Task 1 A restaurant is deciding whether it wants to update its image or not.

Task 1

A restaurant is deciding whether it wants to update its image or not. It currently has a cozy appeal with an outdated décor that is still in good condition, menus and carpet that need to be replaced anyway, and loyal customers.

Required:

Identify for the restaurant management

a. those costs that are relevant to this decision, [5 marks]

b. those costs that are not relevant, [5 marks]

c. and qualitative considerations. [5 marks]

[TOTAL: 15 MARKS]

Task 2

a. How is the role of budgeting similar for a manufacturing firm and a not-for-profit organization?

[5 marks]

b. Describe some of the drawbacks of using the operating budget as a control device.

[5 marks]

c. What is budgetary slack? What are the pros and cons of building slack into the budget from the point of view of (a) an employee and (b) a senior manager? [5 marks]

d. Are negative variances always unfavorable and positive variances always favorable? Explain. [5 marks]

[TOTAL: 20 MARKS]

Task 3

The manager at the Farmers Market in the Mekong Delta (South of Vietnam) pays VND12 billlions to process 200,000 pounds of compost and converts it into fertilizer to sell to local farmers. During this process, 30,000 pounds of the compost were contaminated, yielding 40,000 pounds of lightweight mulch and 120,000 pounds of heavyweight mulch. The lightweight mulch can be sold at VND200,000 per pound, and the heavyweight mulch can be sold at VND100,000 per pound. The 40,000 pounds of lightweight mulch can be processed further to yield 35,000 pounds into hardwood mulch at additional processing costs of VND6 billions. The hardwood mulch can be sold at VND560,000 per pound. The 120,000 pounds of heavyweight mulch can be further processed to yield 40,000 pounds of redwood mulch at additional processing costs of VND5.6 billions. The redwood mulch can be sold at VND460,000 per pound.

Page 3

Required:

Should the manager at the Farmer's Market sell the joint products, lightweight mulch and heavyweight mulch, at the split-off point, or further process them into hardwood mulch and redwood mulch? Show all work.

[TOTAL: 10 MARKS]

Task 4

Truong Minh Autos has been in the tire business for four years. It rents a building but owns all of its equipment. All employees are paid a fixed salary except for the busy season (January - March), when temporary help is hired by the hour. Utilities and other operating charges remain fairly constant during each month except those in the busy season.

Selling prices per tire average VND1.5 millions except during the busy season. Because a large number of customers buy tires prior to winter, discounts run above average during the busy season. A 15% discount is given when two tires are purchased at one time. During the busy months, selling prices per tire average VND1.2 millions. The president of Truong Minh Autos is somewhat displeased with the company's management accounting system because the cost behavior patterns displayed by the monthly breakeven charts are inconsistent; the busy months' charts are different from the other months of the year. The president is never sure if the company has a satisfactory margin of safety or if it is just above the breakeven point.

Required:

a. What is wrong with the accountant's computations? [5 marks]

b. How can the information be presented in a better format for the president? [5 marks]

[TOTAL: 10 MARKS]

Task 5

Thanh and Tuan started the TT Restaurant in 20X9. They rented a building, bought equipment, and hired two employees to work full time at a fixed monthly salary. Utilities and other operating charges remain fairly constant during each month. During the past two years, the business has grown with average sales increasing 1% a month. This situation pleases both Thanh and Tuan, but they do not understand how sales can grow by 1% a month while profits are increasing at an even faster pace. They are afraid that one day they will wake up to increasing sales but decreasing profits.

Page 4

Required:

Explain why the profits have increased at a faster rate than sales. Use the terms variable costs and fixed costs in your response.

[TOTAL: 15 MARKS]

Task 6

XZY University’s Graduation Store sells graduation supplies to students through the college bookstore. The bank charges XYZ University's Graduation Store 3% on the total credit card sales each day to settle the credit card transactions. The college bookstore reported that consumers purchased VND8 millions in credit card purchases. The managerial accountant needs to update the sales budget, the operating expenses budget, and the cash collections budget to account for the credit sales.

Required:

a. What amount should the managerial accountant use to complete the sales budget, the operating expenses budget, and the cash collections budget? [5 marks]

b. In which month should the managerial accountant show this data? [5 marks]

c. What should the managerial accountant consider when updating the master budget?

[5 marks]

[TOTAL: 15 MARKS]

Task 7

Two of the identified uses of budgeting are: (1) It can help coordinate the various sections of the business, and (2) it can motivate managers to perform better

Required:

Briefly explain each of these uses and how these two uses might conflict with each other.

[TOTAL: 15 MARKS]

------THIS IS THE END OF THE ASSIGNMENT-----