Question A
Bath Products Ltd manufactures a variety of bath and beauty products for specialty stores.The company has recently introduced the concept of identifying cost of quality and has identified the following costs for the month:
Rework time $6,000
Cost of defective products that cannot be reused $7,000
Laboratory testing for safety $9,000
Training of quality control supervisors $10,500
Customer complaints $5,800
Inspection of purchased ingredients $3,800
Product liability $500
Sales Revenue for the month was $20500.
Required:
1. Prepare a cost of quality report. The report should include the following information:
? Classification of the above costs as internal failure, external failure, appraisal andprevention costs.
? Calculation of each cost with respect to percentage of sales.
? Calculation of each cost with respect to percentage of total quality costs.
2. Prepare a report for the management of Bath Products Ltd, based on the above analysis.
Question B
Hyde Company has set the following standards for one unit of product:
Direct material: $32 per unit
Quantity 4 kg per unit
Price $8 per kg
Direct labour $52.50 per unit
Quantity 2.5 hours per unit
Rate $21 per hour
Actual costs incurred in the production of 2,500 units were as follows:
Direct material $72,540 ($9.30 per kg)
Direct labour $115,206 ($21.10 per hour)
Required:
1. Calculate the direct material price and quantity variances and the direct labour rate and efficiency variances.
2. Indicate whether each variance is favourable or unfavourable.
Question C
Five-Star Pizza delivers pizzas to the residential halls and units near a major university. The company's annual fixed expenses are $40,000. The sales price of a pizza is $16, and it costs the company $8 to make and deliver each pizza.
Required:
1. Calculate the company's break-even point in units (pizzas).
2. What is the contribution margin ratio?
3. Calculate the break-even sales revenue. Use the contribution margin ratio in your calculation.
4. Explain the concept of ‘break-even' point and justify your answers in 1 & 3 above, with the calculation using contribution margin format of income statement.
5. How many pizzas must the company sell to earn a target net profit of $50,000? (Ignore income taxes.)
6. How many pizzas should Five-Star Pizza sell in order to make a $60000 net profit after tax? Assume that the tax rate is 25%.
7. What is the Five-Star Pizza's total profit or loss when 5200 pizzas are sold?
8. What is the Five-Star Pizza's total profit or loss when 4800 pizzas are sold?
Question D
Using your imagination and creativity, develop a contemporary performance measurement system for a local university, with the use of objectives, lead and lag indicators in various perspectives.