Financial Management Information

Financial Management Information;

Aims of Module:

1.    To further develop students’ knowledge of costing and financial management systems.
2.    To enable students to select, describe and apply a variety of alternative costing techniques
and management accounting techniques.
3.    To further develop the students understanding of computer hardware and software in an
accounting environment, including audit, and financial modelling.
4.         To enable students to select, describe and apply a variety of operations management
techniques

Intended Learning Outcomes

Knowledge and Understanding

On successful completion of this module students will be able to:
1.    Describe and apply basic costing terminology and classify costs.
2.    Describe and compute job and process costs across the whole spectrum of costing
systems, from actual to standard costing and using both variable and absorption costing.
3.    Compute and explain material, labour, overhead and sales variances; distinguish between
planning and operational variances and be able to reconcile actual and budgeted profit.
4.    Introduction to investment appraisal including expected values and sensitivity analysis.
5.    Describe and evaluate the influence of external financial reporting on the costing practices
of organisations.
6.    Investment appraisal evaluation methods.
7.    Define the relative components of information systems technology, including the principles
of systems development methodologies.
8.    Demonstrate competence in the use of Excel software for financial modelling, applying
costing and financial skills developed in the first part of the module.
9.    Describe different methods of quality measurement
10.    Systems used in operations measurement

Transferable/Key Skills and other attributes
On completion of this module students will have had the opportunity to:
1.    Manage their own learning by:
(i)    Organising their work
(ii)    Monitoring their own progress
(iii)    Applying their costing and financial management skills to the design of a spreadsheet
package in a situation of their choice, to a deadline and without direct supervision.
2.    Evidence their ability to apply techniques, make accurate calculations and explain the
procedures followed.
3.    Demonstrate their knowledge of computer systems, skill in the use of computer software
and accuracy in the manual preparation of test data to check computer processing.

Module mark calculation: Method A
Assessment components (in chronological order of submission/examination date)
Denote final assessment component in box marked final assessment component (99)
Type of assessment     Weighting%    Duration
(if exam)    Word count (if essay/dissertation):    Component pass required
assignment
25%
1000
Yes 0 No 1
Yes 0 No 0

Yes 0 No 0Final assessment
component (99)
examination
75%    3 hours
Yes 0 No 1Learning and teaching strategies :

The first part of this module, (aims 1,2) has a high knowledge content and is delivered via formal lectures, tutorials and drop-in sessions.  Handouts are provided for

each lecture so that much of the lecture time is used to work through examples.  Students are set work prior to each tutorial. Students must manage their own learning

by attempting this work before the tutorial. The questions set may go beyond material explicitly covered in the lecture but will always be covered in the week’s

recommended reading, thus requiring students to read as well as attend lectures. Suggested solutions are made available at the tutorial and the tutorial time is

devoted to discussion of the principles which the questions illustrate. Any student requiring further explanation attends the drop-in. Students may raise questions

from the current week, or earlier weeks, at the drop-in sessions.  Students have the opportunity to complete a formative assessment relating to the first part of the

module. This assessment is marked and returned to students, with comments, during the consolidation and revision of Part 1 of the module. During their first year all

students were required to work through a handbook on the use of Microsoft Excel. All students, including direct second year entrants, must ensure that they are able to

use Excel as outlined in this Guide before the start of the second part of the module.

The second part of the module (aim 3) is delivered equally via formal lectures and supervised hands-on computer workshops. Handouts are provided in each lecture and

each topic is cross-referenced to the recommended textbook.  Excel modelling exercises on budgeting and costing are provided at the computer workshops. A compulsory

Excel-based assignment, which accounts for 25% of the module of the total module assessment, is distributed in the first week of Part 2.

