MA Ltd provides online educational services to their clients in the higher education sector. The company...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
MA Ltd provides online educational services to their clients in the higher education sector. The company offers its products in a package which includes online courses and supporting materials for follow up reading and self-paced practices. In the recent years, the company has experienced rapid growth rate and is operating beyond its initial expansion plans. While the management is excited about the growth, it is also concerned about the rising operating costs, particularly the overhead costs. The company operates a standard costing system and all departments are required to participate in the system. The current company policy is to allocate production overheads using the direct labour hours. As the management accountant in the company, you have gathered the following information about the planned overhead costs and the actual amount incurred, as follows. Planned information for the period under review: To complete 8,500 packages . Standard direct labour hours is 8 hours per package • Variable overhead costs was expected to be £54,400 Fixed overhead costs was expected at £136,000. . Actual information for the same period: Completed 8,700 packages A total of 82,650 direct labour hours were used . Variable overhead costs incurred recorded at £59,508 • Fixed overhead costs incurred amounted to £133,893. . You are getting ready to analyse the information gathered, and have informed the management that you will be presenting the variance analysis in the forthcoming management meeting. However, some members in the management seem sceptical about the value of such analysis. They feel that maintaining a standard costing is in itself problematic and hindering the company from adopting modern management approaches, such as pursuing continuous improvement and being creative with products and processes. In fact, the management is in the midst of considering implementing some quality management initiatives to ensure that, albeit the rapid REQUIRED: c) Following the company's concern about its rising operating costs, determine the following overhead cost variances: =) (1) Variable overhead expenditure variance (11) Variable overhead efficiency variance Fixed overhead expenditure variance (iv) Fixed overhead volume variance (iii) (v) Fixed overhead volume capacity variance (vi) Fixed overhead volume efficiency variance (20 marks) b) Based on the above analysis, discuss whether the company's concern on the rising costs is valid. (10 marks) [3 marks] [3 marks] [3 marks] [3 marks] [4 marks] [4 marks] While the fixed overhead absorption rates are often calculated using a single measure of activity, it is suggested that fixed overhead costs should be attributed to cost objects using multiple measures of activity. Discuss how 'activity-based costing' may provide useful information to managers. (10 marks) Discuss the usefulness of standard costing and variances analysis in businesses. (10 marks) [Total 50 marks] MA Ltd provides online educational services to their clients in the higher education sector. The company offers its products in a package which includes online courses and supporting materials for follow up reading and self-paced practices. In the recent years, the company has experienced rapid growth rate and is operating beyond its initial expansion plans. While the management is excited about the growth, it is also concerned about the rising operating costs, particularly the overhead costs. The company operates a standard costing system and all departments are required to participate in the system. The current company policy is to allocate production overheads using the direct labour hours. As the management accountant in the company, you have gathered the following information about the planned overhead costs and the actual amount incurred, as follows. Planned information for the period under review: To complete 8,500 packages . Standard direct labour hours is 8 hours per package • Variable overhead costs was expected to be £54,400 Fixed overhead costs was expected at £136,000. . Actual information for the same period: Completed 8,700 packages A total of 82,650 direct labour hours were used . Variable overhead costs incurred recorded at £59,508 • Fixed overhead costs incurred amounted to £133,893. . You are getting ready to analyse the information gathered, and have informed the management that you will be presenting the variance analysis in the forthcoming management meeting. However, some members in the management seem sceptical about the value of such analysis. They feel that maintaining a standard costing is in itself problematic and hindering the company from adopting modern management approaches, such as pursuing continuous improvement and being creative with products and processes. In fact, the management is in the midst of considering implementing some quality management initiatives to ensure that, albeit the rapid REQUIRED: c) Following the company's concern about its rising operating costs, determine the following overhead cost variances: =) (1) Variable overhead expenditure variance (11) Variable overhead efficiency variance Fixed overhead expenditure variance (iv) Fixed overhead volume variance (iii) (v) Fixed overhead volume capacity variance (vi) Fixed overhead volume efficiency variance (20 marks) b) Based on the above analysis, discuss whether the company's concern on the rising costs is valid. (10 marks) [3 marks] [3 marks] [3 marks] [3 marks] [4 marks] [4 marks] While the fixed overhead absorption rates are often calculated using a single measure of activity, it is suggested that fixed overhead costs should be attributed to cost objects using multiple measures of activity. Discuss how 'activity-based costing' may provide useful information to managers. (10 marks) Discuss the usefulness of standard costing and variances analysis in businesses. (10 marks) [Total 50 marks]
Expert Answer:
Related Book For
Essentials of Marketing Research
ISBN: 978-1305263475
6th edition
Authors: Barry J. Babin, William G. Zikmund
Posted Date:
Students also viewed these accounting questions
-
what did you think accounting was? Search the internet and find at least one website that discusses the accounting equation. Share the URL of the website and summarize what you learned. Ensure you...
