Activity

Answer to requirement 1: 

Activity	Activity Cost	Activity Driver	Annual Quantity Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	Cost per Unit of Activity
Process Receivables	$15,000	No. of Invoices	5000	$3.00
Process Payables	$25,000	Nos. of Purchase Orders	2500	$10.00
Program Production	$28,000	Nos. of Production Schedule	1000	$28.00
Process Sales Order	$40,000	Nos. of Sales Order	4000	$10.00
Dispatch Sales Order	$30,000	Nos. of Dispatches	2500	$12.00
Load Mixers	$14,050	Nos. of Batches	1000	$14.05
Operate Mixers	$45,900	Nos. of Kilograms	200000	$0.23
Clean Mixers	$6,900	Nos. of Trays	1000	$6.90
Move mixture to filling	$3,450	Nos. of Cakes/Pastries	200000	$0.02
Clean Trays	$20,000	Nos. of Trays	16000	$1.25
Fill Trays	$16,000	No. of Cakes/Patries	800000	$0.02
Move to baking	$8,000	No. of Trays	16000	$0.50
Set up Oven	$50,000	No. of Batches	1000	$50.00
Bake Cake/Pastries	$1,30,000	No. of Batches	1000	$130.00
Move to Packing	$40,000	No. of Trays	16000	$2.50
Pack Cake/Pastries	$80,000	No. of Cakes/Patries	800000	$0.10
Inspect Patries	$2,500	No. of Pastries	50000	$0.05

Illustrations for Bill of Activities

Activity Consumed	Annual Quantity of Activity Driver	Cost per Unit of Activity	Total Cost
Process Receivables	500	$3.00	$1,500.00
Process Payables	200	$10.00	$2,000.00
Program Production	100	$28.00	$2,800.00
Process Sales Order	400	$10.00	$4,000.00
Load Mixers	100	$14.05	$1,405.00
Operate Mixers	30000	$0.23	$6,885.00
Clean Mixers	100	$6.90	$690.00
Move mixture to filling	30000	$0.02	$517.50
Clean Trays	2000	$1.25	$2,500.00
Fill Trays	100000	$0.02	$2,000.00
Move to baking	2000	$0.50	$1,000.00
Set up Oven	100	$50.00	$5,000.00
Bake Cake/Pastries	100	$130.00	$13,000.00
Move to Packing	2000	$2.50	$5,000.00
Pack Cake/Pastries	100000	$0.10	$10,000.00
Dispatch Sales Order	500	$12.00	$6,000.00
Develop & Test Product			$600.00
Total Overhead Cost			$64,897.50
Annual Volume			100000
Cost per unit for Lamington			$0.65

By taking into the considerations the above stated tabular representations, it is understood that the overhead cost is stated and accompanies the indirect costs that lends their support to the procedure of manufacturing or the alternative process of distribution (Williams 2014). Furthermore, the evidences from the computations represents that are large amount of indirect costs which efficiently forms the part of the present state of affairs but these indirect cost are yet to be incorporated.

Direct cost can be defined as those costs that can entirely attributed to the cost of productions of the particular goods and services. Some costs form the part of the direct costs such as the depreciation cost and the administrative expenses (Pratt 2016). These costs forms the most difficult to allocate the specific product and hence these costs are regarded as the indirect costs. Direct costs generally regarded as the cost that mainly arises from the manufacturing of products and service dealt in by the firm (Ahmed and Kannaiah 2016). Direct cost forms the vital element of the manufacturing process but there are certain forms of state of affairs where the production of goods and service cannot be carried out without having incurred any associated costs (Marshall 2016). Therefore, to ascertain cost of production of Lamington, it becomes necessary to take into the considerations the indirect cost and the same has been illustrated below;

1. Charges related to freight inward
2. Direct labour costs
3. Direct material costs

Answer to requirement A:   

Taking into the considerations from the circumstances obtained from the current case study it is noticed that HLW has generated revenue from mainly two different sources. These revenues particularly comprises of the revenue from the annual membership and the incomes generated from the court fees (Lanen 2016). Consequently, a large part of the revenue or in other words more than 40 per cent of the revenue is generated from the annual membership fees for the period of two months. After considering the left over part, it is understood that the fees derived from the court is based on every twelve months basis.

More specifically the inward flow of cash from the court fees hardly remains same during each month. An important consideration in this regard is that when the business hits high time evidences have shown that there is a greater amount of court fees generated and the revenue increases by 45% of the total amount of revenue. In addition to this, during the months of May to September, evidences have stated that the amount of court fees have declined significantly and forms merely 15% of the total amount of revenue.

