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Fenton Ltd Fenton Ltd is a manufacturing organisation supplying specialised engineered products to a wide range of public and private sector throughout the UK. You are a trainee in the finance office recently recruited by the company. Management planning meeting: On the 24th of every month (or nearest Monday) the business executive management team meets to plan trading and production for the following month. The meeting commences with a review of the sales order book and a determination of the following months product sales volumes. The expected sales volumes inform the production planning process and decisions are made with respect to production resources and closing inventory requirements. The agreed plan is the production schedule document. This is forwarded to the production departmental managers who will examine and compare their available resources against the requirement for production. Any problems (constraints) or other issues arising are reported back to the executive management team who will consider making adjustments to: The production requirements The available resources At the start of the following month, the production process will commence with a view to meeting the objectives of the agreed production (action) plan This process is described by the production planning flowchart (shown below): . Production Planning Flowchart Start 24th of the Month (or nearest Monday): Executive management planning meeting for the next month's trading objectives: Expected sales determination Production output levels for the following month. . . Management adjustments to original plan data Plan document passed to functional production managers Y N Problems / constraints / other issues arising? Agreed action plan document ready for the following month's production process End 2 Fenton Ltd - continued: The production process: The production process of Fenton Ltd takes place through 3 production departments; machining, painting and assembly. Machining department: Direct materials are transferred from the direct materials stores to the machining department. These are transformed using direct labour employees and machine processes into machined goods. The total of the prime costs add the fixed production overhead (allocated and / or apportioned) is the total cost of machined goods transferred to the painting department. For the machining department, the direct labour employees are paid at a rate of 11.00 per hour and the variable machine cost is 5.00. Painting department: Incremental direct materials are transferred from the direct materials stores to the painting department. These are combined with the machined goods transferred in and are transformed using direct labour employees and machine processes into painted goods. The total combined costs add the fixed production overhead (allocated and / or apportioned) is the total cost of painted goods transferred to the assembly department. For the painting department, the direct labour employees are paid at a rate of 7.00 per hour and the variable machine cost is 3.00. Assembly department: Incremental direct materials and components are transferred from the direct materials stores to the assembly department. These are combined with the painted goods transferred in and are transformed using direct labour employees and machine processes into saleable finished goods. The total combined costs add the fixed production overhead (allocated and / or apportioned) is the total cost of the saleable finished goods transferred to the finished goods warehouse. For the assembly department, the direct labour employees are paid at a rate of 9.00 per hour and the variable machine cost is 5.00. The production process is described in the production process flowchart below: 3 Fenton Ltd - continued: Fenton Ltd - Production Process Flowchart Start Materials movement process Materials movements and internal transfer inspection processes Machining department: Direct materials Add Direct labour (11.00 per hour) Add Direct expenses (5.00 per machine hour) Add Fixed indirect production overhead costs absorbed = Total cost of machined goods (Transferred out to painting department) Materials movements and internal transfer inspection processes Painting department: Direct materials Add machined goods transferred IN Add Direct labour (12.00 per hour) Add Direct expenses (3.00 per machine hour) Add Fixed indirect production overhead costs absorbed = Total cost of painted goods (Transferred out to assembly department) Assembly department: Direct materials Add painted goods transferred IN Add Direct labour (9.00 per hour) Add Direct expenses (5.00 per machine hour) Add Fixed indirect production overhead costs absorbed = Total cost f saleable finished goods produced (Transferred out finished goods warehouse) Materials movements and internal transfer inspection processes Finished goods warehouse End Note: . The costs of materials movements between departments and internal inspection checks are included in indirect production overheads. The above flowchart is an outline process only and does not include control decision, documentation raising and filing requirements. 4 Fenton Ltd - continued: Goods receiving and locating / storage control process: When goods are received to the business raw materials stores, they are first checked by the store keeper for quantity against a copy of the original purchase order document (this is forwarded to the raw materials stores at the time that the order is placed with all money values removed). If the quantity is incorrect (allowing for approved part-order deliveries) a Quantity rejection note' is prepared. Goods that are acceptable by quantity are quality inspected for size, weight, colour etc. Where goods are found to be unacceptable by quality, a 'Quality rejection note' is prepared. Goods rejected by quantity or quality are located at the 'Returns room' ready for return to the supplier. Acceptable goods are initially identified as either 'Alpha' or 'Beta'. Alpha: Alphas that are 'Square' are to be located at 'A01' If the Alphas are not 'Square' are 'Round'. 'Round' Alphas are further sub-analysed as 'Clear' or Opaque'. Alphas that are clear' should be located at 'A02'; otherwise the 'Opaque' Alphas should be located at 'A03'. . Beta: . Betas that are 'Pentagon' should be located at 'B01 Betas that are not 'Pentagon' are 'Hexagon'. 'Hexagon' Betas are further sub-analysed as either "Large' or 'Small'. 'Large Betas' should be located at 'BO2'; otherwise the 'Small Betas' are to be located at 'B03'. the store keeper After goods received carefully accu een locate received note' (GRN). This will be forwarded to the finance office. prepare a 'goods Required: Task 1: Prepare a flowchart in a A4 size paper (one side only) to describe the goods receiving and locating / storage control process. described above. Note: Your flowchart should be prepared in a good style using the Microsoft Office Word: 'Insert / Shapes / Flowchart facility (Maximum 20 marks including 6 marks credit for software use, good style and clear presentation) 20 Marks 5 6 of 10 Trading (production and sales): You should assume that today is Monday 26th July 2021. Sales: The company has the following sales orders to be delivered during August 2021. Order 1102 Order / product: Order 1101 'Alpha 'Beta' Quantity to be delivered (sales in units) 800 700 Selling price (per unit) 85 30 Order 1103 'Omega' 1,200 55 Production: The production schedule for August 2021 (product quantities and production resources requirement) is shown below. Order 1101 Order 1102 Order 1103 Order / product: 'Alpha' 'Beta' 'Omega' Finished goods: 1,100 Quantity to be produced 1,300 1,700 Note: At 1st August 2021 there will be no opening inventory of finished goods. Resources requirement for production: Direct costs (variable costs): Order / product: Order 1101 "Alpha' Order 1102 'Beta' Order 1103 'Omega' Totals 650 Machining department: Incremental materials cost Direct labour hours (total) Machine hours (total) 1,300 90 130 900 65 130 2,850 285 hours 505 hours 175 200 790 1,650 200 2,640 Painting department: Incremental materials cost Direct labour hours (total) Machine hours (total) 130 95 80 305 hours 175 hours 100 50 25 1,100 Assembly department: Incremental materials cost Direct labour hours (total) Machine hours (total) 1,050 200 50 200 650 190 95 2,800 590 hours 205 hours 60 6 Fixed indirect production overheads: Indirect production overheads are fixed (unaffected by production activity levels) at 42,000 per month. This value has been allocated and apportioned to the 3 production departments as follows: Production department: Machining Fixed costs (allocation / apportionment) 21,000 Painting 9,000 Assembly 12,000 Total 42,000 Bases for absorption: Machining department = Machine hours Painting department = Direct labour hours Assembly department = Direct labour hours Note: The quantity for absorption basis (for each production department) should be established using the total departmental resources requirement shown in the tables above. Required: Task 2: Prepare (for each product and in total) the following planned values for August 2021: a. Prime costs 11 Marks b. Total (full) costs of production 14 Marks C. Finished goods closing inventories / cost of sales 7 Marks d. Gross profits and gross profit margins) 3 Marks Note to task 2: The requirement of task 2 should be established using an absorption costing system (as described in the production process flowchart) The total task 2 mark above, includes marks allocated to short descriptive notes to workings (