BAP22 Management Accounting

Part 1

Natural pulp Ltd, a manufacturer of paper and paper board had a flood that destroyed the company’s work in process and finished goods inventories on 1 July, 2014. All raw materials escaped damage because they were stored in a warehouse situated on the hill.

The following information is available.

Sales revenue, 1 June to 30 June 2014 $ 420 000

Income before taxes, 1 June to 30 June 2014 70 000

Direct labour cost, 1 June to 30 June 2014 160 000

Direct material used, 1 June to 30 June 2014 80 000

Cost of goods available for sale, 1 June to 30 June 2014 360 000

Work in process inventory, 1 June 2014 35 000

Finished goods inventory, 1 June 2014 55 000

Gross profit margin 40% of sales 

The management accountant of the company estimated that the manufacturing overhead is 40% of the company’s total manufacturing costs. REQUIRED: Prepare estimates of the following that were destroyed by the flood.

a) The cost of Work in Process. b) The cost of finished goods inventories. 

Part 2

“The value chain provides a useful framework for examining the areas where costs are incurred within a business. The value chain is a set of linked processes or activities that begins with acquiring resources and ends with providing goods and services that customers value” (Langfield-smith et al, 2015, p 44).

REQUIRED:

1) With reference to the above statement, describe what is meant by the value chain.

2) Explain how the value chain may be used to estimate costs.

3) Describe each segment of the value chain and explain why information about costs in the various segments of the value chain can be useful to managers.

4) Identify and explain the major purposes of value chain using examples from your selected annual report/ annual review of one of top 100 manufacturing companies listed on ASX. 

Write response in 1500 words for second part.