Cakes2Go is a company which manufactures and sells three types of cakes in packets.
One of them is called HoneyCake and contains three types of sweeteners: honey, sugar
and syrup. The standard materials usage and cost for one unit of HoneyCake (one
packet) is as follows:
£
Honey 20 grams at £0·02 per gram 0·40
Sugar 15 grams at £0.03 per gram 0·45
Syrup 10 grams at £0·025 per gram 0·25
–––––
1·10
–––––
In the three months ended 30 November 2012, Cakes2Go produced 101,000 units of
HoneyCake using 2,200 kg of honey, 1,400 kg of sugar and 1,050 kg of syrup. Note:
there are 1,000 grams in a kilogram (kg).
Cakes2Go has used activity-based costing to allocate its overheads for a number of
years. One of its main overheads is machine set-up costs. In the three months ended
30 November 2012, the following information was available in relation to set-up costs
Budget
Total number of units produced
Total number of set ups
Total set-up costs
Actual
Total number of units produced
Total number of set ups
Total set-up costs
264,000
330
£52,800
320,000
360
£60,000
Required:
(a) Calculate the following variances for materials in HoneyCake:
(i) Total materials usage variance;
(ii) Total materials mix variance;
(iii) Total materials quantity (yield) variance.
Question 2 – Budgeting
Write an essay of 1000 words demonstrating your conceptual understanding of the
following questions.
1. Is budgeting used primarily for scorekeeping, attention, directing or problem
solving?
2. How do strategic planning, long range planning and budgeting differ?
3. Why is budgeted performance better than past performance as a basis for
judging actual results?
4. What are the major benefits of budgeting?
5. Is budgeting an unnecessary burden for day to day problems? Explain your
answer.
6. Why is the sales forecast the starting point for budgeting?
7. How do Spreadsheets aid the application of sensitivity analysis?
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