Essay Assignment Budgeting and control

Mid-Term Assignment

Written assignment (essay and calculations)

Activity brief

 

BCO322 – Budgeting and Control

Online campus

Professor: Marilet Branders | [email protected]

 

Description Your knowledge will be tested on the content of week 1 to 6 of the course.

 

Format This activity must meet the following formatting requirements:

·         Font size 12

·         1200 – 2200 words

·         Harvard Referencing System

Due date Date: Monday 15 March 2021

Time: 14:00 CET

 
Weight towards final grade This activity has a weight of 40% towards the final grade.  
Learning outcomes ·         Outcome One: Classification of costs

·         Outcome Two: Cost of Finished Goods

·         Outcome Three: Cost of Goods Sold

·         Outcome Four: Job order and process costing

·         Outcome Five: Cost Volume Profit Analysis-Cost per unit

·         Outcome Six: Cost Volume Profit Analysis-Breakeven Analysis

·         Outcome Seven: Cost Volume Profit Analysis-Margin of Safety

·         Outcome Eight: Cost Volume Profit Analysis-operating income with different volumes

 

Assessment criteria ·         Answers should be clear and well presented (Provide spacing between paragraphs, number your questions correctly)

·         Remember to in-text reference and provide your referencing at the end.

·         Referencing should be Harvard Style

·         Show all calculations

·         Cannot submit photos.  May use MS Word, MS Excel, Adobe Acrobat, or similar software.

 

 

 

Questions:

QUESTION 1

  • Classification of costs

    Using the code letters below, indicate in the space provided how each of the following costs should be classified for a pen manufacturing company:

    Costs

    __MO (a) Property tax on the factory building.
    ____ (b) The chief financial officer’s salary.
    ____ (c) Plastic used to manufacture pens.
    ____ (d) Janitors at the factory.
    ____ (e) Manufactured pens waiting to be sold to customers.
    ____ (f) Advertising logos.
    ____ (g) Partially completed pens.

 

QUESTION 2

  1. The following information has been taken from the perpetual inventory system of Imperial Mfg. Co. for the month ended September 30:
    • What does the total amount of inventory to be included in Imperial’s September 30th balance sheet amounts to:
    • What are the Total manufacturing costs charged (debited) to Work in Process during September:
    • Calculate the cost of finished goods manufactured in September
    • Calculate the cost of goods sold in September:

 

QUESTION 3

3.1. There are two distinct types of cost accounting systems: job order costing systems and process costing systems. How does management decide whether to use a job order costing system or a process costing system in any given manufacturing situation? Explain briefly.

3.2. Job order cost system

Century Pools designs and builds custom pools and spas to the customer’s order and uses a job order system. The predetermined overhead rate for the current year is 60% of direct labor cost.

At the end of the current year, Century Pools’ direct labor cost totaled $170,000 and actual overhead amounted to $105,000.

A pool built for F. Becker required $32,000 of direct materials and $6,500 of direct labor. It was completed in May of the current year.

(a) Compute the total cost of the Becker pool as shown on the job cost sheet at date of completion.
(b) Compute the amount of under- or over-applied manufacturing overhead for Century’s operations for the current year.

QUESTION 4

Percula Farms raises marine fish for sale in the aquarium trade. Each year, Percula obtains a batch of approximately one million eggs from a local supplier. Percula’s manager is trying to decide whether to use the farm’s facilities to raise Maroon Clownfish or Queen Angelfish. Clownfish eggs cost $5,500 per batch, while angelfish eggs cost $9,500 per batch. Due to differences in needs, only one species may be raised at a time and only one batch of fish can be raised in any 52-week period.

 

With current facilities, approximately 10 percent of clownfish eggs and 5 percent of angelfish eggs can be successfully raised to maturity. Clownfish take approximately 35 weeks to grow to a salable size, while angelfish take 50 weeks. Angelfish also require more care than clownfish. Each week, angelfish need two complete water changes and 20 feedings, while clownfish need only one water change and 15 feedings. Each feeding costs $150 and each water change costs $1,000. Heating and lighting costs equal $400 per week of rearing, regardless of which type of fish is being raised. Fixed overhead costs for the year amount to $80,000. Percula can sell clownfish for $4 each and angelfish for $10 each.

 

Required:

a-1. Calculate the operating income from raising clownfish and angelfish.

a-2. Which species should Percula raise to earn the highest operating income for the year?

  1. & d.Percula’s manager is considering the following improvements, each of which will cost an additional $8,000 for the year. Due to resource limitations, only one can be implemented.
  2. Purchasing a higher quality filter material that will significantly improve water conditions in the rearing tanks. The higher water quality will increase the survival rates to 12 percent for clownfish and 6 percent for angelfish. The need for water changes will also be reduced to one each week for angelfish. Due to the higher yields, feeding costs will increase to $160 each.
  3. Installing newer, more efficient equipment that will reduce heating and lighting costs to $300 per week of rearing. The new equipment will promote more stable conditions, increasing the survival rates of clownfish to 10.5 percent and of angelfish to 5.5 percent. The slight change in survival rates is not expected to increase feeding costs.
  4. Calculate the operating income from raising clownfish and angelfish with new filter material.
  5. Calculate the operating income from raising clownfish and angelfish with new heating and lighting.

iii. Which option do you think will be more beneficial and which fish species should be raised?

