1. Robust Laptops Co (RL) makes laptop computers for use in dangerous environments.
The laptops are individually specified by customers for each order and pricing has been on a production cost plus basis with a mark-up of 45%.
Traditionally the company has adopted an absorption costing system based on labour hours in order to calculate the production cost per unit.
The Management Accountant of the company is planning to switch to Activity Based Costing (ABC) system.
Financial and other information for the year ended 31 December 2014
|
Volume (units)
|
23,800
|
|
Labour time per unit
|
3 hours
|
|
No of minutes on calls to customer
|
899,600
|
|
No of purchase orders raised
|
21,400
|
|
No of components used in production
|
618,800
|
|
|
£000
|
|
Direct variable costs:
|
|
|
Material
|
40,650
|
|
Labour
|
3,879
|
|
Packaging and transport
|
2,118
|
|
Subtotal
|
46,647
|
|
|
£ 000
|
|
Overhead costs:
|
|
|
Customer service
|
7,735
|
|
Purchasing and receiving
|
2,451
|
|
Inventory management
|
1,467
|
|
Administration of production
|
2,537
|
|
Subtotal
|
14,190
|
|
Order 11784
|
|
Units ordered
|
16
|
|
No of minutes on calls to customer
|
1,104
|
|
No of purchase orders raised
|
64
|
|
No of components used in production
|
512
|
|
Administration of production (absorbed as general overhead)
|
3 labour hours per unit
|
|
Direct costs for this order:
|
£
|
|
Material
|
27,328
|
|
Labour
|
2,608
|
|
Packaging and transport
|
1,424
|
|
Subtotal
|
31,360
|
Required:
Determine the selling price per unit for the Order 11784 under (i) absorption costing and (ii) Activity Based Costing (ABC).
2. Telecoms At Work (TAW) manufactures and markets office communications systems. During the year ended 31 May 2015 TAW made an operating profit of £30 million on sales of £360 million. However, the directors are concerned that products do not conform to the required level of quality and TAW is therefore not fulfilling its full potential in terms of turnover and profits achieved. The directors are also considering the use of value chain for performance management at TAW.
The following information is available in respect of the year ended 31 May 2015:
(1) Production data:
|
Units manufactured and sold
|
18,000
|
|
Units requiring rework
|
2,100
|
|
Units requiring warranty repair service
|
2,700
|
|
Design engineering hours
|
48,000
|
|
Process engineering hours
|
54,000
|
|
Inspection hours (manufacturing)
|
288,000
|
(2) Cost data:
|
Design engineering per hour
|
96
|
|
Process engineering per hour
|
70
|
|
Inspection per hour (manufacturing)
|
50
|
|
Rework per communication system reworked (manufacturing)
|
4,800
|
|
Customer support per repaired unit (marketing)
|
240
|
|
Transportation costs per repaired unit (distribution)
|
280
|
|
Warranty repairs per repaired unit (customer service)
|
4,600
|
(3) Staff training costs amounted to £180,000 and additional product testing costs of £72,000.
(4) The marketing director has estimated that sales of 1,800 units were lost as a result of public knowledge of poor quality at TAW. The average contribution per communication system is estimated at £7,200.
Required:
Prepare a cost analysis which shows actual prevention costs, appraisal costs, internal failure costs, external failure costs and opportunity costs for the year ended 31 May 2015.
3. ENT Entertainment Co (ENT) is a large, diversified entertainment business based in Singland. The company's objective is the maximisation of shareholder wealth for its family owners. It has four divisions:
1. Restaurants
2. Cafes
3. Bars
4. Dance clubs
Recently, ENT's board has employed consultants who have recommended that they should perform a Boston Consulting Group (BCG) analysis to understand whether they have the right mix of businesses. A business analyst has prepared information on each division as shown in the table below.
|
Revenues (Sm)
|
Actual
|
Actual
|
Forecast
|
Forecast
|
|
|
2013
|
2014
|
2015
|
2016
|
|
Restaurants
|
|
|
|
|
|
ENT
|
54
|
56
|
59
|
62
|
|
Market sector
|
10,752
|
10,860
|
10,968
|
10,968
|
|
Cafes
|
|
|
|
|
|
ENT
|
31
|
34
|
41
|
47
|
|
Market sector
|
3,072
|
3,348
|
3,717
|
4,051
|
|
Bars
|
|
|
|
|
|
ENT
|
349
|
342
|
336
|
336
|
|
Market sector
|
9,984
|
9,784
|
9,491
|
9,206
|
|
Dance clubs
|
|
|
|
|
|
ENT
|
197
|
209
|
219
|
241
|
|
Market sector
|
1,792
|
1,900
|
2,013
|
2,195
|
Singland, the economy is generally growing at about 2% per annum. The restaurant, cafe and bar sectors are all highly fragmented with many small operators. Consequently, a market share of more than 3% is considered large as that is comparable to the share of the largest operators M each sector. There are fewer small late night dance club operators and the market leader currently holds a 15% market share.
Required:
Perform a BCG analysis of ENT's business.