Could anyone tell we how to do the Part B? I really need help.

Late 2018, the New Zealand Government announced a ban on single-use plastic bags from July 1st 2019. While the news was welcomed by some, one group that got hit most is the manufacturers of plastic bags. Bags NZ Ltd (BNL) is one of these companies. Prior to 2019, its biggest selling product was plastic shopping bags that it supplied to supermarket chains. The announcement of the ban led to the executive team convening an urgent planning meeting to discuss the company's response to the ban. There was no question that the production of plastic bags had to cease but the good news was that the company had the capability to produce paper carry bags and most of the current resources could be deployed to the production of paper bags. The executive team decided that unlike the production of plastic bags that were tailored to customer orders, they would produce standard-sized homogeneous paper carry bags. However, they agreed to setup a separate printing department where they could personalise the bags with company name, logo, etc. for customers based on their requests. Most of the company's production processes are automated. In the production department, there are 3 full-time staff who are each paid $3,500 per month. These employees are responsible for setting up the machines with the correct moulds, loading the machines with the required raw materials, inspecting the products as they roll off the conveyor belts onto the pallets, moving the pallets to the warehouse for storage and cleaning the production facility at the end of the day.The management argues that all these activities are related to the production process and hence class their hours as direct labour costs. The paper bags were produced in batches of 2,000 bags which require the following materials Materials required Volume required Cost $900 per roll Roll of Kraft Paper 1 per batch $50 per litre Litres of Chemicals 2 per batch $8 per litre Litres of Adhesive 5 per batch $0.20 per metre Metres of String for handle 0.2m per bag $0.01 per clip Clips 4 clips per bag Before the production process begins, the employees load the machine with the required materials. After checking the machine and ensuring all materials are loaded, the production process starts. The process begins by the machine combining the Kraft paper with chemicals to give it adequate strength before cutting it into shape. The folds are made and at 60% of completion, adhesive is added to stick the folds together. 4 holes are then punched towards the top of the bags. In a separate part of the machine, the strings are cut to appropriate lengths and the clips are attached to the ends. These are then added to the bags just before the production process is completed ie. at 95% of production. The bags are then pressed and the conveyor belt carries the bags to the adjacent pallet. An employee inspects the bags as they move down the conveyor belt to the pallet which are moved to the warehouse using a forklift when the pallet is full. Each pallet holds 4000 bags. (Note: Assume the production process is complete at the point of inspection.) In February, the production department completed 100 production runs, transferring 192,000 good bags to the warehouse. For the month, there was no opening or closing work in process. On the 12th of February, an entire batch of bags were discarded as the employee loading the machine used the wrong adhesive. This mistake was only discovered upon inspection at the end of the process. The remaining spoilt items were due to issues inherent in the production process. Printing Department Some customers request their bags to be personalised with their name and logo. For these orders, the bags are sent from the warehouse to the printing department which occupies a third of the floor space in the same building as the production department. This department employees 2 full time employs, each earning $3,500 per month. The printing machine prints 500 bags in each production run. The production process begins with the employees in the printing department retrieving pallets of bags from the warehouse and sorting them into bundles of 500. The machine is then loaded with 1 bundle of 500 bags and the required ink cartridges. The customer's design is then selected on the screen attached to the printer which sends the instructions to the machine to start printing. One employee stands at the end of the machine where the printed bags come out. He inspects each bag at 95% of completion and puts it in piles of 100 bags. Each pile is then shrink wrapped which completes the process for the printing department. Each pile of 100 bags requires 10 metres of shrink wrap which costs $25 per 500 metres. Further information relating to the printing department for the month of February is as follows Physical Units % Complete WIP (01/02/19) 3,000 1%** Units started during the period 75,000 Completed transferred out 73,000 and 90% WIP (28/02/19) 1,500 Normal spoilage rate 4%* Production 153 runs runs completed Note: The per unit cost of bags transferred into the printing department is equal to the per unit cost of good units completed and transferred out of the production department The printing process requires 2 ink cartridges per production run and this is added at 10% of the production process. Each ink cartridge costs $60 The company uses conventional costing system where overheads are allocated based on the number of production runs completed. The manufacturing overheads for the month of February were as follows $9,000 Rent $2,500 Electricity $1,500 Machine Costs Waste removal costs $3,000 Recently, a loyal customer of a company that frequently bought large quantities of plastic bags from the company in the past approached the management team enquiring about the high