Highlights
Task:
Question I
Waratah Ltd manufactures electronic devices, Including PDAs, MP3 and MP4 players. for home and business use. Three years ago, it implemented an activity-based costing system. Both the management accountants and the manufacturing managers are very pleased with the results, as they now have accurate product costing information that they can use for a variety of decisions. However. the ABC system focuses only on product design and manufacturing costs. The activity. based costs of Waratah's major products are as follows:
Activity PDA Basic PDA+ PDA/Phone Dosgning S 100 110 125 Rychafaig 150 95 130 Assembling 890 1200 1400 Finishing 260 250 250 Total activity cost $1400 $1655 $1905
In July, Hannah Allen, the assistant accountant. noticed that over the last six months the spending in both the Customer Support Department ano the Sales Department had been steadily increasing. The previous month's costs rad been 2C per cent above budget! The customer support supervisor, Bill Domenico, is (sole to explain exactly why this is happening. He has had to employ new staff, there is more overtime being worked, and some of The service calls have been outsourced to a IMO-party maintenance company. But all this was necessary, as he explams: If a customer has a problem, we have to fix it! And if we have spent more than our budget, then that is just too Dad. it is important to keep customers happy. Why, orgy the other day the managing director was telling us how important our customers are and how customer satisfaction is critical to the company's success. Hannah asks Bill if she can nave access to the records of his department for the past three months (June quarter). Sne intends to analyse The service calls to see exactly where the extra
Question 2 Hawthorn Leisure Works DAM) offers tennis courts and other physical fitness facilities to its members. The club has 2000 members. Revenue is derived from annual membership fees and hourly court fees. The annual membership fees are:
IntIvidual $45 Studorn 30 Farrdy 100
Approximately half the members are 'family', and the remaining memberships are split equally between individuals and students. For the next two financial years, the hourly court fees are $8 and $12. depending on the season and the time of day (prime versus non-prime time). There are 10 courts at each club. The courts are available for 12 hours per day. from 9 am to 9 pm. The peak tennis season runs from October to April (181 days). During this period, court usage averages from 900100 per cent of capacity during prime time (5 to 9 pm) and from 50 to 60 per cent of capacity during the remaining hours (9 am to 4 pm). Daily court usage during the off season averages from only 20 to 40 per cent of capacity, and Is charged at $6 per hour. All of HLW's memberships expire at the end of September. A substantial amount of the cash receipts is collected during the early part of the tennis season due to the renewal of annual membership fees and heavy court usage. However cash receipts are not as large in autumn and drop significantly In the winter months. For the start of the new financial year on 1 October, HLW is considering introducing a new membership and fee structure in an attempt to improve Its cash flow planning. Under the new membership plan, only an annual membership fee would be charged, rather than a membership fee plus hourly court fees. There would be two classes of membership, with annual fees as follows:
Individual $300 Farndy 500
Question 3
Jason Rivers, the CEO of Ecoframe Ltd was just concluding a budget meeting with his senior managers. It was November and the group was discussing plans for the nest year’s budget. “ I have decided to go ahead and purchase the industrial robot we have been talking about. We will make the acquisition at the start of January next year, and I expect that it will take most of the year to train the workers and organise the production processes to reap the full advantages of the new equipment.”
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