southern new hampshire university | Accounting homework help

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ACC 207 Final Project Guidelines and Rubric

Overview

The final project for this course is the creation of a quantitative analysis with a memo to management.

Classifying a company’s costs allows for an in-depth analysis of the impact that changes in output have on revenues, costs, and net income or net loss. A cost­volume-profit (CVP) analysis will be completed in order to determine the breakeven point. Relevant costs will be used to prepare a flexible budget. Additionally, an appropriate costing system should be selected and the choice should be substantiated with reasonable rationale. Finally, a memo should be prepared for management that summarizes the results of the quantitative analysis and makes recommendations for an optimal costing system to be ethically used by key decision makers.

The project is divided into three milestones, which will be submitted at various points throughout the course to scaffold learning and ensure quality final submissions. These milestones will be submitted in Modules Two, Four, and Five. The quantitative analysis with a memo to management will be submitted in Module Seven.

In this assignment, you will demonstrate your mastery of the following course outcomes:

·            Utilize cost behavior and cost analysis to assist decision makers in planning and adding value to the business

·            Prepare a flexible budget for supporting informed managerial decision making

·            Interpret variances for determining the optimal costing system to fit an organization’s internal accounting needs

·            Interpret the role of ethics in cost accounting for determining its impact on decision making

Prompt

In this assignment, multiple analyses will be conducted in order to obtain a company’s financial information specific to company costs.

MDE manufactures outdoor garden items such as lawn ornaments and bird feeders. MDE uses a standard costing system to set standards for direct materials, labor, and overhead costs. MDE reviews and revises standards as necessary. Recently, budget variances for bird feeders have caused some concern. You, the company’s cost accountant, have been asked to examine the numbers for the product, explain the variances, and suggest ways to improve performance.

Specifically, the following critical elements must be addressed:

You will begin by using the MDE Manufacturing Budget (Table I) to analyze costs, contribution margin, and breakeven point for the bird feeder division. You will then analyze the actual costs and complete a cost-volume-profit (CVP) analysis to determine how many bird feeders must be sold at the current cost and sales price level to earn a $10,000 profit and how much the sales price would have to increase to earn a $10,000 profit at the same cost and sales volume level. Use Tabs 1 and 2 of the Student Workbook.

.    

I. Costs

a)   Classify all product and period costs appropriately.

b)   Compute a cost-volume-profit analysis. What are the implications of this analysis?

c)   Compute contribution margin per unit and contribution margin ratio.

d)   Determine the breakeven quantity and the breakeven revenue accurately.

e)   Determine if the company is breaking even. What are cost-volume-profit analysis implications on short-term planning?

Your next step is to use the MDE Manufacturing Budget (Tables I, II, III, IV) to compare the budget and actual costs. Determine where variances occurred and explain why. Use Tabs 3 and 4 of the Student Workbook to present your budgets/variances and Tabs 5 and 6 for all budget/variance calculations.

II. Prepare and Perform

a) What are your fixed costs? Segregate them in the budget model.

b) Determine how variable costs change as activity measures change. How can this information be applied?

c) Create the budget model, ensuring fixed costs are hard coded into the model (variable costs are stated as a percentage of the relevant activity measures or as a cost per unit of activity measure).

d) Add actual activity measures to the model. Make sure all information is added accurately.

e) Add the flexible budget calculations to the budget model. Make sure all information is accurate.

f) Compare the flexible budget to the actual expenses. What does this inform? Be sure to discuss the following variances:

i.       Static budget variance, including sales volume and flexible budget variances

ii.      Price and efficiency variances for direct materials and direct labor

iii.     Spending and efficiency variances for variable manufacturing overhead

g) Determine the aspects of the budgeting process that are in need of improvement. Justify your response.

h) Interpret what budget variances represent. Should all variances be investigated?

You have also been asked to give management a recommendation on whether the company should switch from process costing to activity-based costing (ABC). This is an exploratory discussion, but management would like to know more about the difference between the two costing systems and if a different costing system might work better for the company.

III. Main Costing Systems — Activity-Based Costing vs. Process Costing

a)   Identify the cost allocation system that would benefit this company most. Justify your response.

b)   Does this cost allocation system meet management planning and control goals? Explain.

c)   What are the ethical implications that should be considered with this cost allocation system?

d)   Describe the ethical implications of direct costs versus indirect costs. What considerations should be made when selecting one of these two?

After all of your calculations and research, you are now ready to prepare your report.

.    

IV. Prepare a Memo to Management

a)   Summarize your quantitative analysis based on your findings (include answers to all questions in Sections I, II, and III).

b)   Report the parts of the budgeting process that are in need of improvement. Provide suggestions to improve those parts.

c)   Report overall improvement recommendations to management. Consider the ethical implications when communicating sensitive information.

………………………………………………………………………………………………………………………………………………………………………………………………………….

 

ACC 207 MDE Manufacturing Budget: Bird Feeder

 

        I.            Sales and Manufacturing Expenses: Budget and Actual(2014)

 

You will use this table to complete Milestones One and Two.

 

 

Budget ($)

Actual ($)

 

 

 

Sales

1,050,000

991,700

 

 

 

Expenses

 

 

Materials –Cedar

225,000

248,160

Materials –Plastic

37,500

37,741

Factory Worker Labor

300,000

332,760

Materials –Indirect

3,000

2,585

Factory Depreciation

78,000

78,000

Factory Utilities

12,000

12,000

Factory Maintenance and Repairs

5,000

4,500

Shipping ($2.25/each)

112,500

105,750

Sales Commissions ($2.00/unit sold)

100,000

94,000

Office Rent

12,000

12,000

Advertising

20,000

20,000

Liability insurance

5,000

5,000

Office Depreciation

1,000

1,000

Office Salaries

48,000

48,000

 

 

 

Total Expenses

959,000

1,001,496

 

 

 

     II.            Contribution Margin: Static Budget and Actual Results (2014)

 

You will use this table to complete Milestone Two.

 

 

Actual Results

Static Budget Amount

 

 

 

Units Sold

47,000

50,000

Revenues ($)

991,700

1,050,000

Manufacturing Costs ($)

 

 

Variable

621,246

565,500

Fixed

94,500

95,000

Gross Margin

275,954

389,500

 

 

 

 

 

 

   III.            Standard Variable Manufacturing Costs (2014)

 

You will use this table to complete Milestone Two.

 

 

Static Budget Costs

Standard Input

 

 

 

Direct Materials: Cedar

225,000

3.0 ft/unit

Direct Materials: Plastic

37,500

1.0 ft/unit

Direct Manufacturing Labor

300,000

0.5 hrs/unit

Variable Manufacturing Overhead

3,000

0.3 ft/unit

 

 

 

   IV.            Actual Variable Manufacturing Costs (2014)

 

You will use this table to complete Milestone Two.

 

 

Actual Costs

Actual Input

 

 

 

Direct Materials: Cedar

248,160

3.2 ft/unit

Direct Materials: Plastic

37,741

1.1 ft/unit

Direct Manufacturing: Labor ($)

332,760

.60 hr/unit

Variable Manufacturing Overhead

2,585

0.25ft/unit

 

 

 

 

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