cost of the paper bags. The customer explained to the executive team that BNL's competitors were offering them personalised bags similar to BNL's product for 20% cheaper. He suggested the company should look at its costing system and maybe try the ABC approach. Following this discussion, the executive team asked the management accountant to explain if the costing system could be the cause of them being overpriced in the market. The accountant was also asked to suggest some possible areas of improvement that could improve the company's profitability However, it was made clear to the accountant that changing contracts relating to supply of raw materials was not possible. He also found that all spoilt units and residuals from the production process were simply dumped into the waste skips which were taken away by the waste management company for a fee. He found given the waste was mainly paper, they could sell the waste to a recycling facility. For the quantity of waste disposed in February, the company could have earned $1,900 Some other data collected by the company's management accountant for the month of February showed that the production run time for the production department is longer hence their consumption of electricity is higher at 2000 kilowatts compared to the printing department's consumption at 400kilowatts. He also found that this drove the machine costs. Part A a) Using the conventional costing approach and the weighted average method, prepare separate process cost reports for the Production Department and Printing Department for the month of February. (Hint: Your calculations should indicate how normal spoilage is treated in a process cost system as well as the physical flow of units and the equivalent unit Page 4 of 5 calculations. You are also required to show the assignment of costs to abnormal spoilage and ending work in process) b) Calculate the normal spoilage rate for the Production Department on the basis of the number of good units that passed the inspection point during the period. c) Calculate the cost per good unit completed and transferred out for the production and printing departments d) Using the February amounts, calculate the overhead allocations for the Production and Printing Departments using the activity-based costing approach. e) Using your solution of (d), re-calculate the cost per good unit completed and transferred out for the two departments. Calculate the monthly net cost/benefit from selling the waste to a recycling facility. Calculate whether this option has an impact on the cost per good unit completed and transferred out. Part B At 6pm on 27h May, the solution guide for Part A will be uploaded on Canvas. Using the calculations in the solution guide, write a formal report to the Executive Team addressing the following two points: 1. Could the costing system be the cause of BNL's products being overpriced in the market. Suggest some possible areas of improvement that could improve the company's profitability 2. Late 2018, the New Zealand Government announced a ban on single-use plastic bags from July 1st 2019. While the news was welcomed by some, one group that got hit most is the manufacturers of plastic bags. Bags NZ Ltd (BNL) is one of these companies. Prior to 2019, its biggest selling product was plastic shopping bags that it supplied to supermarket chains. The announcement of the ban led to the executive team convening an urgent planning meeting to discuss the company's response to the ban. There was no question that the production of plastic bags had to cease but the good news was that the company had the capability to produce paper carry bags and most of the current resources could be deployed to the production of paper bags. The executive team decided that unlike the production of plastic bags that were tailored to customer orders, they would produce standard-sized homogeneous paper carry bags. However, they agreed to setup a separate printing department where they could personalise the bags with company name, logo, etc. for customers based on their requests. Most of the company's production processes are automated. In the production department, there are 3 full-time staff who are each paid $3,500 per month. These employees are responsible for setting up the machines with the correct moulds, loading the machines with the required raw materials, inspecting the products as they roll off the conveyor belts onto the pallets, moving the pallets to the warehouse for storage and cleaning the production facility at the end of the day.The management argues that all these activities are related to the production process and hence class their hours as direct labour costs. The paper bags were produced in batches of 2,000 bags which require the following materials Materials required Volume required Cost $900 per roll Roll of Kraft Paper 1 per batch $50 per litre Litres of Chemicals 2 per batch $8 per litre Litres of Adhesive 5 per batch $0.20 per metre Metres of String for handle 0.2m per bag $0.01 per clip Clips 4 clips per bag Before the production process begins, the employees load the machine with the required materials. After checking the machine and ensuring all materials are loaded, the production process starts. The process begins by the machine combining the Kraft paper with chemicals to give it adequate strength before cutting it into shape. The folds are made and at 60% of completion, adhesive is added to stick the folds together. 