Management and Cost Accounting Assignment

B313F Management and equal Accounting Assignment 1 find out due29 October 2008 burthening15% of the total marks of the tune Question 1(25 marks) Mini Case Setos Storage Warehouse capital of Minnesota Seto owns and manages a commercial memory board warehouse. He stores a vast intermixture of perishable goods for his customers. Under the alive pricing insurance policy, he has supercharged customers development a flat rate of $2. 40 per kilogram per month for goods stored. His storage warehouse has 10,000 cubic metres of storage cognitive content.In the past two divisions, Seto has become displease with the profitability of the warehouse operation. Despite the fact that the warehouse remains comparatively full, revenues have not kept pace with operating constitutes. Recently, Seto approached his accountant, Albert Lo, about utilise activity-based costing (ABC) to improve his understanding of the causes of be and revise the pricing formula. Lo has impelled that most c osts can be associated with one of four activities. Those activities and their related to monthly costs, volume measures, and volume levels for 2008 are as follows Activity Cost Monthly Volume Measure Send/receive goods $80,000 Weight in kilograms 50,000 Store goods $8,000 Volume in cubic metres 800 Move goods $10,000 Volume in square metres 500 Identify goods $3,000 Number of packages 500 Lo has also collect last months information on the following 3 customers whose goods were every received on the first day of last month. Customers Weight of Order Cubic Metres Square Metres Number of Packages (Kilograms) Sunshine Co. 20,000 600 30 10 Best Buy Co. 20,000 400 20 40 Chows Trading 20,000 200 100 160 Seto would like Lo to perform both(prenominal) analyses based on the above information and data in nightclub to evaluate whether to use ABC. take a. Determine the impairment to be charged to individually of the 3 customers under the existing pricing policy. ( 3 marks) b. Based on the monthly activity cost and volume data provided, determine the meat of cost assigned to each of the 3 customers. 10 marks) c. Determine the price to be charged to each of the 3 customers using activity-based costing (ABC), presume Seto would base the price on the cost determined in purpose (b) plus a markup of 40 percent. (3 marks) d. Critic eithery discuss whether Setos existing pricing policy captures the costs incurred to provide the warehouse services. (5 marks) e. A cost hierarchy categorizes costs into distinguishable cost pools on the basis of the different types of cost drivers or cost-allocation bases. Describe the four levels of a manufacturing cost hierarchy under the ABC system. 4 marks) Question 2(25 marks) Antique Furnishings Ltd. is a Yuen bulky based manufacturing business making three unique wood products bed-frames, hot chocolate tables, footstools. These products are completely carved by hand by accomplished craftspeople who have be en trained in making these products. Since it takes about a year to train each craftsperson, the poke cost is a fixed outturn constraint over the short term. For the year ended 31 declination 2008, the telephoner expects to have 34,000 available labour hours. The average hourly labour rate is $25.Information regarding the current product line is as follows Bed-framesCoffee tablesFootstools $ $ $ Selling price900 680 240 variant costs level material220 160 60 Direct manufacturing-labour costs three hundred 275 75 confirming manufacturing-labour costs 80 40 21 opposite in condition manufacturing costs100 80 20 Variable selling expense 20 15 10 Variable manufacturing costs are variable with look on to units produced. Variable selling expenses are variable with respect to units exchange.Fixed costs Indirect manufacturing-labour costs 80,000 Other indirect manufacturing costs 70,000 Selling & administration 75,000 Required a. Compute the contribution margin per unit for each o f the three products above. (6 marks) b. assuming that the market demand exceeds the companys production capacity for all products, determine the number of units of each product that the company should sack. (Hint You need to maximise the contribution per unit of the scarce resource. ) Calculate the profit before value based on your determination of units of each product. (7 marks) c.Assuming that the company has a policy of devoting between 20% to 50% of its available skilled labour capacity to one product, determine the number of units of each product that the company should make and calculate the maximum profit before tax. (7 marks) d. Discuss how managers decide whether a cost is a direct or an indirect cost and call the factors that will affect the classification of a cost as direct or indirect. (5 marks) Question 3(25 marks) DVD Express is a large manufacturer of affordable DVD players. Management recently became aware of rising costs resulting from returns of malfunction ing products.As a starting point for further analysis, Bonnie Lee, the controller, wants to runnel different prognosticateing methods and then use the best one to forecast quarterly expenses for 2009. The relevant data for the previous three years follows 2006Return 2007Return2008Return QuarterExpensesQuarterExpensesQuarterExpenses 1$15,0001$16,2001$16,600 217,500217,800218,100 318,500318,800319,000 418,600417,700419,200 The result of a simple regression analysis using all 12 data points yielded an intercept of $16,559. 09 and a coefficient for the independent variable of $183. 22 (R-squared = . 27, t = 1. 4, SE = 1128). Required a. Calculate the quarterly forecast for 2009 using the high-low method and regression analyses. Recommend which method Bonnie should use. (15 marks) b. How does your analysis in requirement 1 change if DVD Express manufactures its products in nonuple global production facilities to serve the global market? (5 marks) c. How do we get it on when high corr elation exists? Explain whether high correlation is the same as cause and effect? (5 marks) Question 4(25 marks) Quik Printing Inc. , is a rapidly festering company that has not been profitable despite increases in sales.It has hired you as a consultant to find ways to improve the situation. You believe that the blood results from poor cost control and inaccurate cost estimation on billets. To gather data for your investigation, you turn to the accounting system and find that it is around nonexistent. However, you piece together the following information for April Production 1. Completed job ci. 2. Started and completed job 102. 3. Started job 103. Inventory values 1. Work-in-process inventory treat 31 Job 101 Direct material.. $ 2,000 Labor (960 hours ( $10) 9,600 April 30 Job 103 Direct material.. $ 1,600 Labor (1,040 hours ( $10) 10,400 2. Each job in work-in-process inventory was exactly 50 percent completed as to assiduity hours however, all direct mater ial necessary to do the entire job was charged to each job as soon as it was started. 3. in that location were no raw-material inventories or finished-goods inventories at either March 31 or April 30. Actual manufacturing overhead was $20,000. Cost of goods sold (before adjustment for over-or underapplied overhead) Job 101 Direct material $ 2,000 Labor.. ? Overhead ? Total $ 30,800 Job 102 Direct material ? Labor.. ? Overhead ? Total ? Overhead was applied to jobs using a predetermined rate per fight dollar that has been used since the company began operations. All raw materials were purchased for cash and charged directly to Work-in-Process Inventory when purchased. knifelike material purchased in April amounted to $4,600. Direct-labor costs charged to jobs in April totaled $32,000.All labor costs were the same per hour for April for all laborers. Required Write a report, with supporting calculations, to management to show the following a. The cos t elements (direct material, labor, and overhead) of cost of goods sold before adjustment for over-or underapplied overhead for each job sold. (14 marks) b. The value of each cost element (direct material, labor, and overhead) for each job in work-in-process inventory at April 30. (7 marks) c. Over-or underapplied overhead for April. (4 marks)