Cost per Unit of Activity

In the present situation of HLW the application of the new plans of membership it turns out to be important in collecting around 80% of the total volume of revenue within the span of the first month of accounting year (Ellul et al. 2015). Additionally, the HLW would be able to take the advantage of several numbers of benefits and the same has been stated below given the circumstances that the HLW has applied new plans;

1. With the application of the new plan, HLW would be in the position of taking the advantage of the controlled amount of inflow of cash from the business sources or from the annual membership (Bouwens 2017). By taking into the account the current plan, the club is required to be reliant on the individual program namely the hourly fees charged by the court for generating greater than 50% of the total amount of incomes.
2. With the implementation of the new plans, it would provide HLW would with the greater amount of benefit for HLW. This is because it would provide HLW with the preparation of platform that would assist the club in generating the stable amount of inflow of cash during every of business operations (Angelopoulos and Pollalis 2017).
3. The application of new plan for the HLW would help in providing additional amount of benefit because the management of the club is better able to accumulate revenue which would be 80% greater than total amount of revenue derived during the early phases of business operations (Schaltegger and Zvezdov 2015). The application of the new plans ultimately lends the path for HLW in making an appropriate use of the funds that is accumulated together with the considerations made for different forms of financial decisions undertaken.

Answer to requirement 2:    

Evidences obtained from the current case study suggest that there are several highlighted issues and consequently there are some assumptions that is necessary required to be made in getting the better understanding of the effect created from the new plans of membership sales. There are certain listed assumptions in this regard and the same is stated below;

1. The should be a full usage of court be made during the hours when the business hits the peak time
2. Considerations should be made regarding 60% of the total usage capacity when the business goes through the non-peak time
3. Additionally, it is necessary to make use of 40% of the total court during the lean time

The computations that has been made below is useful in ascertaining the effect of the present sales. The assumption in the computations makes the use of systematic method by taking into the considerations the earlier stated assumptions;

Yearly revenues of membership:

Particulars	Weightage	No. of Members	Annual Membership Fees	Total Fees
Total Members	100%	2000
Individual Members	25%	500	$45	$22,500
Student Members	25%	500	$30	$15,000
Family Members	50%	1000	$100	$1,00,000
Total Membership Fees				$1,37,500

Total amount of court fees:

Particulars	Hourly Court fees	No of Courts	No. of Days	Usage %	Hours	Total Fees
Peak Season- Prime Time	8	10	181	100%	4	$57,920
Peak Season- Non Prime Time	12	10	181	60%	8	$1,04,256
Off Season	6	10	184	40%	12	$52,992
Total Court Fees						$2,15,168

Total amount of sales revenue generated:

Particulars	Amount	Weightage
Membership Fees	$1,37,500	38.99%
Court Fees – Peak Season	$1,62,176	45.99%
Court Fees – Off Season	$52,992	15.03%
Total Fees Collected	$3,52,668	100%

As evident from the current state of affairs, the club would be able to generate the sales revenue in compliance with the new plans of membership that is stated below;

Sales revenue from the earlier membership plans:

Particulars	Current Member	% of Continuation	% of Active Members	Annual Fees	Total Fees
Individual	500	70%	45%	250	$39,375
Student	500	70%	45%	250	$39,375
Family	1000	70%	45%	450	$1,41,750
Total Fees from Early Membership					$2,20,500

Sales revenue from the general membership plans:

Particulars	Current Member	% of Continuation	% of General Members	Annual Fees	Total Fees
Individual	500	70%	55%	250	$48,125
Student	500	70%	55%	250	$48,125
Family	1000	70%	55%	450	$1,73,250
Total Fees from Normal Membership					$2,69,500

Total amount of sales revenue generated:

Particulars	Amount	Weightage
Membership Collected:
August-September	$2,20,500	34.45%
October	$2,69,500	42.11%
March	$1,50,000	23.44%
Total Membership	$6,40,000	100.00%

Effect on sales revenue and the cash flow:

A tabular representation is made regarding the impact that is created on the sales revenue and in flow of cash depending upon the current periodic sales revenue:

Particulars	Current Plan	New Plan	Increase/ (Decrease)
Revenue:
Pre-Received (Aug-Sep)	$0	$2,20,500	$2,20,500
October-April	$2,99,676	$4,19,500	$1,19,824
May-September	$52,992	0	-$52,992
Total Membership	$3,52,668	$6,40,000	$2,87,332

The above stated tabular representations provides that the sales revenue that has been generated by the HLW has immensely increased by $2,87,332 given that the HLW has started making sufficient use of the court during the peak business hours. The above assumptions is made after taking into the account the sales revenue that is generated by the company under the current plan. In addition to this, taking into the considerations the above stated computation it is understood that the implementation of the new plans would enable the company in making a greater amount of assembly of revenue from the period of October onwards (Taylor and Nyide 2014).