-
This exercise requires students to search the Internet for information related to how government agencies can utilize the balanced scorecard to improve their operations.
-
This exercise requires students to search the Internet to find stories about how companies are managing their costs. Students are directed to prepare a brief memo that explains the companys efforts.
-
Economists are difficult to understand. They claim that they can put a monetary value on premature death, but not on human life. They also claim that they can value ecosystem services (such as a...
-
At the end of its first year of operations, Margaret's Manufacturing had earnings of $180,000, before income taxes. One of the expenses that was deducted in determining this amount was product...
-
Eastern Motors Auto Dealership wanted to estimate the average CLV over a 5 year time horizon of a customer who purchases a new vehicle. The average vehicle sells for $24,400 and has a margin of 10% ....
-
At December 31,2010, Inland Equipment understated ending inventory by $2,800. How does this error affect cost of goods sold and net income for 2010? a. Overstates cost of goods sold and understates...
-
Albertson's Locksmith Corporation started operations on January 1, 2010. Albertson's estimates uncollectibles using the percentage-of-credit-sales method. The following information pertains to the...
-
The capital structure of Robinson Inn is current at 60% of equity (i.e., 40% of the debt). You find the debt issued by Robinson Inn has a pretax interest rate of 12%. You also find Robinson Inn...
-
On 1 October 2023 Pumice acquired the following non-current investments: (i) 80% of the equity share capital of Silverton at a cost of 13. 6 million (ii) 50% of Silverton's 10% loan notes at par...
-
Omaro Ltd. would like to clear their warehouse and yard of damaged equipment and metal scrap. If the company purchases an industrial recycling bin for $1800, a contractor will pick up the materials...
-
1. There are two airline carriers, United and American Airlines, that are deciding how many flights to run from Detroit (DTW) to Seattle (SEA) every day. To simplify the analysis, both firms can...
-
Consider a square of side r= 4.00 cm with two q = +9.20 C charges at adjacent corners of the square and two p = -3.00 C charges at the other corners. +quc +quc a rcm -pHC. r cm MV -pc Find the...
-
Factor completely. 2 32y4 - 50y
-
If f is any function from A into B, we can describe the inverse image as a function from B into P(A), which is also commonly denoted . If b B, (b) = {a A | f(a) = b}. If does have an inverse, the...
-
a) ABC Company is preparing their year end financial statements. On December 31, 2021, the balance in Accounts Receivable was $680,000. An aging analysis of the accounts receivable indicated that...
-
A group of new machines was purchased on February 17, 2021, under a royalty agreement with the following terms: The purchaser, Keller Corp., is to pay a royalty of $1 to the machinery supplier for...
-
An 8.0 kg crate is pulled 5.0 m up a 30 incline by a rope angled 18 above the incline. The tension in the rope is 120 N, and the crates coefficient of kinetic friction on the incline is 0.25. a. How...
-
Read a recent news article from The Wall Street Journal or other key source that deals with a new-product introduction. Would you think it would be better for that firm to do research in-house or to...
-
A publisher offers teenage boys (aged 1417 years old) one of four best-selling famous rock posters as an incentive for filling out a ten-page mail questionnaire about what makes a good guitar. What...
-
Report the following data: Students can find this information by starting at the U.S. Department of Commerces Bureau of Economic Analysis at www.bea.gov.The easiest way to find the following...
-
A healthy diet is becoming increasingly important for consumers, especially women aged 2535. As a result, they are taking active steps to ensure they are eating healthy but are also looking for other...
-
Lael was just hired by Best East Motels into their manager training program and was excited about the potential benefits after her graduation from Florida State University. Working part-time and...
-
Sophie just completed a sales training course with one of the firms most productive sales representatives, Emma. At the end of the first week, Sophie and Emma sat in a motel room filling out their...
Study smarter with the SolutionInn App