Assignment Task Question 1 Refer to the 2023 annual report of Cortina Holding Limited only. As discussed in class, use group numbers not company.

Assignment Task

Question 1

Refer to the 2023 annual report of Cortina Holding Limited only. As discussed in class, use group numbers not company.

Required

With reference to the extract from the financial statements, what is your assessment of the operating, investing and financing sections for the year ended 31 March 2023 in comparison previous period? Provide evidence to support your assessment. With reference to the extract from the financial statements, what is your assessment of the profitability for the year ended 31 March 2023 in comparison previous period? Provide evidence (calculation of 2 relevant ratios and use of other relevant information) to support your assessment. With reference to the extract from the financial statements, what is your assessment of the liquidity for the year ended 31 March 2023 in comparison previous period? Provide evidence (calculation of 2 relevant ratios and use of other relevant information) to support your assessment. With reference to the extract from the financial statements, what is your assessment of the solvency for the year ended 31 March 2023 in comparison previous period? Provide evidence (calculations of 2 relevant ratios and use of other relevant information) to support your assessment. Based on your calculations in (a) to (d) above, and other information provided in the extract from the financial statements, what is the company’s future outlook and challenges? Provide evidence to support your assessment. 

NOTE: As outlined in the textbook, with some ratios it is common to use average figures (e.g. average total assets) rather than year-end figures. As only information for two years (2023 and 2022) is given, use end of year totals rather than average totals where necessary.

Question 2

Pete operates John Jones Pty Ltd, which is organised on a June year-end. Pete has come to you to provide input on how to treat certain items as John Jones Pty Ltd prepares its financial statements for the year ended 30 June 2023.

Additional information

Annual leave liability has been calculated at $6,000. This amount had not been recorded in the accounts as at 30 JuneSundry expenses account had a payment of $3,000 for a new computer recorded within it. Payment was made on 30 JuneThe accounts receivable list indicated that one debtor did go bankrupt prior to 30 June 2023. The amount of this debt was $20,000. There was no provision for doubtful debts nor was this debt provide for at year end.The company prepaid its insurance for 12 months for an amount of $1,200. The prepayment occurred on 1 May 2023. The $1,200 was shown as insuranceThe company purchased a new computer on 1 June for $20,000. It is estimated that it will last for 10 years. At the end of 10 years, it will have zero scarp value. The company did not record any deprecation for June It has a policy of using straight line depreciation.A loan of $400,000 was incorrectly recorded asA payment of $30,000 on 30 June 2023 for additions to buildings has been incorrectly allocated to repairs and

Required

a) State which of the above items need adjustment and why or why not. For each item that needs adjustment, show the accounting equation entry required to make the necessary adjustments in the books (show all workings and assumptions).

Question 3

Metal Dect Pty Ltd produces over 2 products. These two products are sold to the parent company. They estimate producing 15,000 units in total for June 2023. That is, Blue:- 5,000 units and White:- 10,000 units.

The following estimates are available for Metal Dect for June 2023:

Production machine setup costs

$300,000

Production machine running costs

$400,000

Quality control

$220,000

Other Overhead costs

$80,000

Total Costs

$1,000,000

The following information is available for Blue and the White model.

Blue

White

Direct labour cost per unit

$10

$8

Materials per unit

$15

$5

OH allocated on estimated units produced (per unit)

$80

$60

Blue is sold for $110 per unit, whilst White is sold for $80 per unit.

Metal Dect has considered the introduction of activity-based costing (ABC). To assist with the potential adoption of ABC management have estimated the following data: 

Overhead Activity

Overhead Cost

Cost Driver

Total

Cost Driver Consumption Blue

Cost Driver Consumption White

Machining set ups

300,000

Machine setups

80,000

20,000

60,000

Machine

400,000

Machine hours

400,000

150,000

250,000

Quality

220,000

Number of tests performed

500,000

100,000

400,000

Other Overheads

80,000

Direct labour hours

1,000

300

700

Total

$1,000,000

Required

Determine the per unit cost for Blue and White using estimated units of production as the allocation base for all manufacturing overhead cost and determine the per unit cost for Blue and White using activity-based costing to allocate total overhead cost. What are the management and long-term strategy implications for Blue and White under both traditional overhead costing system and the proposed ABC system? Discuss, include supporting. What does Metal Dect Pty Ltd need to consider before adopting activity-based costing? Explain your answer. 

Question 4 

It has been suggested by one of the partners in the accounting firm that they should cease small business services, as they were unprofitable

Audit

Tax

Small Business

Financial Planning

Fees (@$500 per hour)

$2,000,000

$1,000,000

$200,000

$500,000

Less variable costs based on hours

(600,000)

(500,000)

(40,000)

(200,000)

Contribution

1,400,000

500,000

160,000

300,000

Less fixed costs:

Specific to service

(400,000)

(200,000)

(10,000)

(50,000)

Firm wide (nonspecific)

(200,000)

(200,000)

(200,000)

(150,000)

Profit (loss)

800,000

100,000

(50,000)

100,000

Required

What is the annual break-even point in hours and fees for each service offered by the firm (show all calculations)? What costs are relevant in determining if the firm should continue to operate the small business services segment? Discuss. Should the partner’s suggestion be adopted? Justify and discuss implications. List key qualitative and quantitative factors to justify your decision.If the business had the ability to move some of its fixed costs to variable would this change your conclusion in (c) above? Answer must be supported by assumptions and. 

Question 5

The following summary data are from a performance report for Washington Accounting Services for May, during which 10,700 professional hours were worked. The ‘budget’ column reflects the company’s normal capacity of 10,000 professional hours per month. The managing partner is disappointed with the cost overruns.

Budgeted Costs (10,000 hours)

Actual Costs (10,700 hours)

Variances Over (Under) Budget

Administrative Labour

$35,000

$36,100

$1,100

Professional Labour

70,000

70,300

300

Overheads Variable

24,000

23,600

(400)

Overheads Fixed

18,000

18,700

700

$147,000

$148,700

$1,700

Required

What is a flexible budget and what is it used for?Prepare a flexible budget report for May The report should include price and volume variance for each overhead? (Show all calculations)Is the managing partner’s concerned valid, justify your answer? (Hint briefly outline the meaning of the differences, if any)