production constraint).

Hint: All 5 years of each budget should be shown side by side (1 column per year) for ease of comparison by management. All of the budgets should be presented on one worksheet together, working down the page commencing with the Sales and then Production budgets.

You should be able to drag the formula across for the whole of the budget if the first years are properly constructed with a data input section and using absolute referencing. This makes the process much quicker and easier. An Excel help file has been placed on the Interact site to assist students.

(ii) Using the model developed in part (i) calculate the impact on sales and profit if the option of leasing the additional factory space and brewery equipment is exercised increasing the practical production capacity of the brewery by 40% from 1.2 million dozen bottles (Submit results as a separate worksheet).

(iii) Given your findings from part (i) and (ii) write a report for the management of Medium Creatures recommending whether to take up the option to increase production. In your report consider both thestrategic and financial implications to the firm of reaching its production constraint and the alternative of having extra productive capacity. Your grade will depend on the accuracy and depth of your analysis, and your capacity to identify issues which management should consider when making their decision.

(There is no need to adopt a formal report structure. Word limit guidance 300-450 words)

Question 3 Strategic Management Accounting Case Study

This question builds on prior studies of Cost Volume Profit (CVP) analysis and relates to learning material and objectives from Online Modules 1 and 2.

(For assistance on this question you are advised to undertake the case study from Mars Petcare which is provided online (with solution) in Topic 2 as the Strategy Reflection Task).

‘Delizioso' Pasta Sauce

STRATEGIC MARKET ANALYSIS

You have been asked to join the Strategic Management Committee of Jupiter Australia as the management accounting representative. The main task of the Committee is to carry out ongoing reviews of the profitability and viability of various product lines across all of the divisions of Jupiter Australia.

One of the earliest products developed and manufactured by Jupiter for the Australian FMCG market was the ‘Delizioso' (Italian for delicious) range of stir through pasta sauces. The Delizioso range, as one of the first products into the pasta sauce sector, became the market leader. At the Strategic Committee meeting you are surprised to see that Delizioso product range is considered at risk and under review. The Delizioso pasta sauces product range was introduced in the mid 1980s and is sold through major supermarket chains in Australia and New Zealand.

As people have become more and more time poor there has been a significant move towards products such as stir through pasta sauce which enable families to quickly and easily serve home cooked meals without spending the time necessary to create from the beginning a flavoursome and healthy pasta sauce. As the sector has grown in size over recent years a number of competitors have developed products which imitate the Delizioso offering. These competitors have started to have an impact on the sales and market share of Delizioso products. The major competitor to the Delizioso product is the brand ‘FastaPasta' which retails at a lower price. Market research commissioned by Delizioso management indicates that the quality of the two products is seen as similar, and that price is a significant factor in why consumers are switching from Delizioso to FastaPasta.

The overall market for pasta sauces continues to grow, however in the last three years whilst the market has grown Delizioso's sales have stalled and their market share has fallen from 75% of the total market, down to 50%. In the same period the market share of FastaPasta, their largest individual competitor, has tripled from 10% to 30% (see chart below). The total unit sales of pasta sauce in the Australia and New Zealand market for 2015 was equivalent to 250 million jars*.

Whilst the Delizioso brand is still profitable the Strategic Committee is concerned about the downward trend in both market share and profitability. Jupiter Australia has a base expected return on investment for its business units of 20% (calculated as Gross Profit divided by Total Assets).

*Adjusted for different jar sizes on offer.

The following breakdown of revenues and costs for the ‘Delizioso' product line for the 2015 financial year has been provided:

Delizioso Pasta Sauces
Total AssetsTeaserMalt Factory - Wyong New South Wales	$80m
Total 2015 Sales (Volume)( units)	125m
Regular Retail Price (per unit) (price sold in supermarket)	$3.50
Gross Sales Value (per unit) (Price received by Delizioso)	$2.75
Supermarket Rebates (unit)(Paid by Delizioso to Supermarkets)	$0.15
Net Sales Value	$2.60
Prime Costs	$1.00
Manufacturing Costs	$1.30
Logistic Costs	$0.20
Total Costs (per unit)	$2.50
Gross Profit (per unit)	$0.10
Total Gross Profit	$12,500,000
Return on Total Assets (ROTA)	15.63%

The Return on Total Assets (calculated by dividing Gross Profit by Total Assets) for Delizioso for the 2015 year was 15.63%. This is clearly below the ROTA required by the parent company Jupiter Australia which is set at 20%. If product profitability continues to decline Delizioso may be considered to be unviable, and risks being closed down.

