High Street Reproduction Furniture Ltd

Jayne Ducker, Antony Head, Rona O'Brien (Sheffield Hallam University) and Sue Richardson (University of Bradford Management Centre)

Question 1

Mary has decided to restate Cecil's original profit statement by using the additional information she has collected and by employing a marginal costing approach.

Required:

(a) Prepare a new profit statement for Mary which clearly identifies both the contribution made by each product over the last six months and the overall profit.

(b) Prepare a profit statement which shows the potential situation if John stops production of the dressing tables and demand for the other products remains the same as that of the past six months. Assume that supplies of mahogany are unlimited.

(c) What other issues should John consider before making the decision to stop producing dressing tables?
(d) Prepare a statement which identifies the contribution which the dressing tables would have made in the last six months, had the mirror section not been sub-contracted out. Suggest other issues which might affect John's decision to make the mirror sections in house once
again. Colin Drury, Cost & Management Accounting: An Introduction - High Street Reproduction Furniture Ltd

Question 2

Utilising theoretical models and illustrating your answer with reference to the case study materials, discuss the decision situation regarding the American enquiry. Your discussion should also be supported by financial information which Mary would be likely to produce.

Question 3

Mary has suggested to John that the company would benefit from a management information system to aid him in planning and controlling the activities of the business and to assist in organisational decision making. Join is not sure what Mary means.

Required:

(a) Illustrate the types of planning and controlling activities that are likely to take place at High Street Reproduction Furniture Limited.
(b) Describe the types of information which might be useful.
(c) Suggest the likely sources of this information.

Question 4

At the urgent meeting last week, the Sheffield Timber Company informed John that supplies of mahogany from South America were in jeopardy. There had been a serious forest fire and much of the seasoned stock ready for export at the premises of the South American exporter had been wiped out. Sheffield Timber envisaged that there would be no more supplies of the type used by High Street Reproduction Furniture for the next six months. After that date, it seems that supplies can be restored to normal.

Required:

(a) Provide a production schedule which would maximise profits on the stocks of mahogany held by High Street Reproduction Furniture Limited and identify the forecast profit figure based on this production schedule.

You should assume that forecast demand from the normal customer base will be 10 percent higher than the last six months' figures and that the decision on the American enquiry is still unresolved. You should also assume that the mirror section of the dressing table will have to be produced by High Street Reproduction Furniture, since the current supplier does not hold any stock of the mahogany.

(b) Identify other issues which John would need to take account of, if this production schedule is undertaken.

(c) Compare the predicted profit in (a) above with the profit which John might have expected in the second half of the year, if the predicted demand for all three products had been met, the American contract had not been taken on and the mirror section of the dressing table had
been produced by High Street Reproduction Furniture Limited. Comment on your findings