Syllabus outline:

Part 1:
•    Purpose of Cost and Management Accounting
•    Cost classification, material, labour, overhead, direct, indirect, fixed, variable, full absorption
costs
•    The influence of financial accounting standards on the recording of costs.
•    Recording costs, actual, normal and standard costing systems.
•    Job costing, process costing –including F.I.F.O. , weighted average and standard process
costing and process losses
•    The relationship between costing data for stock valuation and for planning and control.
•    Comparison of  variable costing and absorption costing
•    The role of cost centre information in cost control and product costing
•    Strategic planning and the annual budgeting process.
•    Flexible budgeting and variance analysis. Material, labour, overhead and sales variances.
•    Reconciliation of budgeted and actual profit.
•    Planning and operating variances and disposition of variances.

Part 2:
•    Introduction to hardware and software in common use in organisations.
•    General Systems Theory and its application to IT
•    IS outsourcing.
•    Maintenance of systems .An overview of operations strategy and its importance to the firm.
•    Design of products/services and processes and how this relates to operations and supply.
•    Methods of performance measurement and improvement, particularly the contrast between
benchmarking and Business Process Re-engineering (BPR). Practices of continuous
improvement
•    The use of benchmarking in quality measurement and improvement.
•    Different methods of quality measurement. The characteristics of lean production: flexible
workforce practices, high-commitment human resource policies and commitment to
continuous improvement. Criticisms and limitations of lean production.
•    Systems used in operations management: Manufacturing Resource Planning (MRP),
Optimised Production Technologies (OPT), Just-in-Time (JIT) and Enterprise Resource
Planning (ERP). Approaches to quality management, including Total Quality Management
(TQM), various British Standard (BS) and European Union (EU) systems as well as
statistical methods of quality control.
•    External quality standards Use of the Intranet in information management Contemporary
developments in quality management. The role of the supply chain and supply networks in
gaining competitive advantage, including the use of sourcing strategies

Indicative texts and/or other learning materials/resources ;
A comprehensive reading list can be accessed at http://lasu.salford.ac.uk

UNIVERSITY OF SALFORD
Salford Business School

BSc (Hons) Finance and Accounting

Financial and Management Information Systems
CRN = 35565

ASSIGNMENT
(2014 / 2015)

Overall Weighting in module = 25%

Kauris Ltd

Date of Issue: 13th October 2014

Date of Submission: 28th November 2014

Note:
All answers to be prepared and presented in the answer book provided.
The answer book should then be submitted through TurnitinKauris Ltd

Kauris Ltd is a manufacturing organisation supplying specialised engineered products to a wide range of public and private sector throughout the UK.

You are a trainee in the finance office recently recruited by the company.

Management planning meeting:

On the 20th of every month (or nearest Monday) the business executive management team meets to plan trading and production for the following month.

The meeting commences with a review of the sales order book and a determination of the following months product sales volumes. The expected sales volumes inform the

production planning process and decisions are made with respect to production resources and closing inventory requirements.

The agreed plan is the production schedule document. This is forwarded to the production departmental managers who will examine and compare their available resources

against the requirement for production. Any problems (constraints) or other issues arising are reported back to the executive management team who will consider making

adjustments to:

?    The production requirements
?    The available resources

At the start of the following month, the production process will commence with a view to meeting the objectives of the agreed production (action) plan

This process is described by the production planning flowchart (shown below):

Production Planning Flowchart

Continued:

The production process:

The production process of Kauris Ltd takes place through 3 production departments; machining, painting and assembly.

Machining department:
Direct materials are transferred from the direct materials stores to the machining department. These are transformed using direct labour employees and machine

processes into machined goods. The total of the prime costs add the fixed production overhead (allocated and / or apportioned) is the total cost of machined goods

transferred to the painting department. For the machining department, the direct labour employees are paid at a rate of £12.00 per hour and the variable machine cost

is £8.00.

Painting department:
Incremental direct materials are transferred from the direct materials stores to the painting department. These are combined with the machined goods transferred in and

are transformed using direct labour employees and machine processes into painted goods. The total combined costs add the fixed production overhead (allocated and / or

apportioned) is the total cost of painted goods transferred to the assembly department. For the painting department, the direct labour employees are paid at a rate of

£9.50 per hour and the variable machine cost is £2.50.

