Help me understand this question TUI ACC202

Relevant Information for Decision Making

Assignment Overview

Relevant Cost Case Behemoth Motors Corp.

Behemoth Motors Corp. (BMC) is a major manufacturer of automobiles in the United States. BMC has decided to include a Global Positioning System navigator (GPSN) in all of its Sports Utility Vehicles (SUV) beginning with the 2013 model year. These models are just now being delivered and the GPSN units are manufactured in the Detroit BMC facility. Currently and for the foreseeable future, BMC will need 8,000 GPSNs per month. The total manufacturing cost of the GSPN is $425 per unit calculated as follows:

Item

Cost per unit

Direct materials (purchased locally)

$165

Direct labor (6 hours @ $28 per hour)

168

Factory Floor Space Charges (16,000 sq. ft. at $2.50 per sq. ft. per month allocated over 8,000 units per month)

5

Supervisory labor (monthly cost of $56,000 allocated over 8,000 units per month)

7

General company overhead ($640,000 per month assigned to GPSN allocated over 8,000 units per month)

80

Total Unit Cost

$425

BMC experiences a high level of quality control over these units with only 2% of total production failing quality control testing. 98% of all units manufactured are installed in SUVs.

Wally Wizard, the GPSN manager, has been approached by Far East Enterprises, Ltd (FEE) who has offered to outsource these units for MBC. FEE is a three-year-old electronic manufacturing company located in China and has experienced outstanding growth during that three-year period. FEE has offered to manufacture and deliver to Detroit 8,000 GPSN units at a unit cost of $400 beginning on Jan. 1, 2013. FEE asks for a two-year contract.

Under the existing arrangement, the direct materials are all purchased locally under month-to-month contracts. There are no future obligations under these contracts.

There are 100 direct labor employees involved in this process. These employees can be laid off but if they are, BMC must pay a penalty of $66,000 per year to the employees union. This penalty will continue for 4 years.

There are 10 supervisors, each earning $6,000 per month, assigned to the project. If the product is outsourced, all of these supervisors can be assigned to other supervisory positions within BMC.

If the product is outsourced, half of the factory floor space can be used for storage for materials that are currently stored in rented storage facilities. These rented facilities currently cost BMC $5,000 per month. There is no alternative use for the remaining factory floor space. The current $2.50 per sq. ft. charge is based on the overall BMC factory costs.

General company overhead is first assigned to operating units on the basis of total product produced and then further to produced units on a per unit basis. If the product is outsourced, this overhead will be reassigned to other operating divisions although total corporate overhead incurred will remain unchanged.

You have determined the following additional facts. The units manufactured by FEE will have the same quality as those manufactured by BMC and the delivery schedule will have the same reliability as that of BMC.

Case Assignment

Make a recommendation to Wally Wizard in a 3 to 4 page paper. Be sure to support your recommendation with the decision-making process outlined in the background information.

Assignment Expectations

It is important to answer the questions above. The discussion should be three to four pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.

Module 2 - SLP 

Relevant Information for Decision Making

Review the processes in your company and identify a decision that has recently been made or will be made in the near future in your organization. Next, please identify at least two relevant and two non-relevant costs for this decision. Your report should include

 •The name and nature of the organization

 •The activity and time period you used

 •The inputs you used

 •Your results

 •Any implications from your results

SLP Assignment Expectations

It is important to answer the questions above. The discussion should be two to three pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.

Module 3 - Case

Variable and Fixed Costs

Assignment Overview

Managerial accounting emphasizes short-term profit analysis, so the income statement is very important. Consequently, we’ll examine and discuss income statements in this case.

Keep the analysis from the SLP in mind when addressing the questions below.

 •Explain the main differences between the absorption and contribution (behavioral, variable) income statements. Will net income always be the same under the two approaches? If not, explain the difference.

 •Comment specifically on why companies feel the need to create yet another income statement in a different format. What information can the company gleam from this approach which is helpful as a tool in the decision making process.

 •Explain situations in which break-even analysis can be a useful tool. Provide a specific example.

The submission should be 2 to 4 pages and need to include answers to all the questions listed above. Include references in APA format.

Assignment Expectations

It is important to answer the questions above. The discussion should be two to four pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.

Module 3 - SLP

Variable and Fixed Costs

Below find production and sales information for Herrestad Company. We will use this same company for the remaining SLPs.

Product information

Beginning inventory

0

Units produced

10,000

Units sold

8,000

Selling price per unit

$250

Variable costs per unit

Direct material

100

Direct labor

50

Variable overhead

30

Variable selling and administrative

10

Fixed costs

Fixed manufacturing overhead

200,000

Fixed selling and administrative

100,000

Herrestad Company

Absorption Income Statement

For the period ending Dec. 31, 2011

Sales

$2,000,000

Cost of goods sold

1,600,000

Gross profit (margin)

$400,000

Selling and administrative expenses

180,000

Net income

$220,000

Required:

Prepare a contribution margin (behavioral, variable) income statement for Herrestad Company, compare net operating profit from a contribution margin income statement with net income from an absorption income statement, and explain why this difference happens. Prepare a second version assuming the selling price per unit increases to $270 per unit.

Use the original information to:

 •Determine the number of units the company must sell to break even for the year?

 •Compute break even assuming direct materials cost increase from $100 to $130, but all information remains the same.

