ACG24 Management Accounting
Assignment 2- Case Study due on 26 October 2012
Brilliant Accents Company manufactures and sells two styles of kitchen taps: Brass and Chrome. The Brass has been produced since 2004 and sells for $22.50, and the Chrome, a newer model introduced in early 2009 that sells for $28.50. Based on the following income statement for the year ended November 30, 2011, senior management at Brilliant Accents have decided to concentrate its marketing resources on the Chrome model and to begin to phase out the Brass model.
Brilliant Accents Income Statement
for the Fiscal Year Ended November 30, 2011
Brass
Chrome
Total
Revenues
$495,000
$114,000
$609,000
Cost of goods sold
313,500
79,800
393,300
Gross margin
181,500
34,200
215,700
Selling and administrative expense
145,750
24,450
170,200
Operating income
35,750
9,750
45,500
Units produced and sold
22,000
4,000
Net income per unit sold
$1.6250
$2.4375
Unit costs for Brass and Chrome are as follows:
Brass
Chrome
Direct materials
$5.2
$14.6
Direct manufacturing labour
Brass (1.5 hours X $.30)
0.45
Chrome (3.5 hours X $.30)
1.05
Machine costsa
Brass (8 hours X $.45)
3.6
Chrome (4 hours X$.45)
1.8
Manufacturing overhead other than machine costsb
5.0
2.5
Total cost
$14.25
$19.95
_____________
a
Machine costs include lease costs of the machine, repairs and maintenance
b
Manufacturing overhead was allocated to products based on machine-hours at the rate of $.625 per hour
Brilliant Accents controller, James Nader, is advocating the use of activity-based costing and has gathered the following information about the companys manufacturing overhead costs for the year ended November 30, 2011.
Total Activity
Units of the Cost-Allocation Base
Activity Center (Cost
Costs
Brass
Chrome
Total
Allocation Base)
Soldering (number of solder
23,550
1,185,000
385,000
1,570,000
points)
Shipments (number of
21,500
16,200
3,800
20,000
shipments)
Quality control (number of
31,000
56,200
21,300
77,500
inspections)
Purchase orders (number of
23,760
80,100
109,980
190,080
orders)
Machine power (machine-
1,440
176,000
16,000
192,000
hours)
Machine setups (number of
16,000
14,000
30,000
18,750
setups)
Total manufacturing overhead
120,000
After completing the analysis, Nader shows his results to Sandy Mason, the Brilliant Accents division president. Mason does not like what she sees. If you show headquarters this analysis, they are going to ask us to phase out the Chrome line, which we have just introduced. This whole costing stuff has been a major problem for us. First Brass was not profitable and now Chrome.
Looking at the ABC analysis, I see two problems. First, we do many more activities than the ones you have listed. If you had included all activities, maybe your conclusions would be different. Second, you used number of setups and number of inspections as allocation bases. The number would be different had you used setup-hours and inspection-hours instead. I know that measurement problems precluded you from using these other cost-allocation bases, but I believe you ought to make some adjustments to our current numbers to compensate for these issues. I know you can do better. We cant afford to phase out either product.
Nader knows that the numbers are fairly accurate. As a quick check, he calculates the profitability of Chrome and Brass using more and different allocation bases. The set of activities and activity rates he had used resulted in numbers that closely approximate those based on more detailed analyses. He is confident that headquarters, knowing that Chrome was introduced only recently, will not ask Brilliant Accents to phase it out. He is also aware that a sizeable portion of Masons bonus is based on division revenues. Phasing out either product would adversely affect her bonus. Still, he feels some pressure from Mason to do something.
____________
Required
1. Describe the current costing system and list the potential weaknesses of this system regarding product costing accuracy and cost control.
2. Describe the proposed ABC system, the benefits from using it and why those benefits occur.
3.Using activity-based costing, calculate the unit cost, gross margin and gross margin percentage for both the Chrome and Brass models.
4. Discuss thoroughly whether Brilliant Accents Technology should discontinue production of the Brass model and concentrate on production of Chrome.
5.Comment on Mason’s concerns about the accuracy and limitations of an ABC system.
6.Referring to the ethical dilemma in the case, what would you suggest James Nader should do in response to Masons comments?
Please Note: Your Report should at all times be focused on and refer to given problems and circumstances at the Brilliant Accents Company. If and where you do not apply your Report to the specifics of the Brilliant Accents Company then you will receive zero marks, for example by using general comments as found in the textbooks and other sources.
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ACG24
Assessment Feedback Form
Case Assessment 2012
Required Content
Total
Your
Marks
Marks
I. Introduction (including your answer to question
8 marks
1)
II. Identification of key background information
8 marks
(include an answer to question 2)
III. Analysis:
40
Marks
A. Calculations (include an answer to
question 3)
B. Key Findings (include an answer to
8 marks
question 4)
C. Reflection (include an answer to
8 marks
question 5)
IV Ethical issue (include an answer to question 6)
12 marks
Include
supportive
evidence
V. Conclusion
4
marks
VII. Referencing/Appendix:Citation/Appendices
4
marks
appropriately inserted providing substantiation, that is,
authoritative support for assertions. Citations and
bibliography formatted correctly.
VIII. Readability & Presentation
8 marks
This includes appropriate structure, grammar,
spelling and clarity of expression that facilitates
understanding on the part of the reader.
