Reference no: EM131949011

Project 1

Required:

You are Cindy, completing the analysis and developing a final report to Alan, President of BBCC. The report should analyze BBCC's current cost allocations and give advice for the future. It should be formatted as a memo and include the following:

1.

Prepare a brief overview of the 20X7 results as an introduction to the report. Discuss any significant differences between the 20X7 budget and the actual figures. A full variance analysis is not expected or required.

2.

a)

BBCC has adopted a normal costing approach with manufacturing overhead costs allocated based on direct labour hours. However, the Actual Cost of Product Manufactured report presented in the project details document appears to have included an allocation of actual manufacturing overhead based on a percentage of sales. Revise this report so the normal costing approach adopted by the company is properly reflected. Work-in-process beginning and ending inventory for all three products is as follows:

The-Bar Alamonde Salt-Lick
Beginning inventory $1,196 $837 $0
Ending inventory 1,207 815 0

b)

Prepare a revised income statement using the cost of goods manufactured in part a) and adjusting for over- or underapplied overhead. It is the company's policy to write off any over- or underapplied overhead to cost of goods sold during the period in which it is incurred. Comment on the change in gross margin overall, and for each product individually, as a result of the changes applied. The finished product beginning and ending inventory for all three products is as follows:

	The-Bar	Alamonde	Salt-Lick
Beginning inventory	$1,196	$837	$0
Ending inventory	1,207	815	0

c) Prepare an analysis of utilities costs using the data provided. Using the high-low method, determine how much of the monthly utilities costs for the year are fixed versus variable. Your answer should consist of a cost formula. Determine the accuracy of this formula by applying it to the totals in the 20X7 data and comparing the result to the actual cost. Consider that management is acceptable of a discrepancy of 3% on this cost estimation. (Note: Round the final fixed cost answer to the nearest dollar; however, do not round the variable cost figure when calculating total costs.)

d)

i) Prepare an analysis that highlights idle capacity costs by analyzing manufacturing overhead as a whole, similar to the approach in Topic 2.3-10. Practical capacity is 12,000 direct labour hours (Note: Round the manufacturing overhead costs to the nearest dollar, however, do not round the MPH rate calculated when calculating the total costs.)

ii) Explain the purpose of this analysis to management and the information it provides in relation to capacity utilization.

e) Briefly comment on the results of parts a) and d) above.

3.

a) Based on the information provided by the cocoa bean processing division manager, assess the profits and gross margin percentage of each of the following options:

i) Current sales of cocoa butter and cocoa cakes

ii) Proposed sales of cocoa butter and canned, powdered baking cocoa

iii) Proposed sales of chocolate liquor

Comment on which of the three options is most desirable for the company to pursue.

b)

Allocate joint costs using the following options and methods:

i) Based on the current sales of cocoa butter and cocoa cakes, use the sale value at split-off method.

ii) Based on the proposed sales of cocoa butter and canned, powdered baking cocoa, use the net realizable method.

Attachment:- Project Details.rar