Case study Assignment

Weighting $10\%-$Maximum Marks: $100\%$

Due ACC$221$ Cost Accounting, Semester $2,20232024$

Case study Assignment

Weighting $10\%-$ Maximum Marks: $100\%$

Due date: $9$ May $2024$ at $11$:$00$ PM

P a g e $|1$

Case study Scenario:

Eastern Chemical Company produces three products. The operating results of the current year are:

Product

Sales

Quantity Target Price Actual Price Difference

A $1,100$ $ $286\mathrm{.}00$ $ $287\mathrm{.}00$ $ $1\mathrm{.}00$

B $5,500298\mathrm{.}60256\mathrm{.}60(42\mathrm{.}00)$

C $550203\mathrm{.}50311\mathrm{.}00$ $ $107\mathrm{.}50$

The firm sets the target price of each product at $150\%$ of the product$$s total manufacturing cost. It

appears that the firm was able to sell Product C at a much higher price than the target price of the

product and lost money on Product B$.$ Tom Watson, CEO, wants to promote Product C much more

aggressively and phase out Product B$.$ He believes that the information suggests that Product C has

the greatest potential among the firm$$s three products because the actual selling price of Product C

was almost $50\%$ higher than the target price, while the firm was forced to sell Product B at a price

below the target price.

Both the budgeted and actual manufacturing overhead for the current year are $$510,000.$ The actual

units sold for each product also are the same as the budgeted units. The firm uses direct labor dollars

to assign manufacturing overhead costs. The direct materials and direct labor costs per unit for each

product are:

Product A Product B Product C

Direct materials $ $51\mathrm{.}00$ $ $115\mathrm{.}40$ $ $66\mathrm{.}00$

Direct labor $21\mathrm{.}0013\mathrm{.}0011\mathrm{.}00$

Total prime cost $ $72\mathrm{.}00$ $ $128\mathrm{.}40$ $ $77\mathrm{.}00$

The controller noticed that not all products consumed manufacturing overhead similarly. Upon

further investigation, she identified the following usage of manufacturing overhead during the year:

Product A Product B Product C

Total

Overhead

Number of setups $364$ $ $9,100$

Weight of direct materials $($pounds$)401251351$ $ $121,000$

Waste and hazardous disposals $264631$ $ $275,000$

Quality inspections $313636$ $ $76,000$

Utilities $($machine hours$)2,2007,1001,100$ $ $67,000$

Total $ $548,100$

Required:

$1.$ Compute manufacturing overhead allocation rate under a simple costing system.

$2.$ Determine the manufacturing cost per unit for each of the products using the simple costing

system.

$3.$ Determine the manufacturing cost per unit for each of the products using the Activity$-$based

Costing system $($ABC$).$

ACC$221$ Cost Accounting, Semester $2,20232024$

Case study Assignment

Weighting $10\%-$ Maximum Marks: $100\%$

Due date: $9$ May $2024$ at $11$:$00$ PM

P a g e $|2$

$4.$ What are the least profitable and the most profitable products

a$.$ under the current simple costing and

b$.$ under the ABC systems?

$5.$ What is the new target price for each product based on $150\%$ of the new costs under the ABC

system? Compare this price with the actual selling price.

$6.$ Comment on the result. As a manager of Eastern Chemical, describe what actions you would

take based on the information provided by the activity$-$based unit costs.

Notes:

$$ This case study group work is required to be submitted in Soft Copy $($Excel file$)$ only via

the blackboard by the group leader. If not received, zero marks will be awarded for

the case study, and $10\%$ late penalties apply to the case if received after the due date

and time.

$$ Your work in Excel MUST BE BY USING FORMULAS and not just entering amounts.

$$ Your worksheet should include the following:

o Round your answer to two decimal numbers by using Round Function when

calculating overhead allocation rate.

o The launch page $($content page$),$ name the content page at top as $$Simple Costing

Vs Activity$-$Based Costing System Data Analytics$$

o Assumptions sheet.

o Solution sheet.

o Include the students$$ names & ID in the content page with participation

percentage for every member in the launch page plus the requirement number

solved by each participant.

$$ There will also be extra marks for making your workbook interactive, for example $($links

that take you to the different worksheets$)$ as well as proper and neat presentation.

$$ Worksheet design should be within the printing margin.

$20\%$ of total Marks will be allocated for the above structure in the worksheet.

This case study has been set to assist you in developing and achieving various of the UOB

Graduate Attributes list below:

$$ competence and emerging expertise in their chosen discipline$($s$).$

$$ analytical and critical thinking skills.

$$ problem$-$solving skills.

$$ team learning skills.

$$ communication skills.

$$ information technology literacy appropriate to their discipline$($s$).$

$$ numeracy appropriate to their discipline$($s$).$

$$ information acquisition, organization and presentation skills.

$$ decision$-$making skills based on open$-$mindedness, objectivity and reasoned

analysis.

$$ an awareness of the need for, and an understanding of$,$ high professional standards

and ethical behavior.

$$ an awareness of the need for, and an understanding of$,$ group responsibility and

accountability.

$$ an awareness that learning must be lifelong in an