The market research carried out indicated that by lowering the recommended retail price of Delizioso by $0.55 per unit to $2.95 per unit*, and re-launching the brand with a new marketing campaign, Delizioso will be able to re-capture the 25% of market share that it has lost over the last 3 years. This amounts to a massive 50% increase in sales of Delizioso pasta sauce from 125 million units in 2015 to an estimated 187.5 million units in 2016. To assist with the re-branding and re-launch of the product the research and development (R&D) department has come up with a new Delizioso jar design and logo and a range of new Delizioso recipes. The R&D department advise that the new container and new ingredients will result in a significant saving in prime costs. It is anticipated that the new product will lower Delizioso ingredient and packaging prime costs from $1.00 per unit to $0.80 per unit.

However, the Chair of the Strategic Management Committee advises that even after allowing for the $0.20 per unit savings in prime costs, discounting the product by $0.55 per unit will mean that the product will no longer achieve the firm's long term required return on total assets (ROTA) of 20%. Concern was expressed and that at the proposed reduced recommended price level the product may even be running at a loss. The Committee Chair argues that if this remains the case, the previously successful Delizioso product line may have to be discontinued.

You advise the Committee that you are aware that the ‘Delizioso' Pasta Sauce manufacturing facility in Wyong is currently running at 50% of its practical capacity and that the warehouse facility (logistics) is running at 47% capacity. You are also aware that whilst the Delizioso product's Prime Costs are 100% Variable, other Manufacturing Costs and Logistic Costs are made up of 80% Fixed costs and 20% Variable costs.

You ask if you can be given time to prepare a report for the Strategic Management Committee on the Management Accounting cost and profit implications of the changes proposed by Marketing and R&D based on the budgeted costs and increases in sales and production.

*Remember that the manufacturer does not receive the retail price. In this case study the whole of the $0.55 per unit price reduction is being borne by the manufacturer Delizioso. Whilst supermarkets will receive the same per unit (after rebate) profit of $0.90 for the sale of each unit, the supermarkets actual (after rebate) margin on the product will rise from 34.6% to 43.9%. The discounted wholesale price of Delizioso (before supermarket rebate) will drop from the current $2.75 per unit down to $2.20 per unit.

Required:

(i) Using Excel prepare a ‘before and after' budget comparative analysis of the revenues and costs of the Delizioso product line. The analysis should incorporate the $0.55 cent drop in price, the 20% predicted savings in prime costs, and include the 50% predicted sales increase. Ensure you include in your analysis any impact of the budgeted production increase on other per unit manufacturing and logistics costs.

(ii) It can be assumed that the 80% Fixed/20% Variable cost break-down for manufacturing and logistics costs will hold consistently across the industry (including for competitor FastaPasta). Assume that 60% of the predicted Delizioso unit sales increase will be made at the expense of the unit sales of their main competitor FastaPasta (meaning FastaPasta unit sales will fall by 60% of the Delizioso unit sales increase). Assume that Delizioso and FastaPasta have identical manufacturing and logistics costs structures at the commencement of the 2016 year.

Allowing for the change in sales volumes use Excel to calculate the expected impact of the drop in sales on the per unit product costs of FastaPasta.

(iii) Prepare a brief report (maximum 300 words) for the Strategic Management Committee outlining the key points of your findings. Include some discussion on:

the likely impact of the changes on the cost and profit structure of Delizioso (derived from your answer to (i)).

the likely impact of the changes on the cost and profit structure of FastaPasta (derived from your answer to (ii)).

