Problems associated with cmis traditional costing system

Assignment Help Accounting Basics
Reference no: EM132115698

Unit Learning Outcomes covered in this assessment

The purpose of this assignment is to assess the following Learning Outcomes:

a. Demonstrate advanced understanding of management accounting in the contemporary business environment.
b. Analyse business problems, apply management accounting techniques and critically evaluate appropriate approaches to the generation of financial information for decision making.
c. Apply management accounting practices and theories to research, analyse and solve business and management problems.
d. Research, evaluate and prepare business reports which communicate and present financial solutions on management issues in writing.
e. Adapt knowledge to new situations to develop flexible approaches to problem solving.
f. Assist management decisions by appraising, integrating and prioritising appropriate financial management information to aid decision making.

Assignment Description

Australian owned and operated family safe manufacturing company CMI Safe Co., manufactures and sells fireproof safes and document containers of various shapes and sizes for home use, including safes made to Australian/New Zealand Industry standard AS/NZS 3809. The division now makes 50 different products but these fit into the two main product groups of 35 metal safes and 15 more recently developed plastic safes. Table 1 shows last quarter's income statement by product group.

Table 1-CMI quarter 1 income statement by product group

 

Metal safes

Plastic safes

Total

 

$

$

$

$

$

$

Sales revenues

 

296900

 

246800

 

543700

Direct materials

21500

 

20680

 

42180

 

Process and support costs

231770

 

170280

 

402050

 

Total costs

 

253270

 

190960

 

444230

Net income

 

43630

 

55840

 

99470

Profit margin

 

14.70%

 

22.60%

 

18.30%

Table 2-CMI data on key activities

Activity

Cost driver

Estimated costs ($)

Insulation process

Insulation process hours

180700

Assembly process

Assembly process hours

69600

Quality control

Number of inspections

80080

Materials management

Number of requisitions

47800

Selling and administration

Number of sales orders

23870

Total process and support costs

 

402050

The assembly process for plastic safes is quite complex and there has recently been a high level of rejects. This has resulted in the need for increased quality control activities. Plastic safes generally comprise more components than metal safes, causing more material movements. The plastic safe product group is still new and CMI's customer base is characterised by a large number of customers each ordering small volumes.

Required

Read the above scenario and write a report to the managing director discussing key reasons as to which costing system produces the most useful information for management. Also state your recommendations in respect of product strategy (product mix) as a result of the information produced.

In your report:

1. Explain the general problems associated with CMI's traditional costing system and highlight any indicators that the current costing system is outdated and flawed.

2. Calculate the rate per activity driver to be used in the desired activity-based costing system and produce a revised income statement by product group tracing process and support costs to product groups using activity-based costing methodology.

3. Analyse and explain the differences in product costs and net profit margins between the two alternative costing systems.

Report should incorporate the following sections:
1. Cover page
2. Executive summary
3. Table of contents
4. Introduction
5. Body: this section should include topics such as
- Traditional volume-based costing systems
- Activity-Based Costing System
- Factors affecting the selection of an appropriate product costing system
- Limitations of adopting Activity-Based Costing System
7. Conclusion
8. Reference list (8-10 references must be cited)

To achieve this task, you are required to:

- review journal articles to discuss traditional product costing systems and articles to discuss the appropriateness of the contemporary approaches to cost allocations (e.g. ABC approach) to resolve the issues of costing.

Verified Expert

This assignment has been done in Ms-word. The calculations have been done using Excel. It was regarding the costing methods used world wide. The traditional and the activity based costing are the two being considered in the task.

Reference no: EM132115698

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Reviews

urv2115698

11/16/2018 1:30:13 AM

I strongly recommend ExpertsMind to all students seeking to get help in their assignments. It is the best way to receive excellent quality work without making any effort. As soon as you start working with the team, you realize you will never want to leave them. I must say you guys are done amazing job.

len2115698

9/18/2018 2:10:40 AM

Total marks for criterion 2 50 Criterion 3 Investigation and Analysis (12 references must be cited) ? quality of information sources 2 ? completeness of investigation, accuracy and depth of analysis 5 ? appropriate use of in-text and end text referencing 5 ? appropriate number of references used 3 Total marks for criterion 3 15 Criterion 4 Contribution in group work ? Each member of the group must write a brief statement explaining his/her contribution to this assignment. 10 Total marks for criterion 4 10 Criterion 5 Presentation ? layout 3 ? formatting 3 ? spelling/grammar 4 Total marks for criterion 5 10 Total 100

len2115698

9/18/2018 2:10:33 AM

Criterion 2 Body/contents ? Traditional volume-based costing systems 5 ? Activity-Based Costing System 5 ? Factors affecting the selection of an appropriate product costing system 3 ? Limitations of adopting Activity-Based Costing System 2 ? General problems associated with CMI’s traditional costing system and highlight any indicators that the current costing system is outdated and flawed. 10 ? Calculate the rate per activity driver to be used in the desired activity-based costing system ? Produce a revised income statement by product group tracing process and support costs to product groups using activity-based costing methodology. 15 ? Analyse and explain the differences in product costs and net profit margins between the two alternative costing systems. 10

len2115698

9/18/2018 2:10:25 AM

Detailed Description of the Criteria Marks Criterion 1 Structure and Clarity of the Report/Assignment ? introductory paragraph 5 ? logical flow of clarity and structure of ideas and arguments ? appropriate use of paragraph and headings to explain and discuss ideas 5 ? appropriate concluding paragraph and recommendations 5 Total marks for criterion 1 15

len2115698

9/18/2018 2:10:07 AM

• Group size: This assignment should be completed in groups of four. • All work must be submitted on Moodle by the due date along with a completed Assignment Cover Page. • The assignment must be in MS Word format, 1.5 spacing, 11-pt Calibri (Body) font and 2 cm margins on all four sides of your page with appropriate section headings. • Reference sources must be cited in the text of the report, and listed appropriately at the end in a reference list using APA or IEEE referencing style for School of Business and School of Information Technology and Engineering respectively.

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