**ACC701 – Task 3 – Semester 2 2017**

**ACC701 – ACCOUNTING FOR MANAGERS**

** Question 1** (7 MARKS)

The Sunshine Coast Bank Limited has set monthly key performance indicators (KPIs) for the lending division, as listed below. The bank is pursuing a profitable, internet growth strategy. You must categorise each KPI as __strategic or operating__ AND __driver or outcome__.

- Major brand building advertising spend (1)
- Loan approval times (1)
- Loan approved (in dollars) (1)
- Loan applications numbers received online (1)
- Loans numbers sent for collection due to being 60 days overdue (1)
- Profitability of the loan book (1)
- Percentage of loans funded against loans approved (1)

**Question 2 **(13 MARKS)

Manufacturers Limited produces two products, A and B, for the fishing market.

Below is forecast information for the six months to 31 December.

Product |
Budgeted |
Unit |
Price |
Budgeted |
Budgeted |
||||||

Sales (Units) |
($) |
Inventory |
Inventory |
||||||||

(Units) |
(Units) |
||||||||||

1 July |
31 December |
||||||||||

A |
16,200 | 14.35 | 5,100 | 8,100 | |||||||

B |
11,800 | 12.20 | 2,600 | 6,600 |

Components used in the manufacturing process are set out below.

Component |
Amount used per unit |
Price ($) |
Budgeted |
Budgeted |
||

of product |
Inventory |
Inventory |
||||

(Units) |
(Units) |
|||||

A |
B |
1 July |
31 |
|||

December |
||||||

X |
5 | 3 | 0.68 | 38,000 | 46,000 | |

Y |
2 | 4 | 0.24 | 13,500 | 19,500 |

Labour used in the manufacturing process is set out below.

Product |
Hours per unit |
Rate per hour ($) |
||||||

A |
2 | 4.50 | ||||||

B |
1 | 4.00 |

Overheads for the six months are forecast at $250,000, which the company treats as a period cost. Manufacturers Limited uses variable costing.

Prepare the following:

- Sales budget (2)
- Production budget (2)
- Purchases budget for components (2)
- Purchases budget in dollars (2)
- Total labour hours and costs for the six months (2)
- Contribution per unit (2)
- Profit and Loss forecast for the six months (1)

(NOTE: You may combine these into one or more budgets, however, you must clearly mark your answers by using the numbers and labels shown above and state clearly if you have calculated dollars or units.)

**Question 3 **(10 MARKS)

BFC Ltd manufactures bar fridges, which they sell for $250 each. BFC Ltd can sell a maximum of 5,000 fridges per annum with variable costs of $185 per fridge and fixed costs of $250,000.

You are required to:

- Calculate the break-even point in units and dollars. (2)
- Produce a Break-even chart based on a) showing:
- Fixed Costs (1)
- Total Costs (1)
- Break-even point in units and $ (1)
- Areas of loss and profit (1)

(NB, this chart can be a hand sketch or computer generated but should be included in your word document.)

c. Calculate the profit for sales of 5,000 units. (1)

d. BFC Limited predicts that taking a lease on new equipment will allow for production to be increased to 8,100 units per annum, all of which can be sold. Increased production will see the variable cost fall to $175 per unit. The lease costs will total $200,000 per annum and the lease can only be cancelled with notice of 12 months. Should BFC Limited lease the new equipment? (3)

**Question 4 **(10 MARKS)

Lecture Studies Limited is considering a new project and has asked for your recommendation. Two sets of cash flow forecasts have been provided by Lecture Studies Limited and they are set out below.

You are required to calculate each of the following for both forecasts and advise, based on that measure, if Lecture Studies Limited should accept or reject the project.

- Accounting rate of return (2)
- Payback period calculated to years and months (2)
- Internal rate of return (2)
- Net present value (2)

Also, advise one strength and one weakness of each of the above measures. (2)

Project Cost |
$20,000 |
||||

Estimated life |
5 years | ||||

Residual value |
$2,000 | ||||

Required Rate of Return |
10% | ||||

Maximum Payback |
3 years | ||||

Cash flow forecast 1 |
|||||

Annual cash flow |
Year |
||||

$6,000 |
1 – 5 | ||||

Cash flow forecast 2 |
|||||

Annual cash flow |
Year |
||||

$6,000 |
1 | ||||

$7,000 |
2 | ||||

$12,000 |
3 | ||||

$3,000 |
4 | ||||

$10,000 |
5 |

**NB: All cash flows received are annually in arrears.**

You may use formulas, Excel or the tables in your text to calculate IRR and NPV but where possible you should show or cut and paste your data into your answer. This will allow part marks to be allocated if applicable. Should you simply provide an answer and it is wrong, no marks will be awarded.

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