Posted: February 8th, 2015
Paper, Order, or Assignment Requirements
Financial and Management Information Systems
CRN = 35565
(2014 / 2015)
Overall Weighting in module = 25%
Date of Issue: 13th October 2014
Date of Submission: 28th November 2014
All answers to be prepared and presented in the answer book provided.
The answer book should then be submitted through Turnitin
Kauris Ltd is a manufacturing organisation supplying specialised engineered products to a wide range of public and private sector throughout the UK.
You are a trainee in the finance office recently recruited by the company.
Management planning meeting:
On the 20th of every month (or nearest Monday) the business executive management team meets to plan trading and production for the following month.
The meeting commences with a review of the sales order book and a determination of the following months product sales volumes. The expected sales volumes inform the production planning process and decisions are made with respect to production resources and closing inventory requirements.
The agreed plan is the production schedule document. This is forwarded to the production departmental managers who will examine and compare their available resources against the requirement for production. Any problems (constraints) or other issues arising are reported back to the executive management team who will consider making adjustments to:
At the start of the following month, the production process will commence with a view to meeting the objectives of the agreed production (action) plan
This process is described by the production planning flowchart (shown below):
Production Planning Flowchart
The production process:
The production process of Kauris Ltd takes place through 3 production departments; machining, painting and assembly.
Direct materials are transferred from the direct materials stores to the machining department. These are transformed using direct labour employees and machine processes into machined goods. The total of the prime costs add the fixed production overhead (allocated and / or apportioned) is the total cost of machined goods transferred to the painting department. For the machining department, the direct labour employees are paid at a rate of £12.00 per hour and the variable machine cost is £8.00.
Incremental direct materials are transferred from the direct materials stores to the painting department. These are combined with the machined goods transferred in and are transformed using direct labour employees and machine processes into painted goods. The total combined costs add the fixed production overhead (allocated and / or apportioned) is the total cost of painted goods transferred to the assembly department. For the painting department, the direct labour employees are paid at a rate of £9.50 per hour and the variable machine cost is £2.50.
Incremental direct materials and components are transferred from the direct materials stores to the assembly department. These are combined with the painted goods transferred in and are transformed using direct labour employees and machine processes into saleable finished goods. The total combined costs add the fixed production overhead (allocated and / or apportioned) is the total cost of the saleable finished goods transferred to the finished goods warehouse. For the assembly department, the direct labour employees are paid at a rate of £8.00 per hour and the variable machine cost is £1.00.
The production process is described in the production process flowchart below:
Production Process Flowchart
Goods receiving and locating / storage control process:
When goods are received to the business raw materials stores, they are first checked by the store keeper for quantity against a copy of the original purchase order document (this is forwarded to the raw materials stores at the time that the order is place – with all money values removed). If the quantity is incorrect (allowing for approved part – order deliveries) a ‘Quantity rejection note’ is prepared.
Goods that are acceptable by quantity are quality inspected for size, weight, colour etc. Where goods are found to be unacceptable by quality, a ‘Quality rejection note’ is prepared. Goods rejected by quantity or quality are located at the ‘Returns room’ ready for return to the supplier.
Acceptable goods are initially identified as either ’Steel’ or ‘Wooden’.
After goods received have carefully and accurately been located, the store keeper will prepare a ‘goods received note’ (GRN). This will be forwarded to the finance office.
Prepare a flowchart to describe the goods receiving and locating / storage control process
Your flowchart should be prepared in a good style using the MS Word ‘Insert / Shapes / Flowchart’ facility (see answer book)
Trading (production and sales):
You should assume that today’s date is 18th November 2014
The company has the following sales orders to be delivered during December 2014
|Order / product:||Order 2169
|Quantity to be delivered (sales in units)||1,350||2,000||5,400|
|Selling price (per unit)||£72.00||£45.00||£11.00|
The production schedule for November 2014 (product quantities and production resources requirement) is shown below.
|Order / product:||Order 2169
|Quantity to be produced||1,500||2,500||6,000|
At 1st November 2014 there will be no opening inventory of finished goods
Resources requirement for production:
Direct costs (variable costs):
|Order / product:||Order 2169
|Incremental materials cost||£2,230||£2,300||£6,200||£10,730|
|Direct labour hours (total)||450||350||200||1,000 hours|
|Machine hours (total)||1,200||800||500||2,500 hours|
|Incremental materials cost||£2,140||£5,710||£5,460||£13,310|
|Direct labour hours (total)||340||660||1,000||2,000 hours|
|Machine hours (total)||1,200||1,000||800||3,000 hours|
|Incremental materials cost||£2,100||£5,260||£8,800||£16,160|
|Direct labour hours (total)||850||720||930||2,500 hours|
|Machine hours (total)||750||350||400||1,500 hours|
Fixed indirect production overheads:
Indirect production overheads are fixed (unaffected by production activity levels) at £72,000 per month. This value has been allocated and apportioned to the 3 production departments as follows:
|Fixed costs (allocation / apportionment)||£25,000||£32,000||£15,000||£72,000|
Bases for absorption:
The quantity for absorption basis (for each production department) should be established using the total departmental resources requirement shown in the tables above.
Prepare (for each product and in total) the following planned values:
Note to task 2:
The requirement of task 2 should be established using and absorption costing system (as described in the production process flowchart).
The total task 2 mark above, includes marks allocated to short descriptive notes to workings (<=100 words – see answer book).
These notes should be ‘short explanatory notes’ that will serve to define the terminology used and explain the workings (and results / outcomes) to a colleague who does not work in the finance office.
Prepare the following planned values:
Note to task 3 a. & b.:
The requirement of task 3 should be established using a marginal costing system (where direct costs are classified as variable and indirect production overheads are classified as fixed)
The total task 3 mark above, includes marks allocated to short descriptive notes to workings (<=100 words – see answer book).
These notes should be ‘short explanatory notes’ that will serve to define the terminology used and explain the workings (and results) to a colleague who does not work in the finance
Carol Redbud, the company sales manager has commented that product ‘Pecan’ is not performing well and the company profits would increase if this product was removed from the range
It has been established that, if product Pecan was removed from the catalogue, specific fixed cost savings of £10,000 would be made
Your memo should be prepared in a good style (see answer book) and show effective skills in written communication (information qualities).
The finance office (cost and management accounts) recently performed an ‘activity – based’ production systems analysis for the fixed production overheads. The result is the table below:
|Cost driver||Total cost driver quantity per period||Indirect production overhead recovery rate
|Set up costs||27,000||Set ups||200||135.00|
|Production scheduling||10,000||Set ups||200||50.00|
|Raw materials storage||6,500||Materials movements||3,250||2.00|
A further analysis has produced the following indirect production overhead resource required for each product:
Activity – Based Resource Requirement (by product)
|Set ups (Set – up)||100||50||50||200|
Your written explanations should be effectively communicated and should include notes on:
The task 5 b. mark include marks allocated to short descriptive notes to workings (<=100 words). These notes should be ‘short explanatory notes’ that will serve to identify (observe) the effects on each product (and total) profit caused by the ABC system allocations.
Place an order in 3 easy steps. Takes less than 5 mins.