One of the important considerations concerning the above stated proposed plan is that the revenue that is generated from the new plans would yield HLW with greater amount of revenue from the sales made in earlier instances. The primary reason for this is that there are certainly large amount of factors that is required to be taken into the considerations when implementing the new plans (Christ and Burritt 2015). Bearing in mind the above stated assumptions made, the below stated factors have provided a sufficient amount of explanations relating to the analysis that is made.

1. An important factor that is required to be considered is that the revenue that would be generated from the new plans would be considerably greater than that of the fees that is derived in the earlier instances (Rieckhof, Bergmann and Guenther 2015). Because of this, there are expectations that there could be a loss of memberships after applying the new plans of memberships. In other words there are also certain amount of students that are not reliant based on financial terms and would be incapable of affording greater amount of fees together with the renewal of the plans of membership relating to the new structure of fees (Bierer et al.2015). In addition to this, after taking into account the present outcome, it becomes vital to assess the feedback that is derived form the members.
2. On the application of the new plans of membership, the management is provided with the advantage of making the collection of fees during the starting period of two or three months. In such kind of circumstances, the administration would be better position of reducing the cost of collecting the revenues that is generated from the court fees (Kokubu and Kitada 2015). The management would be provided with better opportunities of maintaining sufficient periodic records for the amount of revenues generated. Therefore, it turns out to be vital in taking account of the cost lowering techniques at the time of evaluation.
3. Within the time period of six months, the management expects that they might lose some of the members (Mahal and Hossain 2015). The management would be required to implement the new plans or consequently they could face with circumstances of failure in attaining the desired amount of revenue.
4. One of the important factor that is required to be taken into the considerations is the execution of special campaign, as this would help in promoting the new plans (Almeida and Cunha 2017). In addition to this, the cost that is involved in the activities of promotional campaigns at the time of deriving the net income together with the amount of cash yielded from the implementation of the new plans.

Annual Quantity

Conclusion:

On arriving at the conclusive note one of the important considerations must be paid towards the methods that is the activity based costing procedure as it is regarded as beneficial in determining the actual cost of the product. One of the important considerations in this regard is that the business information that is necessarily required to be incorporated in the business report and the same has been duly applied in the present case study.

In other words, the activity based costing is referred those business costs that takes into the account the cost that is occurred in the business. Most importantly, the activity based costing method is regarded as the easy to understand and helps the business in better analysis of the present costs. On an important note, an assertion can be bought forward by stating that the activity based costing provides advantage to the business in making the correct business decisions.

Reference List:

Ahmed, R. and Kannaiah, D., 2016. The considerations for the implementation of an Activity Based Costing System (ABC).

Almeida, A. and Cunha, J., 2017. The implementation of an Activity-Based Costing (ABC) system in a manufacturing company. Procedia Manufacturing, 13, pp.932-939.

Angelopoulos, M. and Pollalis, Y., 2017. Activity Based Costing (ABC) as a tool for Lean Transformation: The Case of the Greek Power Public Corporation (PPC).

Bierer, A., Götze, U., Meynerts, L. and Sygulla, R., 2015. Integrating life cycle costing and life cycle assessment using extended material flow cost accounting. Journal of Cleaner Production, 108, pp.1289-1301.

Bouwens, J., 2017. Understanding investment decisions: the role of cost accounting.

Christ, K.L. and Burritt, R.L., 2015. Material flow cost accounting: a review and agenda for future research. Journal of Cleaner Production, 108, pp.1378-1389.

Ellul, A., Jotikasthira, C., Lundblad, C.T. and Wang, Y., 2015. Is historical cost accounting a panacea? Market stress, incentive distortions, and gains trading. The Journal of Finance, 70(6), pp.2489-2538.

Kokubu, K. and Kitada, H., 2015. Material flow cost accounting and existing management perspectives. Journal of Cleaner Production, 108, pp.1279-1288.

Lanen, W., 2016. Fundamentals of cost accounting. McGraw-Hill Higher Education.

Mahal, I. and Hossain, M.A., 2015. Activity-Based Costing (ABC)–An Effective Tool for Better Management. Research Journal of Finance and Accounting, 6(4), pp.66-74.

Marshall, D., 2016. Accounting: What the numbers mean. McGraw-Hill Higher Education.

Pratt, J., 2016. Financial accounting in an economic context. John Wiley & Sons.

Rieckhof, R., Bergmann, A. and Guenther, E., 2015. Interrelating material flow cost accounting with management control systems to introduce resource efficiency into strategy. Journal of Cleaner Production, 108, pp.1262-1278.

Schaltegger, S. and Zvezdov, D., 2015. Expanding material flow cost accounting. Framework, review and potentials. Journal of Cleaner Production, 108, pp.1333-1341.

Taylor, P.A. and Nyide, C.J., 2014. Cost Accounting II Module 11.

Williams, J., 2014. Financial accounting. McGraw-Hill Higher Education.