Assembly department:
Incremental direct materials and components are transferred from the direct materials stores to the assembly department. These are combined with the painted goods

transferred in and are transformed using direct labour employees and machine processes into saleable finished goods. The total combined costs add the fixed production

overhead (allocated and / or apportioned) is the total cost of the saleable finished goods transferred to the finished goods warehouse. For the assembly department,

the direct labour employees are paid at a rate of £8.00 per hour and the variable machine cost is £1.00.

The production process is described in the production process flowchart below:

Continued:

Production Process Flowchart
Note:

?    The costs of materials movements between departments and internal inspection checks are included in indirect production overheads.

?    The above flowchart is an outline process only and does not include control decision, documentation raising and filing requirements.

Continued:

Goods receiving and locating / storage control process:

When goods are received to the business raw materials stores, they are first checked by the store keeper for quantity against a copy of the original purchase order

document (this is forwarded to the raw materials stores at the time that the order is place – with all money values removed). If the quantity is incorrect (allowing

for approved part – order deliveries) a ‘Quantity rejection note’ is prepared.

Goods that are acceptable by quantity are quality inspected for size, weight, colour etc. Where goods are found to be unacceptable by quality, a ‘Quality rejection

note’ is prepared. Goods rejected by quantity or quality are located at the ‘Returns room’ ready for return to the supplier.

Acceptable goods are initially identified as either ’Steel’ or ‘Wooden’.

Steel goods:

?    Steel goods that are ‘Hinges’ are to be located at ‘StH boxes’
?    Steel goods that are ‘Brackets’ are to be located at StB buckets’

?    If the Steel goods are neither ‘Hinges’ nor ‘Brackets’, they are ‘Handles’. These are further analysed as ‘Front’ or ‘Back’. Handles that are ‘Front’ should be

located it the ‘Fh Tub’; otherwise the ‘Back’ handles should be located on the “Side Hook”.

Wooden goods:

?    Wooden goods that are ‘Boards’ should be located on the ‘WBrd shelves’
?    Wooden goods that are ‘Baton’ should be located at the ‘WBat stands’

?    Wooden goods that neither ‘Boards’ nor ‘Baton’, are ‘Blocks’. Wooden ‘Blocks’ are further analysed as either ‘Large’ or ‘Small’. ‘Large Blocks’ should be

located on the ‘LgB Pallet’; otherwise the components are to be located in the ‘SmB Drawer’.

After goods received have carefully and accurately been located, the store keeper will prepare a ‘goods received note’ (GRN). This will be forwarded to the finance

office.

Required:

Task 1:
Prepare a flowchart to describe the goods receiving and locating / storage control process

Note:
Your flowchart should be prepared in a good style using the MS Word ‘Insert / Shapes / Flowchart’ facility (see answer book)

20 Marks

Continued:

Trading (production and sales):

You should assume that today’s date is 18th November 2014

Sales:
The company has the following sales orders to be delivered during December 2014

Order / product:    Order 2169
‘Carom’    Order 2170
‘Horal’    Order 2171
‘Pecan’
Quantity to be delivered (sales in units)    1,350    2,000    5,400
Selling price (per unit)    £72.00    £45.00    £11.00

Production:
The production schedule for November 2014 (product quantities and production resources requirement) is shown below.

Order / product:    Order 2169
‘Carom’    Order 2170
‘Horal’    Order 2171
‘Pecan’
Quantity to be produced    1,500    2,500    6,000

Note:
At 1st November 2014 there will be no opening inventory of finished goods

Resources requirement for production:

Direct costs (variable costs):

Order / product:    Order 2169
‘Carom’    Order 2170
‘Horal’    Order 2171
‘Pecan’

Machining department:
Totals
Incremental materials cost    £2,230    £2,300    £6,200    £10,730
Direct labour hours (total)    450    350    200    1,000 hours
Machine hours (total)    1,200    800    500    2,500 hours

