York Ltd has been running a small business of manufacturing and selling one type of electric...
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York Ltd has been running a small business of manufacturing and selling one type of electric heaters. Currently, each heater is sold for £40. Variable cost per unit is £16. Total fixed cost for the business is £200,000. Total sales is 10,000 heaters. The business wishes to increase their sales. There are three possible options: 1. Expansion - This option is an expansion of the operation, which allows the volume of sales to be increased to 15,000, but additional fixed costs £60,000 are incurred. Selling price and variable cost will remain same. 2. Cheaper product - This is an adaptation of the product, making a cheaper alternative product for the market. The selling price would drop to £30; the variable costs are £11. The number of customers will increase to 16,000. Fixed costs will remain same. 3. Better product - This is an adaptation of the product, making a superior quality product for the market. The selling price would increase to £48 and the variable costs would increase to £24. The number of customers would decrease to 12,000 and fixed costs would remain same. Independent activity: Using the case study, Yorks Itd, considered in week 3 and your reading and research advise management which option should be selected. 3 and 4 Using the information from the simulation scenario allocated, analyse the decisions you made. Provide evidence of completion of the scenario and for the decisions taken, and their effects, e.g. graphs, reports and tables. 5 With reference to the in-class activities, compare traditional costing with activity-based costing. 6 With reference to the budget activity done in class, critically evaluate the concept of incremental budgeting in comparison to zero-based budgeting. York Ltd has been running a small business of manufacturing and selling one type of electric heaters. Currently, each heater is sold for £40. Variable cost per unit is £16. Total fixed cost for the business is £200,000. Total sales is 10,000 heaters. The business wishes to increase their sales. There are three possible options: 1. Expansion - This option is an expansion of the operation, which allows the volume of sales to be increased to 15,000, but additional fixed costs £60,000 are incurred. Selling price and variable cost will remain same. 2. Cheaper product - This is an adaptation of the product, making a cheaper alternative product for the market. The selling price would drop to £30; the variable costs are £11. The number of customers will increase to 16,000. Fixed costs will remain same. 3. Better product - This is an adaptation of the product, making a superior quality product for the market. The selling price would increase to £48 and the variable costs would increase to £24. The number of customers would decrease to 12,000 and fixed costs would remain same. Independent activity: Using the case study, Yorks Itd, considered in week 3 and your reading and research advise management which option should be selected. 3 and 4 Using the information from the simulation scenario allocated, analyse the decisions you made. Provide evidence of completion of the scenario and for the decisions taken, and their effects, e.g. graphs, reports and tables. 5 With reference to the in-class activities, compare traditional costing with activity-based costing. 6 With reference to the budget activity done in class, critically evaluate the concept of incremental budgeting in comparison to zero-based budgeting.
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Related Book For
Horngrens Financial and Managerial Accounting
ISBN: 978-0133866292
5th edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura
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