Prepare an analysis of the variances for materials and

Question

ACCY211: Management Accounting Assignment

QUESTION 1 - Sutherland University offers only high-tech graduate-level programs. It has two principal operating departments, Engineering and Computer Sciences, and two support departments, Facility and Enrolment Services. The base used to allocate Facility is budgeted total maintenance hours. The base used to allocate Enrolment Services is number of credit hours for a department. The following chart summarizes budgeted amounts and allocation-base amounts used by each department:

	Support Departments		Operating Departments
	Facility	Enrolment	Engineering	Computer Sciences
Budgeted costs	$350,000	$950,000	$1,500,000	$2,000,000
Maintenance hours	Zero	1,000	2,000	5,000
Credit hours	16,000	Zero	24,000	36,000

Required:

(a) Using the direct method, what amount of support department costs will be allocated to the Engineering department?

(b) Using the step-down method, what amount of support department costs will be allocated to the Engineering department if the service department with the highest dollar amount is allocated first?

(c) Describe the key features of the reciprocal method and express support department costs and reciprocal relationships in the form of linear equations.

(d) What is conceptually the most defensible method for allocating support- department costs? Why?

QUESTION 2 - Amber Company uses a standard cost system and sets predetermined overhead rates on the basis of direct labour hours. The following data are taken from the company's budget for the current year.

Denominator activity	4,500 units
Variable manufacturing overhead (9,000 direct labour hours @$3.80)	$34,200
Fixed manufacturing overhead cost	$63,000
Predetermined overhead rate ( $97,200÷9,000 direct labour hours)	$10.80

The standard cost card for the company's only product is given below:

	Standard Quantity or hours	Standard price or rate	Standard cost Per Unit
Direct materials	4 kilograms	$2.60 per kilogram	$10.40
Direct labour	2 direct labour hours	$9 per direct labour hour	18.00
Variable overhead	2 direct labour hours	$3.80 per direct labour hour	7.60
Fixed overhead	2 direct labour hours	$7 per direct labour hour	14.00
Total standard cost			$50.00

During the year, the company produced 4,800 units of product and incurred the following costs:

	Quantity	Amount
Direct materials purchased	30,000 kilograms	$75,000
Direct materials used.	20,000 kilograms
Direct labour	10,000 hours	$86,000
Variable manufacturing overhead cost		$35,900
Fixed manufacturing overhead cost		$64,800

Required:

(a) Prepare an analysis of the variances for materials and labour for the year.

(b) Prepare an analysis of the variances for variable and fixed overhead for the year.

(c) Based on the results from your analysis above, comment on the cost control efficiency of the company.

QUESTION 3 - Yokohama Company produces baseball bats for kids that it sells for $36 each. At capacity, the company can produce 50,000 bats a year although company is currently producing and selling 40,000 bats. The costs of producing and selling 50,000 bats are as follows:

	Cost per Bat	Total costs
Direct materials	$13	$650,000
Direct manufacturing labour	5	250,000
Variable manufacturing overhead	2	100,000
Fixed manufacturing overhead	6	300,000
Variable selling expenses	3	150,000
Fixed selling expenses	2	100,000
Total costs	$31	$1,550,000

Required:

(a) Bench Company wants to place a one-time special order for 10,000 bats at $23 each. Yokohama Company will incur no variable selling costs for this special order. Should Yokohama Company accept this one-time special order? Show your calculations.

(b) If Yokohama Company is currently producing and selling 50,000 bats, on financial consideration alone should Yokohama Company accept this one-time special order?

(c) Identify and briefly discuss other factors Yokohama Company should consider in deciding whether to accept the one-time special order.