CAN YOU PLEASE ANSWER THE QUESTION 6. a) and b)

White Bolder Investments (WBI) You are an intern working for WBI, a large investment advisory services in Sydney. Among other regular customers, WBI has been providing advisory services for Jumbo Bank (JB) and Ombrelloni Felici (OF). For the sake of simplicity, this assignment does not consider taxes and other fees. You might have to use information from previous questions for answering information for following questions and whenever possible support your arguments with your calculations. Questions One of your LinkedIn contacts who poses himself as an entrepreneur and is starting a trendy business shirt venture has offered you a one chance in a lifetime of becoming his partner in this new incredible venture. The entrepreneur has offered you a partnership in this venture under the condition you share with him the WBI employees and customers contact list. The entrepreneur has guaranteed you a commission for any WBI employee or customer who buys one of the trendy business shirts. Required Please state one of the ethical standards, as provided by the Institute of Management Accountants (IMA) Statement of Ethical Professional Practice, which would be jeopardized if you accept the business offer and justify why this standard is beng jeopardized (there might be more than one ethical standard being jeopardited but only one is required for this question). Please elaborate on how the business offer could be accepted without jeopardizing an ethical standard. (Chapter 1, 10 marks) Question 2 WBI board is discussing how much a business advisor should charge per hour of service. WBI has budgeted to supply 300,000 hours of business advisory service for the forthcoming year. Its variable cost is estimated at $35 per hour and its fixed costs are estimated at $4,000,000 for the forthcoming year. The board has been discussing whether to use a cost-plus approach perhaps examining the demand levels. The marketing department has the following estimation on demand levels at different prices: Table 1-Demand levels Price per hour Demand in hours $64 310,000 $65 300,000 $66 280,000 $67 270,000 $68 250,000 Questions Jumbo Bank (JB) is a bank specialized in advisory for loans and savings for retail customers and corporate customers. The manager responsible for retail customers is Kim Schifino and the manager responsible for corporate customers is Matt Johnson. JB has 'Know Your Customer' (KYC) procedures for their retail customers and corporate customers; the procedures are (i) Customer Identification Program (CIP), (ii) Customer Due Diligence (CDD), and (iii) Ongoing Monitoring. JB currently uses the following cost-allocation rate per procedure, based on the following cost drivers used as the allocation base for the previous year: Table 2-Cost-allocation rate KYC procedures Cost driver used as allocation base CIP Applications (potential customers) CDD Applications (potential customers) Ongoing Monitoring Ongoing customers Quantity 600 600 55,000 Cost-allocation rate $55.0 $125.0 $20.0 Currently, there has been much discussion regarding how much each procedure costs for each activity for retail customers and corporate customers. The accounting department has provided a breakdown for costs for each type of customer and procedure from the previous year. Table 3 - Costs of procedures per type of customer KYC procedures Retail customers Corporate customers Total CIP $25,000 $8,000 $33,000 CDD $25,000 $50,000 $75,000 Ongoing Monitoring $500,000 $600,000 $1,100,000 Total costs $550,000 $658,000 $1,208,000 The manager responsible for corporate customers, Matt Johnson, is concerned there is a product-cost cross- subsidisation. As an example, he argues the cost-allocation rate of $20 regarding ongoing monitoring used for his corporate customers is artificially high because of the costs of ongoing monitoring for retail customers. The manager responsible for retail customers, Kim Schifino, argues exactly the opposite, that the corporate customers are the one pushing the cost-allocation rate higher, because, when compared to the retail customers, they are few in numbers. The commercial department has the breakdown of applications (potential customers) and ongoing customers from the previous year. Table 4-Customers KYC procedures CIP CDD Ongoing Monitoring Retail customers Corporate customers Total customers 500 100 600 400 200 600 50,000 5,000 55,000 Page 5 of 9 Question You have been assigned for reviewing the actual and budgeted figures of the variable manufacturing overhead of straight umbrellas at Ombrelloni Felici (OF). The management at OF argues there are no evident issues with the variable manufacturing overhead budget as the static-budget variance is often favourable, which proves the budgeting process works quite well. The management at OF also argues the employees at the production line of straight umbrellas are always highly efficient because of the consistently favourable efficiency variances. Your analysis is for a specific month of the year, comparing the budgeted and actual figures. The variable manufacturing overhead cost is allocated to each straight umbrella based on budgeted direct manufacturing labour-hours per straight umbrella. For the specific month of the year, each straight umbrella is budgeted to take 5 labour-hours. Budgeted variable manufacturing overhead cost per labour-hour is $20. The budgeted number of straight umbrellas to be manufactured in this given month is 100. Actual variable manufacturing overhead costs in the given month were $12,000 for 95 straight umbrellas started and completed. There was no opening or closing stock of straight umbrellas. Actual direct manufacturing labour-hours for this given month were 490. Required a) Calculate the static-budget variance, the flexible-budget variance, the sales-volume variance and the spending and efficiency variances for the given month for the variable manufacturing overhead. (e.g., Exercise 16.11, Chapter 16, 10 maks) b) Explain whether the management at OF is correct or not regarding having a good budgeting process due to often having a favourable static-budget variance and a consistently favourable efficiency variance. Use your calculations for supporting your argument. (Chapter 16, 10 marks) Questions Ombrelloni Felici (OF) has a division of folding umbrellas which can produce two different types of umbrellas, the Ombrelli Divertenti, which is made of polyester fabric, and the Ombrelli Sicuri, which is made of flame- resistant fabric. The company has 10,000 machine hours available to produce these products. Table 5-Straw Production Per batch Sales price Variable expenses Contribution margin Contribution margin ratio Ombrelli Divertenti Ombrelli Sicuri $2.00 $6.00 $0.50 $3.00 $1.50 $3.00 75% 50% Page 6 of 9 One batch of Ombrelli Divertenti requires 5 machine hours and one batch of Ombrelli Sicuri requires 8 machine hours. Required How many of each product hould Ombrelloni Felici (OF) produce for maximizing the profit of the division of folding umbrellas and why? Use your calculations for supporting your argument and showing the maximum profit the division of folding umbrellas can achieve. (Product-mix decisions under capacity constraints, 10 marks) Question 6 Ombrelloni Felici (OF) has a division of customised umbrellas called Ombrelli Pazzi. The marketing and creative team receive from the customer the draft concept of each new set of customised umbrellas to be manufactured. An outsourced team of designers create the prototypes of the umbrellas based on the concept prepared by the marketing and creative team. The prototypes of the umbrellas are then assessed by the marketing and creative team following the guidelines set by the customer. If the customer approves the prototype the design team has to prepare the setup for the production line. The production line is outsourced in a warehouse located in a Southeast Asian country and shipped to Australia. Before marketing and sales begin, samples of the customised umbrellas are subject to strenuous quality testing following the international safety standards for umbrellas. Once the new set of customised umbrellas is deemed safe the marketing and sales of the product begins. Currently, OF does not follow up customer satisfaction. Now Of is considering implementing a Balanced Scorecard (BSC) for the Ombrelli Pazzi division, focussing on the performance of each set of customised umbrellas. Required a) Recommend one measure for each one of the four perspectives of the BSC for the Ombrelli Pazzi division and justify why you have selected such measures. (Chapter 20, 10 marks). b) The management at OF is also keen on rewarding the division manager based on how the division performs among the four measures you have recommended. However, there is a growing concern evaluating the division manager performance based on the four measures you have proposed will make the performance evaluation too subjective. Using the definition of subjectivity in performance evaluation provided in Castro (2017, p. 532)2 explain how, applied to the Ombrelli Pazzi division, subjectivity in performance evaluation can be mitigated. (Chapter 20, 10 marks)