The submission should be 2 to 4 pages and need to include answers to all the questions listed above. Show computations, discuss the results and include references in APA format.

SLP Assignment Expectations

It is important to answer the questions above. The discussion should be two to four pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.

Module 4 - Case

Allocating Fixed Costs

Case Assignment

This case has two separate parts.

Part I

How can activity based management and activity based costing (ABC) benefit an organization? Specifically, address the following points.

 •How does ABC differ from other allocation methods?

 •Describe the main characteristics of ABC.

 •What type of companies tends to benefit from ABC?

 •Comment on a company (research Internet) that has implemented ABC. ?What type of company is it?

 ?Was it successful?

Part II

The below concepts are all applied by many business in an attempt to be more efficient and reduce costs. Create a table describing at least three of the concepts below and how implementation may benefit an organization.

 •Lean manufacturing

 •Just-in-time

 •Theory of constraints

 •Total quality control

 •Value chain

The submission should be 3 to 5 pages and need to include answers to all the questions listed above. Include references in APA format.

Assignment Expectations

It is important to answer the questions above. The discussion should be three to five pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.

Module 4 - SLP

Allocating Fixed Costs

Herrestad Company does produce and sell two products and the details below will be used to prepare a segmented income statement (showing the income for each product and the total) for the company. Use ABC to allocate all fixed costs to the two products.

Background information

Total

Prod A

Prod B

Beginning inventory

0

Units produced

10,000

2,500

7,500

Units sold

8,000

2,000

6,000

Selling price per unit

$255

480

180

Variable costs per unit

Direct material

100

280

40

Direct labor

60

60

60

Variable overhead

25

40

20

Variable selling and admin. exp.

10

13

9

Fixed costs

Fixed manufacturing overhead

200,000

Fixed selling and administrative

100,000

Production runs (not $)

100

65

35

Number of sales reps (not $)

25

15

10

Here are the first few lines of the segmented income statement to help you get started. Complete the statement in good format and make sure you allocate the fixed costs to the two products. When done, comment on the information and the relative profitability of the two products.

Herrestad Company

Segmented Income Statement

For the period ending Dec. 31, 2011

A

B

Total

Sales

$960,000

$1,080,000

$2,040,000

Variable costs:

Direct material

560,000

240,000

800,000

SLP Assignment Expectations

The submission should be 2 to 4 pages and need to include answers to all the questions listed above. Show computations, discuss the results and include references in APA format.

When your paper is done, send it in.

Module 5 - Case

Budgeting

Case Assignment

The submission should be 2-4 pages and needs to include answers to all the questions. Include references in APA format.

This Case has two parts.

Part I

We have learned about the basic ideas of managerial accounting during the first two modules. Let’s try to apply this knowledge and review Charter School Budget ACC202 Module 5 Case. This budget is prepared assuming three levels of student enrollment (66, 100 and 120). Revenue and expenses projections are shown in the budget. Operating assumptions are shown in “Schedule A”.

The first requirement of this Case relates to the planning function of a budget. Comment on the following relating to the charter school budget:

 1.Is this a static or flexible budget?

 2.What is total revenue (excluding grants) per student?

 3.What are total expenses per student?

 4.Do all expenses seem necessary?

 5.Is this school viable? How many students does the school need to break even (show your calculations with analysis and state your assumptions for break-even)?

(Note: For break-even analysis, ignore revenue received as “Grants” and “Startup Costs” (Schedule A).

 6.What are the general benefits of preparing this budget?

 7.Discuss how this budget is likely to be used for the control function.

Part II

The second requirement of this case relates to the control function of a budget. Use the background material and Internet to answer the following questions.

 1.Variance analysis is a traditional tool used for planning and control. Comment on advantages and disadvantages of using this approach for performance evaluations.

 2.Do you have any suggestions for complementary or alternative performance measures?

Module 5 - SLP

Budgeting

Differential analysis involves knowing which costs are relevant, i.e. future costs that vary among alternatives. It is important to know what information to use and not just how to execute the analysis.

Herrestad Company receives an offer to make a new product, called C, for a new customer. The customer wants to buy 1,000 units. Product C has the same cost structure as product B with three exceptions. The new customer is only willing to pay $150 per unit, direct materials costs will decrease by $12 per unit and Herrestad does not have to incur any variable selling and administrative expenses.

 •Make a list of the expenses and amounts that are relevant for this decision. How much with the sale of this product contribute to the profitability of Herrestad?

 •What if the company only pays $140 per unit? How does this change the contribution towards profitability?

 •If you were the manager, would you accept this order? What considerations, other than financial would enter into your decision?

This is a Signature Assignment Expectation for ACC202 Module 5 SLP.

There are 2 specific learning outcomes:

 1.apply business theories, models, and concepts to guide analysis of problems and situations

 2.utilize data driven analysis in making business decisions.

In this SLP assignment for Module 5 our emphasis will be on understanding the concept of relevant costs. You will be summarizing all of what you learned the in the Cases, SLPs and TDs.

SLP Assignment Expectations

 •Demonstrate familiarity with the concept of relevant costs.

 •Write 2-4 pages, showing computations and discussing the results.

 •List supporting references and cite sources.

 •Use appropriate writing style (organization, grammar, & spelling - see Writing Guidelines).