Painting department:
Incremental materials cost    £2,140    £5,710    £5,460    £13,310
Direct labour hours (total)    340    660    1,000    2,000 hours
Machine hours (total)    1,200    1,000    800    3,000 hours

Assembly department:
Incremental materials cost    £2,100    £5,260    £8,800    £16,160
Direct labour hours (total)    850    720    930    2,500 hours
Machine hours (total)    750    350    400    1,500 hours

Continued:

Fixed indirect production overheads:

Indirect production overheads are fixed (unaffected by production activity levels) at £72,000 per month. This value has been allocated and apportioned to the 3

production departments as follows:

Production department:    Machining    Painting    Assembly    Total
Fixed costs (allocation / apportionment)    £25,000    £32,000    £15,000    £72,000

Bases for absorption:

?    Machining department = Machine hours
?    Painting department = Direct labour hours
?    Assembly department = Direct labour hours

Note:
The quantity for absorption basis (for each production department) should be established using the total departmental resources requirement shown in the tables above.

Required:

Task 2:
Prepare (for each product and in total) the following planned values:

a.    Prime costs
15 Marks

b.    Total (full) costs of production
20 Marks

c.    Finished goods closing inventories / cost of sales
12 Marks

d.    Gross profits (and gross profit margins)
6 Marks

Note to task 2:
The requirement of task 2 should be established using and absorption costing system (as described in the production process flowchart).

The total task 2 mark above, includes marks allocated to short descriptive notes to workings (<=100 words – see answer book).

These notes should be ‘short explanatory notes’ that will serve to define the terminology used and explain the workings (and results / outcomes) to a colleague who

does not work in the finance office.

Continued:

Required

Task 3:
Prepare the following planned values:

a.    Contribution and contribution / sales ratio (for each product and in total) and the gross profit (in total only – see note)

10 Marks

b.    Prepare a reconciliation to explain the difference between the total gross profits established using an absorption costing system (task 2 d.) and a marginal

costing system (task 3 b.)

12 Marks

Note to task 3 a. & b.:
The requirement of task 3 should be established using a marginal costing system (where direct costs are classified as variable and indirect production overheads are

classified as fixed)

The total task 3 mark above, includes marks allocated to short descriptive notes to workings (<=100 words – see answer book).

These notes should be ‘short explanatory notes’ that will serve to define the terminology used and explain the workings (and results) to a colleague who does not work

in the finance office

Continued:

Carol Redbud, the company sales manager has commented that product ‘Pecan’ is not performing well and the company profits would increase if this product was removed

from the range

Task 4:

a.    Re – calculate the gross profit (and gross profit margin) if product ‘Pecan’ was removed from the production and sales schedule

Note:
It has been established that, if product Pecan was removed from the catalogue, specific fixed cost savings of £10,000 would be made

6 Marks

b.    Draft a short memo to Carol in reply to her comment (with clear explanatory supporting reasons to a non – accountant)
10 Marks

Note:
Your memo should be prepared in a good style (see answer book) and show effective skills in written communication (information qualities).

Continued:

The finance office (cost and management accounts) recently performed an ‘activity – based’ production systems analysis for the fixed production overheads. The result

is the table below:

Cost
£    Cost driver    Total cost driver quantity per period    Indirect production overhead recovery rate
£
Set up costs    27,000    Set ups    200    135.00
Production scheduling    10,000    Set ups    200    50.00
Quality control    18,000    Inspections    2,400    7.50
Depreciation    10,500    Machine hours    7,000    1.50
Raw materials storage    6,500    Materials movements    3,250    2.00
Total:     72,000

A further analysis has produced the following indirect production overhead resource required for each product:
Activity – Based Resource Requirement (by product)

Carom    Horal    Pecan    Total
Set ups (Set – up)    100    50    50    200
Inspections    1,750    250    400    2,400
Machine hours    3,150    2,150    1,700    7,000
Materials movements    1,450    800    1,000    3,250

