(i) The product mix ratio<br>(ii) Contribution to sales ratio for each product<br>(iii) General fixed costs<br>(iv) Method of apportioning general fixed costs<br>Which of the above are required in order to calculate the break-even sales revenue for the company？

All of the above
B. (i), (ii) and (iii) only
C. (i), (iii) and (iv) only
D. (ii) and (iii) only

Lesting Regional Authority (LRA) is responsible for the provision of a wide range of services in the Lesting region, which is based in the south of the country ‘Alaia’. These services include, amongst other things, responsibility for residents’ welfare, schools, housing, hospitals, roads and waste management.<br>Over recent months the Lesting region experienced the hottest temperatures on record, resulting in several forest fires, which caused damage to several schools and some local roads. Unfortunately, these hot temperatures were then followed by flooding, which left a number of residents without homes and saw higher than usual numbers of admissions to hospitals due to the outbreak of disease. These hospitals were full and some patients were treated in tents. Residents have been complaining for some years that a new hospital is needed in the area.<br>Prior to these events, the LRA was proudly leading the way in a new approach to waste management, with the introduction of its new ‘Waste Recycling Scheme.’ Two years ago, it began phase 1 of the scheme and half of its residents were issued with different coloured waste bins for different types of waste. The final phase was due to begin in one month’s time. The cost of providing the new waste bins is significant but LRA’s focus has always been on the long-term savings both to the environment and in terms of reduced waste disposal costs.<br>The LRA is about to begin preparing its budget for the coming financial year, which starts in one month’s time. Over recent years, zero-based budgeting (ZBB) has been introduced at a number of regional authorities in Alaia and, given the demand on resources which LRA faces this year, it is considering whether now would be a good time to introduce it.<br>Required:<br>(a) Describe the main steps involved in preparing a zero-based budget. (3 marks)<br>(b) Discuss the problems which the Lesting Regional Authority (LRA) may encounter if it decides to introduce and use ZBB to prepare its budget for the coming financial year. (9 marks)<br>(c) Outline THREE potential benefits of introducing zero-based budgeting at the LRA. (3 marks)

Secure Net (SN) manufacture security cards that restrict access to government owned buildings around the world.<br>The standard cost for the plastic that goes into making a card is $4 per kg and each card uses 40g of plastic after an allowance for waste. In November 100,000 cards were produced and sold by SN and this was well above the budgeted sales of 60,000 cards.<br>The actual cost of the plastic was $5·25 per kg and the production manager (who is responsible for all buying and production issues) was asked to explain the increase. He said ‘World oil price increases pushed up plastic prices by 20% compared to our budget and I also decided to use a different supplier who promised better quality and increased reliability for a slightly higher price. I know we have overspent but not all the increase in plastic prices is my fault’ The actual usage of plastic per card was 35g per card and again the production manager had an explanation. He said ‘The world-wide standard size for security cards increased by 5% due to a change in the card reader technology, however, our new supplier provided much better quality of plastic and this helped to cut down on the waste.’<br>SN operates a just in time (JIT) system and hence carries very little inventory.Required:<br>(a) Calculate the total material price and total material usage variances ignoring any possible planning error in the figures. (4 marks)<br>(b) Analyse the above total variances into component parts for planning and operational variances in as much detail as the information allows. (8 marks)<br>(c) Assess the performance of the production manager. (8 marks)

Jungle Co is a very successful multinational retail company. It has been selling a large range of household and electronic goods for some years. One year ago, it began using new suppliers from the country of Slabak, where labour is very cheap, for many of its household goods. In 20X4, Jungle Co also became a major provider of ‘cloud computing’ services, investing heavily in cloud technology. These services provide customers with a way of storing and accessing data and programs over the internet rather than on their computers’ hard drives.<br>All Jungle Co customers have the option to sign up for the company’s ‘Gold’ membership service, which provides next day delivery on all orders, in return for an annual service fee of $40. In September 20X5, Jungle Co formed its own logistics company and took over the delivery of all of its parcels, instead of using the services of international delivery companies.<br>Over the last year, there has been worldwide growth in the electronic goods market of 20%. Average growth rates and gross profit margins for cloud computing service providers have been 50% and 80% respectively in the last year. Jungle Co’s prices have remained stable year on year for all sectors of its business, with price competitiveness being crucial to its continuing success as the leading global electronic retailer.<br>The following information is available for Jungle Co for the last two financial years:<br>3. Administration expenses<br>Included in these costs are the costs of running the customer service department ($860,000 in 20X5; $1,900,000 in 20X6.) This department deals with customer complaints.<br>4. Non-financial data<br>Required:<br>Discuss the financial and non-financial performance of Jungle Co for the year ending 31 August 20X6.<br>Note: There are 7 marks available for calculations and 13 marks available for discussion.

