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Microsoft Word - ACCT6004_Assessment 2 Brief.docx ACCT6004_Assessment 2 Brief_Individual Case Study Page 1 of 10 ASSESSMENT BRIEF Subject Code and Name ACCT6004 Management Accounting Assessment Assessment 2 - Case Study Individual/Group Individual Length (1,800 words +/- 10%) Learning Outcomes b) Identify and analyse ethical and organisational issues confronting contemporary management accountants. c) Categorise and identify the nature of various types of costs, cost objects and cost behaviours and use cost estimation techniques to develop cost functions. d) Apply cost accounting techniques to calculate the cost of a range of cost objects, as well as analyse costs. e) Apply cost information to planning, control and decision-making. f) Critically evaluate the relevance of both quantitative and qualitative costing information to management decision making. Submission By 11:55pm AEST/AEDT Sunday of Module 5.1 (week 9) Weighting 30% Total Marks 100 marks Context: The purpose of this assessment is to establish the skills needed in the workplace for costing products and services using the appropriate processes and tools and applying analytical processes to construct accounting systems and models using workplace tools. Each question uses realistic data and the professional practices similar to that found in workplaces. ACCT6004_Assessment 2 Brief_Individual Case Study Page 2 of 10 Instructions: • Students will work individually to prepare a response to ALL of the questions listed in the case study. • Students need to submit a report, presented in proper report format (including a reference list) by Sunday, 15th November 2020 (end of Week 9). Submission Instructions: • The report needs to be submitted though the submission link available on the Blackboard. • The report should be submitted in Word format ACCT6004_Assessment 2 Brief_Individual Case Study Page 3 of 10 Question 1: Support Department cost allocation Computer Horizons Ltd. manufactures computers. The company has two corporate support departments (legal and personnel) in supporting each other and two manufacturing departments, the Laptop department and the Workstation department. The overhead costs of support departments are allocated to the manufacturing departments. Legal hours are used to allocate the cost of legal department, and personnel hours are used to allocate the cost of personnel department. The budgeted overhead costs and cost allocation bases are given below: Support Departments Manufacturing Departments Legal Personnel Laptop Workstation Overhead Costs before any inter department cost allocations $9,055 $4,000 $240,000 $200,000 Support Work provided by Legal Department Legal hours 2 3 37 20 Support work provided by Personnel Department Personnel hours 40 30 200 160 Required: Report the total costs of the manufacturing departments (Laptop and Workstation) after the support departments’ (Legal and Personnel) costs have been allocated using each of the following methods: i. Direct Method ii. Step Down Method (allocate Legal department’s cost first) iii. Reciprocal Method ACCT6004_Assessment 2 Brief_Individual Case Study Page 4 of 10 Question 2: Support Department Cost allocation and Job Costing Custom Boat Manufacturing Company makes customised boats and uses job costing system. The company has two support departments (administration and security) and two manufacturing departments (machining and assembly). The following table shows the total overhead costs of manufacturing departments after the support departments’ cost have been allocated under three cost allocation methods. Cost Allocation Method Machining Department Cost Assembly Department Cost Direct Method $ 8,650,000 $ 7,350,000 Step-down Method $ 8,500,000 $ 7,500,000 Reciprocal Method $ 9,000,000 $ 7,000,000 Management of the company has decided that it will achieve the most appropriate job costs by using individual manufacturing department overhead rates to allocate the overhead costs to the jobs. These rates are developed after support-department costs are allocated to manufacturing departments. The company uses normal costing. Machining department’s cost is allocated on the basis of machine hours and Assembly department’s cost is allocated based on labour hours. The budgeted labour hour and machine hours for the two manufacturing departments are presented below. Manufacturing Departments Machine Hours Labour Hours Machining Department 200,000 15,000 Assembly Department 80,000 35,000 Required: (a) Based on the following information, determine the total costs for Job MT27 if the company uses Reciprocal Method to allocate support departments’ costs to the manufacturing departments. Job no. MT27 Machining Assembly Direct materials $36,000 $6,710 Direct labour cost $1,550 $1,650 Direct labour hours 45 70 Machine Hours 210 20 (b) The company evaluates the performance of the operating department managers on the basis of how well they managed their total costs, including allocated costs. As the manager of the Machining Department, which