case study in regards to candle making business

Required: Upon deeper reflection on the above issues both Bright and the CEO decide that external expertise is needed to solve the current impasse in the costing system. They hire you to provide recommendations in the form of a management consulting report. They have requested that the following information be included in the report: 1. Using the data in the exhibits, determine the conversion cost of a 100-unit batch of BW-18 beeswax candle, a month's production of spare candles for inventory, and a month's work done for other divisions under the present model, Bright's first proposal, and his revised proposal. 2. Assume that direct materials cost for a 100-unit batch of BW-18 beeswax candle is $2,200 and that Nature Candle sells these candles at $46 each. Using both the present and first proposed costing methods, advise if the BW-18 price should be increased? Should it be dropped from the product line? 3. Comment on the cost differences you observe in question one and two between the different costing approaches. What causes the differences? Are they significant enough to cause a revision of the costing system? Explain your answer. 4. Drawing on your considerable expertise in cost management, suggest other costing techniques that Nature Candle might find useful besides those proposed by Bright. Describe specifically how these techniques could be used within Nature Candle by providing tangible examples of how they would operate and the benefits they would bring in terms of decision-making. 5. It is clear that any new costing system within Nature Candle could potentially be met with considerable hostility and opposition from the department managers. Conduct research and make suggestions on how these behavioural issues could be minimised.Exhibit 1: Calculation of Plantwide Labour and Overhead Hourly Rate for October Labour Dollars Hours Wick making $40,873 2.527 Wax melting 28,760 2,138 Molding 143.899 7.678 Custom work 61,137 3,712 Packing 218.638 15.357 Total labour 493,307 31,412 Overhead 824.492 Total labour and overhead 1,317,799 Hourly Rate = $1,317,799/31,412 =$41.95 per hour (=$15.70 labour + $26.25 overhead) Exhibit 2: Proposed Departmental Labour and Overhead Hourly Rates Labour Rate Overhead Total Cost Department per Hour per Hour per Hour Wick making $20.10 $23.53 $43.63 Wax melting 18.50 22.61 41.11 Molding 19.75 46.89 66.64 Custom work 23.10 30.36 53.46 Packing 15.00 15.89 30.89 Exhibit 3: Direct Labour Hour Distribution for Three MCT's Activities BW-18 Beeswax Spare Candles Work for Candles (per Batch for Inventory Other Divisions Department of 100) (per Month) (per Month) Wick making 8 hours 122 hours 270 hours Wax melting 5 hours 108 hours 216 hours Molding 23 hours 446 hours 863 hours Custom work Packing 14 hours Total 50 hours 676 hours 1,349 hoursExhibit 4: Departmental Overhead Rates Based on Normal Volume Normal Volume Normal Overhead Overhead Department (DLH) Cost* (per DLH) Wick making 2.500 $59,100 $23.64 Wax melting 2,400 51.750 21.56 Molding 8,000 369.000 46.13 Custom work 3.600 110,865 30.80 Packing 17.500 264.338 15.11 Total 34.000 855.053 25.15 * Estimated overhead cost if each department operates at its normal volume