Less Penalties
Total Mark
100 marks
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General Instructions for Assessment 2: Group Case
OBJECTIVES
The assignment will help to extend your knowledge of this course material, encourage you to work collaboratively and develop your communication and problem solving skills. You will strengthen your graduate qualities as discussed further later in these instructions. Please refer to the assignment feedback form, which outlines the marking criteria. The feedback form is available above in this document.
This case is designed as a group assignment. In the business world, people often need to work collaboratively. Getting organised into a group and managing the task is part of the assignment to fulfil the UniSA graduate qualities and prepare you for the workforce.
As a result of group work, you and your group members acquire benefits. Employers seek graduates who can work effectively in teams. Completing significant projects in business and professionally often requires the collaboration of many people. Working in teams exposes you as students to a real world situation and develops skills that employers value. In teams, you co-operate, share knowledge, reach consensus, show leadership and deal positively with conflicts that may develop within the team from time to time.
Learning benefits can also be derived from group work. Research indicates that students who are actively engagedin the learning process learn more. Working in teams provides you with such an opportunity throughproblem solving, communication with peers, learning from others and reinforcement of knowledge through explanation of concepts to others.
You can complete this assignment individually or in a group of three students (maximum). Only 1 assignment file is submitted per group, with each student’s name and ID number clearly marked on the coversheet. You are advised to organise a group early in the study period. There are many benefits associated with completing this assignment in a group. Getting organised into a group and managing the task (group management) is an important skill to learn for application in your professional career. Opportunities to organise a group are available through the discussion forum. You are advised to look over the assignment as soon as possible to become aware of the nature of the information in it and then read the questions carefully.
FORMAT
You are expected to present your assignment in a report format. The word limit is a maximum of 1,500 words, plus calculations(+/- 10%). It should be noted that the report for this assignment is an academic report whichrequires an Executive Summary and Bibliography as well as the other elements. Please note that the executive summary and the appendix of your report are not included in the word count Please refer to the article Writing Readable Reports (available on the course website) for guidance on writing an analytical report. Also, please look at:
http://www.unisa.edu.au/ltu/students/study/assessment/reports.asp
To assist you in preparing your report, please refer to the assignment feedback form, which outlines the marking criteria. This form is available in this document.
SUBMISSION OF THE ASSIGNMENT
The assignment MUST be submitted online via Grade book (see below under important information). Assignments submitted via alternative modes will not be accepted.
Please make sure that your names appear on the assignment cover sheet.
Before submitting an assignment using Gradebook:
keep a copy(a backup is imperative),
number and put your names on the pages and
include an electronic version of the Assignment Cover Sheet.
Your assignment will be marked and returned, usually no later than three weeks from the due date.
REFERENCING & PLAGIARISM
For any citations use the Harvard method, where the format of your reference list should be consistent with the Harvard system. If you are not aware of the Harvard style, refer to:
http://www.unisanet.unisa.edu.au/learningconnection/student/studying/referencing.asp
Note brief points below that assist in clarification of the meaning of plagiarism:
Do not copy from texts, articles or any other source without citing the source.
Quotations should be kept to a minimum and when used must be cited (refer to the source of the information).
If information contained in the assignment is not your own words or ideas, you must acknowledge the source within the text of the paper as well as in the reference list.
To acknowledge the source when you use another persons words (i.e. quote them) you must indicate that this is a direct quote, usually by quotation marks,and reference the source (including the pagenumber) within the text of the paper, as well as providing full source information in the reference list. Including the source in the reference list at the end of the paper alone is notsufficient.
Changing, deleting, adding only a few words, or rearranging the sentence/paragraph does not negate that fact that you are quoting.
If paraphrasing you still need to include an in-text reference (which includes the page number). Take care that the paraphrasing is not too close to the original and then, in fact, a quote.
The fact that the source of the material is from a text book, an Internet site, and/or the specific author cannot be identified does not negate the need to acknowledge the source of the ideas, or words, and to reference correctly.
If you need help with referencing, please refer to the following resources available from the Learning Connections website at: http://www.unisanet.unisa.edu.au/learningconnection/student/studying/referencing.asp:
Introduction to referencing
Styles of referencing
Referencing using the Harvard system
Frequently asked questions
All students should ensure that they are familiar with the plagiarism policy and referencing requirements BEFORE commencing the assignment in this course.
It is your responsibility, if unsure, to make sure you understand plagiarism, so that you do not present any assessment containing plagiarism. Plagiarism is regarded as a serious issue within the university system with severe consequences for students who have been found to have plagiarised. Often the minimum penalty is a zero for the assignment with exclusion from the university an option in serious cases.
The Universitys policies on academic misconduct include the following:
9.2.2 (c) submitting another students work in whole or in part, where such assistance is not expressly permitted in the course information booklet;
9.2.1(e) providing assistance to a student in the presentation of individual work, where such assistance is not expressly permitted in the course information booklet.
Whilst we understand that pressures from fellow students are sometimes difficult to resist, and it is acceptable (and indeed generous) to assist other students by discussing issues relating to the assignment, it is not acceptable to provide access to, or copies of, your own assignment (or part of your assignment) to other students. Nor is it acceptable to use another students work as the basis for submission of your own (or part of) assignment, whether quoting, paraphrasing or simply using their ideas.
Note that it is intended that the assignment in this course will be checked, using text comparison software, for instances of plagiarism or collusion.