In: Accounting
Question 1
Required:
Forecasting is an important business process to enable planning and preparation.
Describe THREE (3) techniques that could be used to forecast costs. Illustrate your answer with the use of simple numerical examples.
Evaluate the usefulness of these three techniques. (maximum word count 500 words)
Question 2
The Feathered Friends Company is a small business manufacturing products for domestic and wild birds. Its best-selling product is the ‘fat ball’ that can be hung or placed in a garden to provide healthy nourishment for wild birds during cold winters.
The standard material cost per ‘fat ball’ is as follows:
£ |
||
Fat |
50g @ £6.80/kg |
0.34 |
Nuts |
30g @ £13.00/kg |
0.39 |
Seeds |
100g @ £2.50/kg |
0.25 |
Total standard material cost per ‘fat ball’ |
0.98 |
[1 kg = 1,000g]
5,000 ‘fat balls’ were produced and sold in the second quarter of the year (April – June), incurring the following material costs:
£ |
||
Fat |
150kg |
1,083 |
Nuts |
220kg |
2,552 |
Seeds |
650kg |
1,300 |
Total material cost incurred |
4,935 |
The management accountant met with the production manager to review the variances that had been calculated. The production manager observed that some of the original information on the standard cost card was out of date. He specifically noted the following points:
Required:
Question 3
Julie’s Cleaning Services is considering expanding its domestic cleaning operations to include the provision of carpet cleaning. This will require the purchase of 20 specialised carpet cleaning machines, at a cost of £400 each, to be used by the team of cleaners. The company will treat this expenditure as a fixed cost.
This is a large additional cost for the business, but Julie expects that the demand for this service is sufficient to warrant charging a fee of £75 per room carpet. The variable costs incurred per clean are £21 which include all labour and materials costs.
Required:
(maximum word count 300 words)
Julie is considering refining the pricing model for the carpet cleaning to allow for different sized room carpets (lower prices for smaller rooms). Describe, using a numerical example, how the calculations in part (a) will be amended to allow for this pricing model. (maximum word count 120 words)
Question 4
Fancy Flowers Ltd is considering how many bouquets of flowers it will need at its stall at a local arts festival that is running for a few weeks. Due to supplier issues, it must choose in advance whether to prepare 200, 300 or 400 bouquets per day. Demand for bouquets can be 200, 300 or 400 per day at the festival. Any flowers not sold on the day will have to be thrown away.
The price charged per bouquet is £20, and the variable cost is £8 per bouquet. If the demand for bouquets exceeds the number of bouquets taken to the festival, then customers will have to be turned away. Fancy Flowers Ltd estimates that if this situation arises, it would cost the company £200 in loss of goodwill, irrespective of the number of customers turned away (i.e. the loss would be £200 if 100 customers were disappointed or if 300 were disappointed).
Required:
(maximum word count 140 words)
Questions 1:- Techniques to forecast the cost are:
1) Qualitative method
2) Time Series Analysis
3) causal Method
#Qualitative Forecasting Methods
The qualitative(or critical) approach can be helpful in defining transient conjectures and can likewise enhance the projections dependent on the utilization of any of the quantitative techniques.
Four of the better-known subjective guaging strategies are official assessments, the Delphi strategy, deals power surveying, and shopper reviews:
1. Exicutive Opinions
The abstract perspectives on administrators or specialists from deals, creation, account, buying, and organization are arrived at the midpoint of to produce a gauge about future deals. Typically this strategy is utilized related to some quantitative technique, for example, pattern extrapolation. The supervisory group alters the subsequent estimate, in light of their desires.
2. Delphi Method
This is a gathering procedure where a board of specialists is interrogated exclusively concerning their view of future occasions. The specialists don't meet as a gathering, so as to diminish the likelihood that agreement is reached on account of prevailing character factors. Rather, the figures and going with contentions are summed up by an outside gathering and came back to the specialists alongside further inquiries. This proceeds until an agreement is reached.
3. Sales Force Polling
A few organizations use as a gauge source sales reps who have constant contacts with clients. They accept that the salesmen who are nearest to a definitive clients may have noteworthy experiences in regards to the condition of things to come showcase. Conjectures dependent on deals power surveying might be found the middle value of to build up a future gauge. Or then again they might be utilized to alter other quantitative as well as subjective estimates that have been created inside in the organization.
4. Customer Surveys
A few organizations lead their own market overviews in regards to explicit customer buys. Overviews may comprise of phone contacts, individual meetings, or surveys as a methods for getting information. Broad measurable investigation as a rule is applied to study brings about request to test speculations with respect to buyer conduct.