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financial and managerial accounting

 

Part 1 – Financial Analysis

Peter is a self employed music teacher and has the following trial balance:

 

Trial Balance as at 30 June 2013

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                                                                                      Debit                                                 Credit

                                                                        £                                                          £

Instruments

1,500

 

Furniture

400

 

Rent for room

2,400

 

Computer

1,000

 

Fees from tuition

 

10,500

General expenses

1,000

 

Capital

 

3,550

Bank

1,500

 

Postage and stationery

50

 

Electricity

300

 

Advertising

300

 

Creditors

 

150

Debtors

350

 

Telephone

400

 

Drawings

5000

 

 

14200

14200

 

Note: In this case, there are no trading purchases.

 

Required:

1)    Prepare Peter Income Statement for the year ended 30 June 2013 and a Balance Sheet as at 30 June 2013.

(30 marks)

2)    Briefly research and discuss the changes in international regulation for reporting financial statements. In particular the changes to the names of profit and loss account.                                                                                                                 

(20 marks)

 

 

 

 

Part 2 – Performance Evaluation

 

The comparative condensed income statements of SPENCER Corporation are shown below.

SPENCER CORPORATION

Comparative Condensed Income Statements

For the Years Ended December 31

                                                                                                 2013                           2012             

Net sales                                                               $620,000                   $500,000

Cost of goods sold                                               450,000                      400,000

Gross profit                                                             170,000                      100,000

Operating expenses                                                54,000                        40,000

Net income                                                           $116,000                    $  60,000

 

Instructions

(a)   Prepare a horizontal analysis of the income statement data for SPENCER Corporation using 2013 as a base. (Show the amounts of increase or decrease.)

(b)   Prepare a vertical analysis of the income statement data for SPENCER Corporation in columnar form for both years.

 

 Question 1 – Costing

 

Cakes2Go is a company which manufactures and sells three types of cakes in packets. One of them is called HoneyCake and contains three types of sweeteners: honey, sugar and syrup. The standard materials usage and cost for one unit of HoneyCake (one packet) is as follows:

                                                                                                            £

Honey

20 grams at £0·02 per gram

0·40

 

Sugar

 

15 grams at £0.03 per gram

0·45

 

Syrup

10 grams at £0·025 per gram

0·25

 

 

–––––

1·10

–––––

 

In the three months ended 30 November 2012, Cakes2Go produced 101,000 units of HoneyCake using 2,200 kg of honey, 1,400 kg of sugar and 1,050 kg of syrup. Note: there are 1,000 grams in a kilogram (kg).

Cakes2Go has used activity-based costing to allocate its overheads for a number of years. One of its main overheads is machine set-up costs. In the three months ended 30 November 2012, the following information was available in relation to set-up costs

 

Budget

Total number of units produced

Total number of set ups

Total set-up costs

 

Actual

Total number of units produced

Total number of set ups

Total set-up costs

 

 

264,000

330

£52,800

 

 

320,000

360

£60,000

 

 

Required:

(a) Calculate the following variances for materials in HoneyCake:

(i) Total materials usage variance;                                                           

 (ii) Total materials mix variance;

 (iii) Total materials quantity (yield) variance.

 (b) Calculate the following activity-based variances in relation to the set-up cost of the machines:

(i) The expenditure variance;

 (ii) The efficiency variance.

 (c) Briefly outline the steps involved in allocating overheads using activity based costing.

(50 marks)

 

Question 2 – Budgeting

 

Write an essay of 1000 words demonstrating your conceptual understanding of the following questions. 

 

  1. Is budgeting used primarily for scorekeeping, attention, directing or problem solving?
  2. How do strategic planning, long range planning and budgeting differ?
  3. Why is budgeted performance better than past performance as a basis for judging actual results?
  4. What are the major benefits of budgeting?
  5. Is budgeting an unnecessary burden for day to day problems? Explain your answer.
  6. Why is the sales forecast the starting point for budgeting?
  7. How do Spreadsheets aid the application of sensitivity analysis?

 

 (50 marks)

 

Total (100 marks)

 
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