Question 1

Assume Verve does not carry any materials, WIP, and finished goods inventories. Prepare the budgeted income statement for the year using the contribution margin format

Question 2
Compute the sales of the two products for the company to break even. Round up to the nearest $.

Question 3

Compute the total indirect costs for the Production and Shipping departments by using the direct method to allocate the costs of support departments. Explain the reasons for your choice of the cost allocation base.

Question 4
Verve allocates production overheads on the basis of production quantity.
(a) Compute the manufacturing overhead application rate. Answer in 3 decimals.
(b) Compute the unit cost of the two products. Answer in 3 decimals.

Question 5
Verve recently started a task force to study the indirect costs as they have risen significantly over the years. The study revealed the following information:

Question 6

Use the activity-based costing method to determine the unit cost of the two products. Answer in 3 decimals.

Question 7

At the end of the year when Verve reviewed the actual financial performance (you may assume that actual sales achieved budgeted sales), it was puzzled why the company made a loss for the year when the company sales were more than what was needed to break even. Explain the reasons using the analysis that you have done in the previous questions.

Question 8

A local farmer offers to sell and deliver Herb-X for $580 per kg. Analyze the considerations (both quantitative and qualitative) for Verve to accept or reject the offer. You may make assumptions where necessary.

Question 9

Design an appropriate balanced scorecard with the key performance indicators (KPIs) in each of the four perspectives for Verve. Show the causal links between the KPIs. Explain your key considerations for the KPIs that you have included in the scorecard. If necessary, you may make reasonable assumptions.