You have been appointed financial controller of Constructabus plc, a coach building company, which specialises in two
Question:
You have been appointed financial controller of Constructabus plc, a coach building company, which specialises in two types of bus, a standard double-deck vehicle and a luxury coach model.
The chassis and engine are bought in and the framework of each bus is built on the assembly floor. All the fixtures and fittings are added in the finishing shed to meet customers’ specifications.
The head of the accounts department has provided you with the following information for the year ended 31 August Year 8:
Further information:
1 Stocks are valued at variable cost of production for management accounting purposes. Work in progress may be ignored. At 1 September Year 7, stock values were £25,000 per standard bus and £21,500 per luxury coach.
2 The assembly floor has achieved full working capacity during the year but the finishing shed was 25% under-utilised.
The head of the accounts department has prepared the following budget for the year ending 31 August Year 9:
Further information:
1 Labour hours per unit are assumed to be the same as for the year ended 31 August Year 8.
2 Due to changing patterns in public transport, the budget has recognised that demand for standard buses has fallen by 40% but that sales of the luxury coaches will expand by 25%.
Required:
Prepare a report for the board which provides:
(a) a statement of budgeted profit for each product for the year ending 31 August Year 9;
(b) a comparison of this budget with the actual results for each product for the year ended 31 August Year 9; and
(c) comments on your analysis.
Step by Step Answer:
