ACC5213 Assignment
(Due Date Monday 18th May 2015) – TOTAL MARKS 100
(weighting 30%)
You should make use of the readings and materials from Modules 6-8 and other
research as you feel necessary, to help answer this assignment. Submission is via
studydesk. Knowledge of prior modules is also assumed (particularly module 3).
QUESTION 1 (10 marks)
Reading: Garret, K 2015, Target Costing and Lifecycle Costing, ACCA Technical
article, updated 2 March 2015, Association of Chartered Certified Accountants,
viewed 25 April 2015,
http://www.accaglobal.com/an/en/student/acca-qual-student-journey/qualresource/acca-qualification/f5/technical-articles/target-lifestyle.html
Required
Read the above article, and in conjunction with material from module 6 and your own
research, answer the following questions. Any material used (apart from module 6
materials) should be fully referenced.
a) What two flaws in conventional costing are identified by Garret (2015) and
how are these addressed by the use of target costing and life cycle costing? In
your answer explain how target costing and lifecycle costing are implemented.
What is the link between life cycle costing and target costing? (5 marks)
b) Compare the definition of life cycle costing per Garret (2015) with that
provided by the text. Are there any differences? (1 mark)
c) Identify a real-life example of a business that has undertaken life cycle costing
and briefly outline how this has changed a product or process. (4 marks)
QUESTION 2 (20 marks)
Reading:
Sholihin, M, Pike, R, Mangena, M, Li, J 2011, ‘Goal-setting participation and goal
commitment: Examining the mediating roles of procedural fairness and interpersonal
trust in a UK financial services organisation’, The British Accounting Review, vol.
43, issue 2, pp. 135-146
(Access via USQ library search for the journal)
Required
Read the above article, and in conjunction with material from modules 3 and 7 and
your own research, answer the following questions. Any material used (apart from
module 3 or 7 materials) should be fully referenced.
a) Explain the difference between imposed and participatory budgets. Why is a
participatory budget considered to be more motivational and effective? (3
marks)
b) After examining prior literature on goal commitment in the budgeting process,
what expectation do Sholihin et al. (2011) have and what is their main
hypothesis that they wish to test? (1 mark)
c) The study by Sholihin et al. (2011) finds ‘that goal-setting participation is
positively associated with goal commitment’ ( p. 136). What other variables
does the study introduce to examine the relationship further? (2 marks)
d) Why do you think that participants were informed that there would be ‘data
confidentiality’ and that the questionnaire responses were sent directly to the
researchers? (1 mark)
e) What else did the researchers do to confirm/supplement the results of the
survey, according to the method section? (2 marks)
f) How did the researchers attempt to ensure the validity of the survey
instrument? (1 mark)
g) What is a ‘Likert scale’? Why is one used? (2 marks)
h) Examine Table 1 p.141. Which of the variables had the greatest variety/spread
of answers? (1 mark)
i) Examine Table 4 p. 143. The t-statistic results are given in brackets. What is a
t-statistic and why do the researchers conclude that in the full model (Panel C -
all variables included) hypothesis H5 ‘Trust is positively associated with goal
commitment’ is ‘not supported’? (2 marks)
j) In what ways do the researchers claim that this study contributes to the
literature i.e. expands on or improves research that has already been done? (3
marks)
k) What limitations do the researchers believe that their study has? (2 marks)
QUESTION 3 (70 marks)
Rocklea Furniture (RF) makes two types of settees/sofas – the Queen and the
Duchess. In 2014 the average monthly sales figures were:
Units Selling Price
Queen 100 $1,200
Duchess 200 $800
RF intends lowering the selling price per unit for the Queen beds due to increased
competition to $1,000 per unit. It is hoped that this will increase sales in January by
20% compared to the December 2014 level and again by a further 20% from January
to February 2015 and then remain at that level for the rest of the year. It is expected
that sales of the Duchess will remain unchanged at 200 units @ $800 per month.
80% of sales are on credit, and the remainder cash. RF offer a 2% discount for credit
customers who pay within the month and 10% of customers do so. Another 70% pay
in the month following the sale and the remaining customers pay 2 months following
the sale. RF do not have any problem with bad debts.
Each unit requires the following materials:
Queen Duchess Cost
Fabric 5 m2
4 m2
$10 per m2
Wood 10 m 8 m $2 per m
Filler 3 m2
2 m2 $3 per m2
Springs 600 500 $0.02 each
The materials used for each sofa are the same i.e. the same fabric, wood, filler and
springs are used for each, but the Queen is slightly larger.
Materials are paid for in the month after purchase. The amount of accounts payable at
31 December 2014 was $18,266.
Direct Labour required (at $15 per hour)
Queen Duchess
Labour hours 2 1.8
Labour is paid for as incurred (in the month when the work is done).
Opening materials inventories:
Fabric 100 m2
Wood 10 m
Filler 20 m2
Springs 600
The desired materials ending inventory is 50% of that required for the next month’s
production.
Opening finished goods inventories:
Queen Duchess
Finished sofas 20 10
For 2015 the desired ending finished goods inventory is equal to the 50% of following
month’s sales in units.
Variable manufacturing overheads are expected to be $22 per unit manufactured in a
month for both Queen and Duchess sofas. These are paid for as incurred.
Fixed manufacturing overheads are expected to be $13,000 per month (including $500
for depreciation). These are paid for as incurred.
Other expenses are estimated at $50,000 per month, also paid as incurred.
A $200,000 loan will be repaid in February. A $6,000 tax expenses will be paid in
March.
Interest received on an investment is due to be paid into the business bank account in
January, totalling $300.
The cash at bank balance at 31st December was a credit balance (overdraft) of
$40,000.
Required:
a) Prepare a sales budget in units and dollars for the 3 months and the total
quarter, for the Queen and the Duchess sofas. (4 marks)
b) Prepare a production budget in units and dollars for the 3 months and the total
quarter, for the Queen and the Duchess sofas. (16 marks)
c) Prepare a materials usage budget in units for each of the four materials
(separate budgets) and calculate the dollar purchases for each, showing the 3
months and the total quarter, for the Queen and the Duchess sofas. Note that as
both products use the same materials, these materials budgets should be for the
combined usage of Queen + Duchess sofas e.g. total fabric needed for both
each month. (16 marks)
d) Calculate the total value of materials purchases each month. (1 mark)
e) Prepare a direct labour budget. (4 marks)
f) Prepare a schedule of collection of sales. (8 marks)
g) Prepare a cash budget showing each month and the quarter total. (11 marks)
h) Without regard to your calculations in a) to g) above, assume that the actual
Wood used to produce 172 Queen sofas in January was 1892m2
and this cost
$3, 594.80. Calculate the materials efficiency and price variances for the
Queen sofas in January. Suggest a possible relationship between/explanation
for these two variances. (10 marks)
NOTES ON ASSIGNMENT SUBMISSION
Submission is electronic via the link on studydesk. Acceptable file types are office
Word documents. Although you may use excel or a similar spreadsheet function to do
parts of your assignment if you wish, this must be incorporated into a Word document
for submission, and all workings should be shown. Submission of excel spreadsheets
will NOT be accepted.
Please ensure that you include your last name and your student number in naming
your file and that you include a header or footer within your document giving you full
name and student number.
If you have questions regarding the assignment please ask these in the studydesk
assignment discussion forum provided unless they are of a personal nature, in which
case please contact your lecturer or course examiner directly (preferably via email).