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Action management

Question 1

A. Explain briefly what action management can take to manage direct

labour if this is expected to be a scarce resource.

examples or case studies to answer this question and include references

appropriately as an evidence of your wider reading and research.

(15 marks)

B. Hygienics Co produces free-standing sanitiser units for domestic and

commercial use. They produce a single product in a highly competitive

market. They have gathered the following expected information for the year

2021:

£

Selling price (per unit)

Direct materials (per unit)

Direct labour (per unit)

155.00

60.25

30.50

Other costs are estimated for the year 2021 based on the expected sales of

62,000 units. These costs are given below:

Fixed

Costs

Variable

Costs

Operating Costs 420,000 1,750,000

Marketing Costs 350,000 122,500

Storage Costs 570,000 101,000

Administration Costs 232,000 –

For the year 2021, you are required to calculate:

a) the expected profit or loss

(5 marks)

b) breakeven point in units and sales revenue

(5 marks)

c) margin of safety in units and % change

(5 marks)

d) the profit/loss if the selling price is increased by 5% and sales

quantity decreases by 50%

(5 marks)

e) the revised break-even point in units for (d)

(5 marks)

AFE4005-B_ITA_Alternative Assessment MAIN_ 2020-2021

(Total 40 marks)

AFE4005-B_ITA_Alternative Assessment MAIN_ 2020-2021

Question 2

A. Discuss the importance, for an organisation, of preparing a cash budget

especially in light of the COVID-19 pandemic and the difficulties this may

present.

Note: You must use the relevant academic literature to answer this question and

include references appropriately as an evidence of your wider reading and

research.

(15 marks)

B. Bright Co. has three production departments Star, Shine, and Spark and one

service department Shade. Bright Co is preparing its annual budget for the final

quarter of 2021. Planned overhead costs for the quarter are as follows:

Overheads £

Allocated overheads 40,000

Supervision 14,400

Depreciation 18,000

Machine Insurance 6,000

Rates and Rent 36,000

The following information is available for each department:

Departmental details Star Shine Spark Shade

Allocated overhead 12,500 14,000 10,250 3,250

Machine Value (£) 5,000 2,500 3,500 1,500

Budgeted Direct Labour hours 1,000 500 1,500 1,000

Floor Area Occupied (Square metres) 1,500 400 500 100

Of the total overhead costs allocated to the service department Shade, 30% is

charged to Star and the remainder is charged equally to Shine and Spark.

a) Prepare an overhead analysis sheet showing the total overhead cost

budgeted for all four departments. You must show all your workings

clearly.

(25 marks)

b) Allocate the services department Shade’s costs to all production

departments.

(5 marks)

c) Glow+ is one of the leading products of Bright Co. Bright Co. plans to earn

20% profit on per unit cost of Glow+.

Standard cost: Glow+ Per Unit

Direct Materials per unit £60

Direct Labour per unit £64

Labour hours per unit of each department:

Star 2

Shine 1

Spark 3

Sample Solution

central banks used the intense simulative monetary policy to solve the recession. The fall of Keynesianism also credited to the fact that many economists did not take into account the probability of stagflation (Blinder, 2013). Historical data pointed out that high unemployment rates were related with low inflation rates and vice versa, as shown in the Phillips curve (Khan Academy, 2017). The theory was that a high demand for goods increased prices, which in turn stimulated companies to employ more people. Likewise, high employment rates augmented demand. During the 1970s stagflation, it became obvious that the link between inflation rates and employment levels was sometimes unstable. As a result, macroeconomists were unconvinced about Keynesianism, eventually steering to the end of the impact of Keynesian theories in economic strategies. Monetarist economists, such as Edmund Phelps and Milton Friedman clarified a shift in the Phillips curve: they maintained that when companies and workers anticipated high inflation, there was a shifting up of the Phillips curve, suggesting that high inflation can occur at any rate of unemployment (Khan Academy, 2017). Unambiguously, they argued that if inflation remained high for many years, workers and companies would begin emphasizing its consequences during wage negotiations, causing in a quick increase of earnings and firms’ prices, which further quickened inflation. This enlightenment was an extreme case of criticism of Keynesianism, and Keynesians progressively agreed the explanation. This reduced Keynesianism spread and influence on economic policies. To conclude, it is evident that the spread and impact of Keynesianism was largely accelerated by the unmatched economic success and constancy in the post-war period from 1945 until 1973. The basis of Keynesianism was government intervention using active monetary and fiscal actions to normalize aggregate volatility in market economies. Its collapse could have accredited to the 1970s stagflation depicted by an instantaneous increase in both unemployment and inflation rates. Critics maintain that stagflation was an unavoidable heritage of demand management policies associated with Keynesian economy. The critical fall of Keynesianism was noticed by the end of the neoclassical synthesis conventional position because of empirical and theoretical we
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