Task 5:

a.    Explain ‘Activity – Based Costing (ABC)’ as an alternative to full absorption costing and discuss the potential benefits that ABC might bring to production and

information systems of Kauris Ltd

Note:
Your written explanations should be effectively communicated and should include notes on:
?    The reasons for the development of ABC
?    The ‘Activity – Based’ concept
?    The process of an ABC system development
?    The potential benefits (if any) you feel could be achieved by the introduction of an ABC system for Kauris Ltd
15 Marks

b.    Recalculate the gross profits (by product an in total) after allocating fixed production overheads to products using an activity – based system
18 Marks

The task 5 b. mark include marks allocated to short descriptive notes to workings (<=100 words). These notes should be ‘short explanatory notes’ that will serve to

identify (observe) the effects on each product (and total) profit caused by the ABC system allocations.

UNIVERSITY OF SALFORD
Salford Business School

BSc (Hons) Finance and Accounting

Financial and Management Information Systems
CRN = 36656

ASSIGNMENT
(2014 / 2015)

Overall Weighting in module = 25%

Kauris Ltd

Date of Issue: 13th October 2014

Date of Submission: 28th November 2014

ANSWER BOOK

Note:
All answers to be prepared and presented in this answer book.
The answer book should then be submitted through Turnitin

Task 1
Prepare a flowchart to describe the goods receiving and locating / storage process
(To max 20 marks including 6 marks credit for use of software, good style and clear presentation)

Flowchart tools:

Task:    2 a.    Kauris Ltd
Prime Costs (planned – December 2014 – To max 9 marks)

Prime costs:    Order 2169 ‘Carom’    Order 2170 ‘Horal’    Order 2171 ‘Pecan’
Machining department    Qty    Price
/ rate
£    Total
£    Qty    Price
/ rate
£    Total
£    Qty    Price
/ rate
£    Total
£
Materials            2,230                        6,200
Labour    450    12.00    5,400
Expenses    1,200    8.00    9,600
Prime cost:     17,230    Prime cost:         Prime cost:
Painting department    Qty    Price
/ rate
£    Total
£    Qty    Price
/ rate
£    Total
£    Qty    Price
/ rate
£    Total
£
Materials
Labour    340    9.50
Expenses    1,200    2.50
Prime cost:         Prime cost:         Prime cost:
Assembly department    Qty    Price
/ rate
£    Total
£    Qty    Price
/ rate
£    Total
£    Qty    Price
/ rate
£    Total
£
Materials
Labour
Expenses
Prime cost:         Prime cost:         Prime cost:

Note to workings (Prime cost (direct costs) – To max 3 marks):

To max 3 marks for accurate completion of this table:

Total
Prime costs
£    ÷
Units produced    =
Prime cost / unit
£
Order 2169 ‘Carom’
Order 2170 ‘Horal’
Order 2171 ‘Pecan’
Total ALL products:

Task:    2 b.    Kauris Ltd
Total (full) costs of production
(planned – December 2014 – To max 4 marks)

Overhead absorption rates:    Total Overhead cost (given)
£    ÷
Total basis hours
(labour or machine hours)    Overhead absorption rate
£ / hour
Machining department    25,000
Painting department    32,000
Assembly department    15,000

To max 6 marks for accurate completion of this section:

Indirect production overheads:    Order 2169 ‘Carom’    Order 2170 ‘Horal’    Order 2171 ‘Pecan’
Basis
hours    Oar
£    Overhead
£    Basis
hours    Oar
£    Overhead
£    Basis
hours    Oar
£    Overhead
£
Machining
Painting
Assembly

Note to workings (Full production costs / absorption costing – 6 marks):

To max 4 marks for accurate completion of this section:

Prime costs B/fwd
£    Indirect production overheads
£    Total (full) cost
£    ÷
Units produced    =
Full cost per unit
£
Order 2169 ‘Carom’
Order 2170 ‘Horal’
Order 2171 ‘Pecan’
Totals:

