Development Ltd. is looking to outsource its finance department and is in discussions with Sums plc, an international facility management company. Development Ltd havs reviewed its cost base and hasascertained that the following costs are associated with the running of the finance department:
|Administration labour||10,000 hours at £8 per hour|
|Supervisory Labour||6,000 hours at £12 per hour|
|Variable overheads||£5 per administration hour|
|Apportionment of Fixed overheads||£8,000|
Sums plc has offered to provide the service at a cost of £200,000 per annum.
Calculate whether or not Development Ltd should outsource the department to Sums plc. and state the maximum that Development Ltd would be willing to pay to outsource its finance department.
It is the end of December 2022 and Palace Ltd is completing the preparation of its short term financial plan for the three months to 31 March 2023. To complete the preparation of the cash budget for each of these months the following projections and assumptionshave been made:
1. Past experience suggests that the firm will collect 40% of its sales revenue in the month of the sale, 50% one month after the sale, and the balance in the second month following the sale.2. Sales for October, November and December were £200,000, £220,000 and £170,000 respectively.3. Purchases are made in the month of sale but paid for in the following month.4. Purchases for December were £90,000.5. Labour costs follow the shift patterns worked by the company’s employees and normally represent 5% of that month’s sales, with payment being made in the month that the expense is incurred.6. Administration costs of £50,000 are incurred each month. These are paid in the month they are incurred.7. A VAT payment of £40,000 is due to be paid in March.8. Year-end performance bonuses are paid in January and are estimated to be £20,000.9. The company has decided to replace the motor vehicles of three of its board members in February at a cost of £65,000 per vehicle10. The cash balance at the beginning of January was £20,000. The directors feel that a minimum cash balance of £20,000 should be maintained at all times.
Prepare a cash budget for the three months of January, February and March 2023.
Smithton Ltd bought machinery for £70,000 on 1January 2023. The machine was to be used as part of the business for 3 years and was expected to have a residual value of £10,000 at the end of year three.
(a) Calculate for each of the financial years ended 31 December 2023 and 2024
i. the annual depreciation chargeii. the closing net book value of the machine
You should use the straight line method of depreciation.
Smithton paid £15,000 for property insurance on 1 January 2023. The policy covered the 15-month period to 31 March 2022.
(b) Calculate for the year ended 31 December 2023
i. The charge for property insurance in the income statement.ii. The entries for the above transaction in the balance sheet
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