Required:

　　Assess the performance of the business in 2010 using both financial performance indicators calculated from the above information AND the non-financial performance indicators provided.

　　NOTE:Clearly state any assumptions and show all workings clearly.Your answer should be structured around the following main headings:turnover;cost of sales;gross profit;indirect expenses;net operating profit.However,in discussing each of these areas you should also refer to the non-financial performance indicators,where relevant.（20 marks）

　　3 The Cosmetic Co is a company producing a variety of cosmetic creams and lotions.The creams and lotions are sold to a variety of retailers at a price of $23·20 for each jar of face cream and $16·80 for each bottle of body lotion. Each of the products has a variety of ingredients,with the key ones being silk powder,silk amino acids and aloe vera. Six months ago,silk worms were attacked by disease causing a huge reduction in the availability of silk powder and silk amino acids.The Cosmetic Co had to dramatically reduce production and make part of its workforce,which it had trained over a number of years,redundant.The company now wants to increase production again by ensuring that it uses the limited ingredients available to maximise profits by selling the optimum mix of creams and lotions.Due to the redundancies made earlier in the year,supply of skilled labour is now limited in the short-term to 160 hours（9,600 minutes）per week,although unskilled labour is unlimited.The purchasing manager is confident that they can obtain 5,000 grams of silk powder and 1,600 grams of silk amino acids per week.All other ingredients are unlimited.The following information is available for the two products:

　　Each jar of cream sold generates a contribution of $9 per unit,whilst each bottle of lotion generates a contribution of $8 per unit.The maximum demand for lotions is 2,000 bottles per week,although demand for creams is unlimited. ixed costs total $1,800 per week.The company does not keep inventory although if a product is partially complete at the end of one week,its production will be completed in the following week.

　　Required：

　　（a）On the graph paper provided,use linear programming to calculate the optimum number of each product that the Cosmetic Co should make per week,assuming that it wishes to maximise contribution. Calculate the total contribution per week for the new production plan.All workings MUST be rounded to 2 decimal places.（14 marks）

　　（b）Calculate the shadow price for silk powder and the slack for silk amino acids. All workings MUST be rounded to 2 decimal places. （6 marks）

　　（20 marks）

　　4 The Gadget Co produces three products,A,B and C,all made from the same material. Until now,it has used traditional absorption costing to allocate overheads to its products.The company is now considering an activity based costing system in the hope that it will improve profitability.Information for the three products for the last year is as follows:

　　The price for raw materials remained constant throughout the year at $1.20 per kg. Similarly,the direct labour cost for the whole workforce was $14.80 per hour.The annual overhead costs were as follows:

　　Required:

　　（a）Calculate the full cost per unit for products A,B and C under traditional absorption costing, using direct labour hours as the basis for apportionment. （5 marks）

　　（b） Calculate the full cost per unit of each product using activity based costing. （9 marks）

　　（c） Using your calculation from（a）and （b）above,explain how activity based costing may help The Gadget Co improve the profitability of each product. （6 marks）

　　（20 marks）

　　5 Some commentators argue that:＆With continuing pressure to control costs and maintain efficiency,the time has come for all public sector organisations to embrace zero-based budgeting.There is no longer a place for incremental budgeting in any organisation,particularly public sector ones,where zero-based budgeting is far more suitable anyway.

　　Required:

　　（a）Discuss the particular difficulties encountered when budgeting in public sector organisations compared with budgeting in private sector organisations,drawing comparisons between the two types of organisations.（5 marks）

　　（b）Explain the terms ＆incremental budgeting 'and ＆zero-based budgeting'.（4 marks）

　　（c）State the main stages involved in preparing zero-based budgets. （3 marks）

　　（d）Discuss the view that 'there is no longer a place for incremental budgeting in any organisation,particularly public sector ones,'highlighting any drawbacks of zero-based budgeting that need to be considered.（8 marks）

　　（20 marks）

　　Formulae Sheet

　　Learning curve