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Scenario - Cogwinder amp; Co Decorating Products Cogwinder amp; Co. Ltd was established in 1930 in rural Devon, England, producing paint brushes...

Scenario - Cogwinder & Co Decorating Products Cogwinder & Co. Ltd was established in 1930 in rural Devon, England, producing paint brushes for the decorating industry. The business has developed over the years and now produces a range of decorating products for the commercial and domestic markets. The company has always differentiated itself on quality and product performance, for example, it has always used the finest natural bristles in its paint brushes. Cogwinder drives and maintains a robust quality management system to, "Focus on customer satisfaction by striving to design and produce products that exceed the expectations of our customers and to control operational processes by utilising appropriate techniques". In 2010, in order to deliver products more effectively to global markets, Cogwinder established a wholly-owned-subsidiary enterprise in China. Q1 While initial production matched that of the Devon headquarters in terms of product quality, some operations issues have emerged in recent months, with several customers complaining about late delivery, poor quality of product finished and lack of customer service. The Chief Executive has decided to use a 'balanced scorecard' approach to manage the performance of the China subsidiary. Critically evaluate the balanced scorecard approach against similar models (For example, the performance prism, or EFQM model), for measuring performance. (25 marks) Q2 The UK headquarters manufacture four types of electric paint stripping machines for removing old paint from walls (A, B, C and D), details of which for the next period are: Type-A Type B Type C Type D Maximum demand (units) 3000 5900 4500 4000 Selling Price (per unit) 185 200 205 275 Costs per unit are: £ £ £ £ Direct Labour 21 30 21 42 Direct Materials 28 51 29 60 Processing cost 21 30 21 30 Production Overhead 35 50 35 50 Administrative Overhead 20 20 30 30 Selling Overhead 20 15 30 37 Notes  Direct Labour and Direct Materials are wholly variable with the volume of output  Processing cost varies with the number of processing hours at a rate of £6 per hour  Production overhead is charged to each unit at a composite rate of £10 per processing hour - £8 per hour being in respect of fixed overheads, the remaining £2 in respect of variable  Selling Overhead is fully variable with the number of units sold  Administrative costs are 80% fixed and 20% variable with the number of units sold  Processing hours are limited to 40000 in total next period. Determine the best production mix for Cogwinder for the next period. (25 marks) Q3 Cogwinder is planning to develop a new wallpaper hanging device (WHD) which will reduce the time it takes decorators to hang wallpaper in commercial installations. State-of-the-art machinery will be installed at the China subsidiary. The cost of the first wallpaper hanging device (WHD) to be produced has been estimated to be: £ Materials 5000 Labour 800 hours @ £5 4000 Overhead (150% of labour cost) 6000 Total Costs 15000 Profit mark-up of 20% 3000 Selling Price 18000 It is planned to sell all the WHD at full cost plus 20%. An 80% learning curve is expected to apply to the production work. You are asked to provide cost information so that decisions can be made on what price to charge. (a) What is the separate cost of a WHD? (7 marks) (b) What would be the cost per unit for a third and a fourth WHD, if they are ordered separately later on? (6 marks) (c) If they were all ordered now, could Cogwinder quote a single unit price for four WHDs and eight WHDs? (6 marks) (d) Discuss the practical limitations of learning-curve theory (6 marks) (Total 25 marks) Q4 In April, 20000 Premier paint brushes are expected to be produced and sold. Costs and revenues are anticipated to be: £ Sales 100000 Production costs: Variable 35000 Fixed 15000 Administrative & Selling Overheads: Fixed 25000 a) Prepare operating profit statements based on Absorption and Marginal costing approaches (5 marks) b) If the level of activity changes to 25000 units, what effect will this have on anticipated operating profit for both absorption and marginal costing approaches? (5 marks) c) In (a) above, if only 18000 Premier Paint Brushes were sold of the 20000 units produced, what effect will this have on the operating profit for both absorption and marginal approaches? (5 marks) d) Critically examine the arguments for using absorption or marginal costing in routine costing

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