Make a recommendation to the Committee on whether to go ahead with the planned changes. Include any other strategic advice that you consider relevant to the Committee's decision making (for example profitability for supermarkets).
(Please ensure that your answer adequately addresses ALL of the points above. There is no need to adopt a formal report structure for this answer)

Question 4: Overhead Cost Allocation-

This question relates to learning material and objectives from Online Module 1-5.

You are asked to investigate the use of normal costing utilising factory-wide cost drivers at one of the Jupiter Australia subsidiaries. You are provided with the following information:

Budgeted $ Sales

$20,500,000

Budgeted Machine Hours

100,000

Budgeted Direct Labour Hours

38,000

Budgeted Direct Labour Rate (ph)

$26

Budgeted Manufacturing Overhead

$1,340,000

Actual Machine Hours

107,000

Actual Direct Labour Hours

37,000

Actual Direct Labour Rate (ph)

$27.50

Actual Manufacturing Overhead

$1,362,000

Required:

(i) From the data provided calculate the pre-determined overhead using each of the following factory-wide cost drivers (3 marks):

Machine hours

Direct labour hours

Direct labour cost

(ii) For each of the three cost drivers above, calculate whether overhead has been under or over-applied (and by how much) (3 marks).

(iii) Use your results from (ii) to discuss whether any or all of these factory-wide cost drivers are an effective method to apply overhead. Discuss any alternative approaches that you believe may work.

Question 5: Ethical understanding-

This question relates to learning material and objectives from Online Module 1.Students are expected to research more widely than the online materials and text book. Please note that professional bodies guidance statement on ethics is linked through the online modules and is available in Resources on the subject Interact site.

Ethical understanding is a key learning outcome for accounting students:

(i) Explain what is meant by each of the following fundamental ethical principles for accountants: integrity, objectivity, professional competence, confidentiality, and professional behaviour.

(ii) What does being ethical mean to you?

(iii) How could ethics be an issue in a management accounting environment?

(Q.5 Word limit guidance - between 300 and 450 words)

Question 5 Process Costing

This question relates to learning material and objectives from Online Module 5.

The ‘Cat‘n'Kitty' division of Jupiter Australia factory has been operating at its current site in Wodonga, Victoria since the late 1970s, with the current fully automated factory commencing operation 15 years ago. The ‘Cat‘n'Kitty' brand is Australia and New Zealand's leading brand of cat food and operates using a two stage process costing system to allocate costs to products.

On the ‘Cat‘n'Kitty' production line direct materials are added at two different points of the conversion process. ‘Cat‘n'Kitty' contains two forms of Direct Material: (1) the raw ingredients, and (2) the aluminium tray or can packaging of cat food. The addition of ingredients occurs at the commencement of the process and the addition of the trays or cans occurs after 20% of conversion.

All raw ingredient materials are added at the commencement of the manufacturing process including all protein (beef, chicken, fish), cereals, gravies and emulsifiers. These ingredients are added in proportion according to the recipe (bill of materials) for each ‘Cat‘n'Kitty' variety. After the products are blended and mixed together the combined but raw ingredients are added into their aluminium trays or cans with lids and sealed. This addition of the second occurs after 20% of the conversion process has taken place. The remaining 80% of the conversion process occurs as the ingredients are steam cooked at very high temperatures and then moved into Finished Goods inventory.

At shut down on July 31st 2015 ‘Cat‘n'Kitty' has 150,000 units in Work-in-Process (WIP) which are complete as to Direct Materials Ingredients ($54,000) and Direct Materials Packaging ($1,780) and 40% complete for Conversion ($87,700). 5,375,000 units are commenced during August and units completed and transferred to Finished Goods amounted to 5,420,000 units. The units in closing WIP are 15% completed.

The following costs were incurred during August:

Direct Materials:

Ingredients $1,952,000

Packaging $350,540

Conversion Costs $3,139,500

Required:

Using Excel prepare spreadsheet models to answer the following questions:

(i) Using the Weighted Average Cost Method determine the cost value of closing WIP and the cost value of goods transferred out during the period.

(ii) Using the FIFO method determine the cost value of closing WIP and the cost value of goods transferred out during the period.