The board of Helot Co has asked the finance director to explain what activities can be undertaken to close a cost gap on its computer games.<br>Which of the following would be appropriate ways for Helot Co to close a cost gap？<br>(1) Buy cheaper, lower grade plastic for the game discs and cases<br>(2) Using standard components wherever possible in production<br>(3) Employ more trainee game designers on lower salaries<br>(4) Use the company’s own online gaming websites for marketing

A. 1, 2 and 3
B. 1, 3 and 4
C. 2 and 4
D. 2 and 3 only

CSC Co is a health food company producing and selling three types of high-energy products: cakes, shakes and cookies, to gyms and health food shops. Shakes are the newest of the three products and were first launched three months ago. Each of the three products has two special ingredients, sourced from a remote part the world. The first of these, Singa, is a super-energising rare type of caffeine. The second, Betta, is derived from an unusual plant believed to have miraculous health benefits.<br>CSC Co’s projected manufacture costs and selling prices for the three products are as follows:<br>For each of the three products, the expected demand for the next month is 11,200 cakes, 9,800 cookies and 2,500 shakes.<br>The total fixed costs for the next month are $3,000.<br>CSC Co has just found out that the supply of Betta is going to be limited to 12,000 grams next month. Prior to this, CSC Co had signed a contract with a leading chain of gyms, Encompass Health, to supply it with 5,000 shakes each month, at a discounted price of $5·80 per shake, starting immediately. The order for the 5,000 shakes is not included in the expected demand levels above.<br>Required:<br>(a) Assuming that CSC Co keeps to its agreement with Encompass Health, calculate the shortage of Betta, the resulting optimum production plan and the total profit for next month. (6 marks)<br>One month later, the supply of Betta is still limited and CSC Co is considering whether it should breach its contract with Encompass Health so that it can optimise its profits.<br>Required:<br>(b) Discuss whether CSC Co should breach the agreement with Encompass Health.<br>Note: No further calculations are required. (4 marks)<br>Several months later, the demand for both cakes and cookies has increased significantly to 20,000 and 15,000 units per month respectively. However, CSC Co has lost the contract with Encompass Health and, after suffering from further shortages of supply of Betta, Singa and of its labour force, CSC Co has decided to stop making shakes at all. CSC Co now needs to use linear programming to work out the optimum production plan for cakes and cookies for the coming month. The variable ‘x’ is being used to represent cakes and the variable ‘y’ to represent cookies.<br>The following constraints have been formulated and a graph representing the new production problem has been drawn:<br>Singa: 0·25x + 0·5y ≤ 12,000<br>Betta: 0·5x + 0·2y ≤ 12,500<br>Labour: 0·1x + 0·12y ≤ 3,000<br>x ≤ 20,000<br>y ≤ 15,000<br>x, y ≥ 0<br>Required:<br>(c) (i) Explain what the line labelled ‘C = 2·6x + 1·75y’ on the graph is and what the area represented by the points 0ABCD means. (4 marks)<br>(ii) Explain how the optimum production plan will be found using the line labelled ‘C = 2·6x + 1·75y’ and identify the optimum point from the graph. (2 marks)<br>(iii) Explain what a slack value is and identify, from the graph, where slack will occur as a result of the optimum production plan. (4 marks)<br>Note: No calculations are needed for part (c).

What is the forecast cost gap for the new game？

A. $2·05
B. $0·00
C. $13·70
D. $29·25

Helot Co is thinking about expanding its business and introducing a new computer repair service for customers. The board has asked if target costing could be applied to this service.<br>Which of the following statements regarding services and the use of target costing within the service sector is true？

A. The purchase of a service transfers ownership to the customer
B. Labour resource usage is high in services relative to material requirements
C. A standard service cannot be produced and so target costing cannot be used
D. Service characteristics include uniformity, perishability and intangibility

The following scenario relates to questions 11–15.<br>Helot Co develops and sells computer games. It is well known for launching innovative and interactive role-playing games and its new releases are always eagerly anticipated by the gaming community. Customers value the technical excellence of the games and the durability of the product and packaging.<br>Helot Co has previously used a traditional absorption costing system and full cost plus pricing to cost and price its products. It has recently recruited a new finance director who believes the company would benefit from using target costing. He is keen to try this method on a new game concept called Spartan, which has been recently approved.<br>After discussion with the board, the finance director undertook some market research to find out customers’ opinions on the new game concept and to assess potential new games offered by competitors. The results were used to establish a target selling price of $45 for Spartan and an estimated total sales volume of 350,000 units. Helot Co wants to achieve a target profit margin of 35%.<br>The finance director has also begun collecting cost data for the new game and has projected the following:<br>Which of the following statements would the finance director have used to explain to Helot Co’s board what the benefits were of adopting a target costing approach so early in the game’s life-cycle？<br>(1) Costs will be split into material, system, and delivery and disposal categories for improved cost reduction analysis<br>(2) Customer requirements for quality, cost and timescales are more likely to be included in decisions on product development<br>(3) Its key concept is based on how to turn material into sales as quickly as possible in order to maximise net cash<br>(4) The company will focus on designing out costs prior to production, rather than cost control during live production

A. 1, 2 and 4
B. 2, 3 and 4
C. 1 and 3
D. 2 and 4 only

One of these techniques involves analysing costs under three distinct categories: material, system, and delivery and disposal.<br>What is this technique known as？

Activity-based costing
B. Life-cycle costing
C. Input-output analysis
D. Flow cost accounting