allocation method would you prefer to allocate support department’s costs to manufacturing departments? ACCT6004_Assessment 2 Brief_Individual Case Study Page 5 of 10 Question 3: Process Costing Cannondale Bicycle Company manufactures various lines of bicycles. Because of the high volume of each type of product, the company employs a process cost system to determine unit costs. Bicycle parts are manufactured in the Moulding Department and transferred to the Assembly Department where they are assembled. After assembly, the bicycles are sent to the Packing Department. Cost and production figures for the Assembly Department are presented below for the month of June: Production Data (in unit) Beginning WIP Inventory (70% complete as to material; 40% complete as to conversion) 70,000 Started in June 460,000 Completed and transferred out 450,000 Ending WIP Inventory (75% complete as to material; 25% complete as to conversion) 80,000 Cost Data (in dollar) Material Conversion Beginning WIP Inventory $36,550 $13,500 Current period $391,850 $287,300 Required: (a) Determine the cost per equivalent unit for the Assembly Department’s direct materials and conversion costs, and the total unit cost for the current period, under the i. Weighted-Average method ii. FIFO method (b) Assign total costs to units completed (and transferred out) to Packaging Department and to units in ending work in process in the Assembly Department. ACCT6004_Assessment 2 Brief_Individual Case Study Page 6 of 10 Question 4: Cost Volume and Profit (CVP) Analysis Bellroy Company makes protective cases for iPhone 11 Pro Max. The company has three product lines - Polycarbonate (PC) cases, Silicone (S) cases and Thermoplastic Polyurethane (TPU) case. The following table presents the sales and cost data of the business. PC case S case TPU Case Selling Price per unit 50 65 90 Variable Cost Per unit 45 61 87 Company’s total fixed cost 35,100 After analysing the market trend, the management accountant of Bellroy Company expects that the company will be able to sell 17,500 cases in next month consisting, 2,500 units of PC case, 10,000 units of S case and 5,000 units of TPU case. Required: (a) If the given sales mix is maintained, what is Bellroy company’s break-even point in units? (b) Assuming that the given sales mix is maintained, what is the operating profit when 17,500 units are sold? (c) If the company sold 2,500 units of PC case, 7,500 units of S case and 7,500 units of TPU case, what would be the operating income? What would be the new break-even point in units if these new relationships persist in the next period? (d) The CEO of the Bellroy Company reviewed the break-event points calculated the requirement (a) and (c). After careful observation, she commented “It is always better for a company to choose the sales mix that yields the lower break-even point”. Do you agree with the CEO’s comment? Explain your answer. ACCT6004_Assessment 2 Brief_Individual Case Study Page 7 of 10 Question 5: Planning: Operational Budgets John is a manager of the sales department of Conad company. The company operates in the retail industry where it buys products from offshore suppliers at a lower price and sells those products in the local market at a higher price. The pandemic has slowed down the movements of goods across countries. Most countries have restricted or stopped international flights and air travel. This has, in turn, shrunk the air freight capacity of most of the airlines. The shipping sector has also been hit as vessels are placed under quarantine for weeks before being allowed into the ports thereby slowing down processes. Shipping containers are stuck at the ports and on transit at state borders. Due to these changed conditions, the company needs to place its orders to the suppliers eight months in advance to meet customer demands on time. The CFO of the company is preparing the master budget for next year and asked john to provide him with information on the estimated sales for next year. The company has a policy that sales managers can receive a bonus equal to 5 percent of the actual sales in excess of budgeted sales. Required: (a) Describe the ethical conflict that John is facing when asked to provide estimated sales for next year? (b) If John behaves unethically, how would his behaviour impact the company and its customers? ACCT6004_Assessment 2 Brief_Individual Case Study Page 9 of 10 Learning Rubric: Assessment 2 Assessment Criteria Fail (Unacceptable) 0-49% Pass (Functional) 50-64% Credit (Proficient) 65-74% Distinction (Advanced) 75 -84% High Distinction (Exceptional) 85-100% Knowledge and understanding of the cost concepts and techniques used in the case study. Shows very little to no understanding of how to apply the costing system technique to the case study questions. Shows limited understanding of how to apply the costing system technique to the case study questions. Thorough knowledge or understanding of the costing system techniques relevant to the case study. Highly developed understanding of the costing system techniques relevant to