Task:    2 c.    Kauris Ltd
Finished goods closing inventories / cost of sales
(Planned December 2014 – To max 6 marks)

Cost of sales and closing inventory:    Unit production    less
Unit sales    = Closing inventory (units)    Cost of sales
£    Closing inventory
£
Order 2169 ‘Carom’    1,500
Order 2170 ‘Horal’    2,500
Order 2171 ‘Pecan’    6,000
Totals:

Note to workings (Cost of sales / closing inventory / Gross profits – absorption system)
(To max 6 marks):

Task:    2 d.    Kauris Ltd
Trading accounts (Gross profits and gross profit margins)
(Planned December 2014 – To max 6 marks)

Gross profits and margins:    Order 2169 ‘Carom’
£    Order 2170 ‘Horal’
£    Order 2171 ‘Pecan’
£    Totals
£
Sales
Less cost of sales
Gross profit (Absorption system):

Gross profit margin:

Task:    3 a    Kauris Ltd
Contribution and C/S ratio
(Planned December 2014 – To max 5 marks)

Contributions and profits    Order 2169 ‘Carom’
£    Order 2170 ‘Horal’
£    Order 2171 ‘Pecan’
£
Selling price
Less variable / prime cost per unit
= Unit contribution:
C/S ratio:                Total
Units sold                £
Total contribution:
Less total fixed costs:     (72,000)
Gross profit (marginal system):

Note to workings (Gross profits – marginal system / observations– To max 5 marks):

3 b.    Kauris Ltd
Reconciliation of profits – (To max 6 marks)

Difference in profits:    £
Gross profit (absorption system)
Gross profit (marginal system)
Difference (to be reconciled)

Reconciliation:    Order 2169 ‘Carom’    Order 2170 ‘Horal’    Order 2171 ‘Pecan’
Total overhead
÷ Total production (units)
= Overhead per unit                Total (as above)
X closing inventory (units)                £
= Overhead held in inventory:

Note to workings (Reconciliation of profits / explanation – To max 6 marks):

Task:    4 a.    Kauris Ltd
Recalculate gross profit (and margin) if product ‘Pecan’ is removed (deleted) from the product range – (To max 6 marks)

Contributions:    Order 2169 ‘Carom’
£    Order 2170 ‘Horal’
£    Order 2171 ‘Pecan’
£    Total
£
Contribution B/fwd
Less Contribution lost (deleted)
Contribution c/fwd:                    A

Fixed costs:    Total
£
Fixed costs B/fwd
Less fixed costs savings
Fixed costs c/fwd:         B

Adjusted profit (after deletion):    £
Adjusted profit after deletion (A – B)

Reconciliation:    Total
£
Profit (marginal basis) B/fwd
Less contribution lost
Add fixed costs savings
Adjusted profit (as above) c/fwd:
Task:    4 b.    Memo  (To max 10 marks)

Task:    5 a.    Kauris Ltd
Explanation of activity – based costing (ABC)
(To max 15 marks)

Task:    5.b.    Kauris Ltd
Recalculate gross profit (and margin) after allocating fixed production overheads using an ABC system– (To max 10 marks)

Overhead recovery (ABC System)    Order 2169 ‘Carom’    Order 2170 ‘Horal’    Order 2171 ‘Pecan’
Driver
Qty    Recovery rate
£    Overhead
£    Driver
Qty    Recovery rate
£    Overhead
£    Driver
Qty    Recovery rate
£    Overhead
£
Set – Ups    100
Inspections    1,750
Machine hours    3,150
Materials movements    1,450
Total overheads:         Total overheads:         Total overheads:

Profits (Marginal / ABC):    Order 2169 ‘Carom’
£    Order 2170 ‘Horal’
£    Order 2171 ‘Pecan’
£    Total
£
Contribution B/fwd
Less Fixed costs (ABC)
Profits (Marginal / ABC):
Profit margin (%)

Notes to Marginal / ABC profits (Workings / Observations – To max 8 marks):

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