You are three students who have together bought a business that makes snow. The customers consist of

Fantastic news! We've Found the answer you've been seeking!

Question:

You are three students who have together bought a business that makes snow. The customers consist of both large public enterprises and private individuals. The business is run all year round, but the reduction only takes place in the period from October to April and it is only during this period that the business has direct costs. In total, the company measures 1,000,000 m2 with 3,000 customers. The customers can be divided into three groups, group 1 (65% of the area) where the snow is plowed with a tractor (mainly applies to large customers), group 2 (30% of the area) where the snow is plowed with a small tractor/snowblower and the last group (5 % of the area) where the dipping takes place by hand. The direct materials are fuel at NOK 0.5 l per m2 for the whole season and the company expects a diesel price of NOK 15. Furthermore, a machine cost of NOK 1.5 per m2 is budgeted. The direct labor costs are NOK 3,000,000 and they budget for 10,000 hours over the course of a season. The company's indirect variable costs are 3.5 million, which will mainly cover the workshop and repair of machines and equipment, and the indirect fixed costs are 10.0 million. The fixed costs cover operational managers, administration and rent. In its calculation, the business allocates the variable costs to the budgeted number of liters of diesel and the fixed indirect costs to the number of square meters used.

Task 1 (the task counts for 20% of the total assessment) The average price per square meter is NOK 31. How much profit does the business have per m2. Calculation must be shown by setting up a self-cost calculation per m2.

Task 2 (the task counts for 20% of the total assessment) After the first production, you prepare the accounts. The accounts show a higher amount for the direct costs even though the business has not taken up more square meters than was budgeted. Explain why such a deviation can occur (which components are included) and how you will adapt the operation and the calculation for the next operating year. From the accounts you get; diesel consumption 475,000 liters and the average price was 16, while the total machine costs were 1,650,000. The business has paid out NOK 3,100,000 in direct wages and 11,000 hours have been used. Show and explain the deviations.

Task 3 (the task counts for 20% of the total assessment) The 2022 season did not go well financially. You have gradually realized that there is a need for a little more professional help and you employ a lecturer from Kristiania as the new chairman of the board. You were told to come to the board with a new budget for the business. You must show the profit and loss budget, the liquidity budget and the balance sheet budget. Explain what the various budgets contain and what is the connection between them. Why is it particularly important for this business to see the three budgets together.

Task 4 (the task counts for 20% of the total assessment) This autumn the prices of the business's input factors have risen considerably. This applies in particular to fixed costs. This means that you can match the price to the customers. You are unsure of what price to charge per m2. What assessments do you have to make when you are going to set the price. Explain.