Management and Cost Accounting Assignment

B313F focal point and Cost Accounting Assignment 1 Date due29 October 2008 weighting15% of the total marks of the by nature Question 1(25 marks) Mini Case Setos Storage Wareho rehearse Paul Seto owns and manages a commercial storage warehouse. He stores a vast variety of perishable goods for his customers. to a lower place the alive pricing polity, he has ae restraind customers employ a flat rate of $2. 40 per kilogram per month for goods stored. His storage warehouse has 10,000 cubic metres of storage capacity.In the angiotensin converting enzyme-time(prenominal) two years, Seto has become dissatisfied with the profitability of the warehouse operation. Despite the fact that the warehouse remains relatively full, revenues have non kept pace with operating salutes. Recently, Seto approached his accountant, Albert Lo, round using activity-based compriseing (ABC) to improve his pinch of the make believes of be and revise the pricing formula. Lo has goaded that most c ost can be associated with one of quaternity activities. Those activities and their related periodic be, volume measures, and volume levels for 2008 are as follows Activity Cost Monthly vividness Measure Send/receive goods $80,000 metric weight whole 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 bit of packages 500 Lo has also collected rifle months information on the following 3 customers whose goods were alone veritable on the first day of ratiocination month. Customers Weight of Order Cubic Metres square(p) Metres Number of Packages (Kilograms) Sunshine Co. 20,000 600 30 10 Best Buy Co. 20,000 400 20 40 Chows calling 20,000 200 100 160 Seto would resembling Lo to perform some analyses based on the above information and selective information in order to evaluate whether to use ABC. require a. construe the price to be charged to each(prenominal) of the 3 customers chthonic the existing pricing insurance. (3 marks) b. Based on the monthly activity cost and volume data provided, reckon the amount of cost depute 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), assumptive Seto would base the price on the cost determined in part (b) sum a markup of 40 percent. (3 marks) d. Critically talk over whether Setos existing pricing policy captures the costs incurred to provide the warehouse services. (5 marks) e. A cost hierarchy categorizes costs into diverse cost pools on the basis of the disparate types of cost drivers or cost-allocation bases. Describe the four levels of a manufacturing cost hierarchy under the ABC trunk. 4 marks) Question 2(25 marks) shop Furnishings Ltd. is a Yuen Long based manufacturer make ternary unique woods results bed-frames, coffee tables, footstools. These products are completely carve by hand by versatile cra ftspeople who have been conditioned in making these products. Since it takes about a year to train each craftsperson, the lug cost is a fixed production constraint over the short term. For the year ended 31 December 2008, the gild expects to have 34,000 for sale labour hours. The average hourly labour rate is $25.Information regarding the current product military control is as follows Bed-framesCoffee tablesFootstools $ $ $ Selling price900 680 240 inconstant costs institutionalize substantive220 160 60 take aim manufacturing-labour costs 300 275 75 indirect manufacturing-labour costs 80 40 21 early(a) indirect manufacturing costs100 80 20 Variable selling expense 20 15 10 Variable manufacturing costs are variable with look upon to units produced. Variable selling expenses are variable with respect to units sold.Fixed costs Indirect manufacturing-labour costs 80,000 Other indirect manufacturing costs 70,000 Selling & disposition 75,000 Required a. Compute the contributi on boundary line per unit for each of the three products above. (6 marks) b. expect that the market demand exceeds the companys production capacity for all products, determine the number of units of each product that the company should make. (Hint You need to maximize the contribution per unit of the scarce resource. ) deem the profit in the beginning tax based on your last of units of each product. (7 marks) c.Assuming that the company has a policy of devoting between 20% to 50% of its getable skilled labour capacity to one product, determine the number of units of each product that the company should make and calculate the level best profit before tax. (7 marks) d. Discuss how managers ensconce whether a cost is a direct or an indirect cost and withd vulgar the factors that will affect the classification of a cost as direct or indirect. (5 marks) Question 3(25 marks) videodisk Express is a large manufacturer of affordable DVD players. Management recently became aware of rebellion costs resulting from returns of malfunctioning products.As a jump point for further analysis, middling Lee, the controller, wants to campaign different forecasting modes and then use the best one to forecast every quarter 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 stop over 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 steep-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 multiple global production facilities to action the global market? (5 marks) c. How do we contend when high correlation exists? Explain whether high correlation is the same as cause and effect? (5 marks) Question 4(25 marks) Quik Printing Inc. , is a rapidly growing company that has non been profitable despite increases in sales.It has chartered you as a consultant to bugger off ways to improve the situation. You believe that the line results from poor cost control and outside cost estimation on pranks. To crumple data for your investigation, you turn to the accounting system and find that it is almost nonexistent. However, you piece unitedly the following information for April Production 1. blameless assembly line 101. 2. Started and completed job 102. 3. Started job 103. ancestry determines 1. Work-in-process inventory march 31 suppose 101 work out material.. $ 2,000 perseverance (960 hours ( $10) 9,600 April 30 barter 103 Direct material.. $ 1,600 Labor (1,040 hours ( $10) 10,400 2. each job in work-in-p rocess inventory was simply 50 percent completed as to outwear hours however, all direct material necessary to do the entire job was charged to each job as soon as it was started. 3. There were no raw-material inventories or finished-goods inventories at either certify 31 or April 30. Actual manufacturing command processing overhead time was $20,000. Cost of goods sold (before enrollment for over-or underapplied overhead) Job 101 Direct material $ 2,000 Labor.. ? Overhead ? measure $ 30,800 Job 102 Direct material ? Labor.. ? Overhead ? Total ? Overhead was applied to jobs using a predetermined rate per labor buck 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. Raw 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 labo rers. Required Write a report, with financial backing calculations, to management to show the following a. The cost 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)