Reference no: EM131970417

Project

Required:

In a memo, please respond to Alan, President of BBCC, on the following issues:

1.

a) Prepare an activity-based costing analysis of each product using the information provided and the 20X7 actual costs incurred. The analysis should consist of a statement showing sales and manufacturing costs for each product, including revised gross margin and gross margin percentage. Because the change in beginning and ending inventory amounts are negligible, these figures can be omitted from this analysis.

b) Discuss the results achieved in part (a) and explain why the gross margin(s) have changed. Finally, discuss how the activity-based approach provides a better allocation of costs and a more reliable gross margin.

2.

a) Determine the breakeven sales dollars of the Skinny-Bar product and prepare a contribution margin income statement based on the figures provided. The income statement must include the cost of direct materials, direct labour, variable manufacturing overhead, fixed manufacturing overhead and fixed general and administrative costs.

b) Prepare a lifetime cost analysis of Skinny-Bar and propose a selling price for this new product based on BBCC's markup policy. The overhead costs should be based on the activity-based analysis prepared in requirement 1 using the batch size for the The-Bar product. This also includes the setup time, number of inspections and machine hours per batch for The-Bar. Direct labour hours per batch is 22.5. Product costs are based on one product line. Lifetime research and development costs are $900,000 for the Skinny-Bar and this figure should be used in your calculation. Use the activity rates calculated there as well. Compare the proposed price with the selling price set at the time of the initial introduction of this product. Discuss the adequacy of this new proposed price.

3.

a)
Prepare an analysis of cash requirements for purchases for the year for BBCC's major outside source of direct ingredients - sugar cane, vanilla flavouring and almonds. Base this on the 20X8 forecast sales, the budgeted costs for BBCC's three products and BBCC's paying habits. Note: Show all supporting schedules and calculations.

b)

Comment on cash requirements. Consider that BBCC attempts to keep enough cash on hand per quarter to deal with a maximum cash flow demand of $30,000 for these direct ingredients purchases.

4. Provide management with at least two observations you have made during your work on both projects that can be considered for future analysis.

Attachment:- Project Details.rar