 

QUESTION 5

Blaster Corporation manufactures hiking boots. For the coming year, the company has budgeted the following costs for the production and sale of 30,000 pairs of boots.

 

  Budgeted Costs   Budgeted
Costs
per Pair
Percentage
of Costs
Considered
Variable
Direct materials $ 630,000     $ 21     100 %
Direct labor   300,000       10     100  
Manufacturing overhead (fixed and variable)   720,000       24     25  
Selling and administrative expenses   600,000       20     20  
Totals $ 2,250,000     $ 75        

 

Required:

  1. Compute the sales price per unit that would result in a budgeted operating income of $900,000, assuming that the company produces and sells 30,000 pairs. (Hint: First compute the budgeted sales revenue needed to produce this operating income.)

 

Assume that the company decides to sell the boots at a unit price of $121 per pair.

b-1. Compute the total fixed costs budgeted for the year.

b-2. Compute the variable cost per unit.

b-3. Compute the contribution margin per pair of boots.

b-4. Compute the number of pairs that must be produced and sold annually to break even at a sales price of $121 per pair.

 

QUESTION 6

 

Sonic Charge, is a newly organized manufacturing business that plans to manufacture and sell 60,000 units per year of a new product. The following estimates have been made of the company’s costs and expenses (other than income taxes).

 

  Fixed   Variable
per Unit
Manufacturing costs:              
Direct materials         $ 25  
Direct labor           15  
Manufacturing overhead $ 500,000       8  
Period costs:              
Selling expenses           2  
Administrative expenses   300,000          
Totals $ 800,000     $ 50  

 

Required:

  1. What should the company establish as the sales price per unit if it sets a target of earning an operating income of $700,000 by producing and selling 60,000 units during the first year of operations? (Hint: First compute the required contribution margin per unit.)
  2. At the unit sales price computed in part a, how many units must the company produce and sell to break even? (Assume all units produced are sold.)
  3. What will be the margin of safety (in dollars) if the company produces and sells 60,000 units at the sales price computed in part a?
  4. Assume that the marketing manager thinks that the price of this product must be no higher than $60 to ensure market penetration. Will setting the sales price at $60 enable Ionic Charge to break even, given the plans to manufacture and sell 60,000 units?

 

 

 

 

 

 

 

 

 

 

 

 

 

Rubric: written assignment

Criteria Accomplished (A) Proficient (B) Partially proficient (C) Borderline (D) Fail (F)
Problem identification The business issue has been correctly identified, with a competent and comprehensive explanation of key driving forces and considerations. Impact on company operations has been correctly identified. Thorough analysis of the issue is presented. The student correctly identified the issue(s), taking into account a variety of environmental and contextual drivers. Key case information has been identified and analyzed. The student correctly identified the case (issues), considering obvious environmental/contextual drivers. There is evidence of analysis, but it lacks depth. The student correctly identified the issue(s) but analysis was weak. An absence of context – the work is basically descriptive with little analysis. The student failed to correctly identify the issue(s); analysis was incorrect or too superficial to be of use; information was misinterpreted.
Information gathering The student showed skill in gathering information and analyzing it for the purposes of filling the information gaps identified. Comprehensive and relevant. Relevant information gaps were identified and additional relevant information was found to fill them. At least two different types of sources were used. The student demonstrates coherent criteria for selecting information but needs greater depth. The student correctly identified at least one information gap and found relevant information, but which was limited in scope. Some evidence of sound criteria for selecting information but not consistent throughout. Needs expansion. An information gap was identified and the student found additional information to fill it. However, this was limited in scope. Weak criteria for the selection of necessary information. Information was taken at face value with no questioning of its relevance or value. Gaps in the information were not identified or were incorrect.
Conclusions The student evaluated, analyzed, synthesized all information provided to create a perceptive set of conclusions to support the decisions and solutions. The student evaluated, analyzed and synthesized to create a conclusion(s) which support decisions and solutions. The student reached conclusions, but they were limited and provided minimal direction for decision-making and solutions. The conclusion was reasonable but lacked depth and would not be a basis for suitable strategy development. The student formed a conclusion, but it was not reasonable. It was either unjustified, incorrect or unrelated to the case in hand.
Solutions The student used problem solving techniques to make thoughtful, justified decisions about difficult and conflicting issues. A realistic solution was chosen which would provide maximum benefit to the company. Alternative solutions were explored and ruled out. The student used problem solving techniques to make appropriate decisions about complex issues. Relevant questions were asked and answered. A realistic solution was chosen. Alternatives were identified, explored and ruled out. The student used problem-solving techniques to make appropriate decisions about simpler issues. The solution has limited benefit but does show understanding of implications of the decision. Alternatives were mentioned but not explored. The student used problem solving techniques to make decisions about simpler issues but disregarded more complex issues. Implications of the decision were not considered. Alternatives were not offered. The student formed a conclusion, but it was not reasonable. It was either unjustified, incorrect or unrelated to the case in hand.

 

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