4 holes are then punched towards the top of the bags. In a separate part of the machine, the strings are cut to appropriate lengths and the clips are attached to the ends. These are then added to the bags just before the production process is completed ie. at 95% of production. The bags are then pressed and the conveyor belt carries the bags to the adjacent pallet. An employee inspects the bags as they move down the conveyor belt to the pallet which are moved to the warehouse using a forklift when the pallet is full. Each pallet holds 4000 bags. (Note: Assume the production process is complete at the point of inspection.) In February, the production department completed 100 production runs, transferring 192,000 good bags to the warehouse. For the month, there was no opening or closing work in process. On the 12th of February, an entire batch of bags were discarded as the employee loading the machine used the wrong adhesive. This mistake was only discovered upon inspection at the end of the process. The remaining spoilt items were due to issues inherent in the production process. Printing Department Some customers request their bags to be personalised with their name and logo. For these orders, the bags are sent from the warehouse to the printing department which occupies a third of the floor space in the same building as the production department. This department employees 2 full time employs, each earning $3,500 per month. The printing machine prints 500 bags in each production run. The production process begins with the employees in the printing department retrieving pallets of bags from the warehouse and sorting them into bundles of 500. The machine is then loaded with 1 bundle of 500 bags and the required ink cartridges. The customer's design is then selected on the screen attached to the printer which sends the instructions to the machine to start printing. One employee stands at the end of the machine where the printed bags come out. He inspects each bag at 95% of completion and puts it in piles of 100 bags. Each pile is then shrink wrapped which completes the process for the printing department. Each pile of 100 bags requires 10 metres of shrink wrap which costs $25 per 500 metres. Further information relating to the printing department for the month of February is as follows Physical Units % Complete WIP (01/02/19) 3,000 1%** Units started during the period 75,000 Completed transferred out 73,000 and 90% WIP (28/02/19) 1,500 Normal spoilage rate 4%* Production 153 runs runs completed Note: The per unit cost of bags transferred into the printing department is equal to the per unit cost of good units completed and transferred out of the production department The printing process requires 2 ink cartridges per production run and this is added at 10% of the production process. Each ink cartridge costs $60 The company uses conventional costing system where overheads are allocated based on the number of production runs completed. The manufacturing overheads for the month of February were as follows $9,000 Rent $2,500 Electricity $1,500 Machine Costs Waste removal costs $3,000 Recently, a loyal customer of a company that frequently bought large quantities of plastic bags from the company in the past approached the management team enquiring about the high cost of the paper bags. The customer explained to the executive team that BNL's competitors were offering them personalised bags similar to BNL's product for 20% cheaper. He suggested the company should look at its costing system and maybe try the ABC approach. Following this discussion, the executive team asked the management accountant to explain if the costing system could be the cause of them being overpriced in the market. The accountant was also asked to suggest some possible areas of improvement that could improve the company's profitability However, it was made clear to the accountant that changing contracts relating to supply of raw materials was not possible. He also found that all spoilt units and residuals from the production process were simply dumped into the waste skips which were taken away by the waste management company for a fee. He found given the waste was mainly paper, they could sell the waste to a recycling facility. For the quantity of waste disposed in February, the company could have earned $1,900 Some other data collected by the company's management accountant for the month of February showed that the production run time for the production department is longer hence their consumption of electricity is higher at 2000 kilowatts compared to the printing department's consumption at 400kilowatts. He also found that this drove the machine costs. Part A a) Using the conventional costing approach and the weighted average method, prepare separate process cost reports for the Production Department and Printing Department for the month of February. (Hint: Your calculations should indicate how normal spoilage is treated in a process cost system as well as the physical flow of units and the equivalent unit Page 4 of 5 calculations. You are also required to show the assignment of costs to abnormal spoilage and ending work in process) b) Calculate the normal spoilage rate for the Production Department on the basis of the number of good units that passed the inspection point during the period. c) Calculate the cost per good unit completed and transferred out for the production and printing departments d) Using the February amounts, calculate the overhead allocations for the Production and Printing Departments using the activity-based costing approach. e) Using your solution of (d), re-calculate the cost per good unit completed and transferred out for the two departments. Calculate the monthly net cost/benefit from selling the waste to a recycling facility. Calculate whether this option has an impact on the cost per good unit completed and transferred out. Part B At 6pm on 27h May, the solution guide for Part A will be uploaded on Canvas. Using the calculations in the solution guide, write a formal report to the Executive Team addressing the following two points: 1. Could the costing system be the cause of BNL's products being overpriced in the market. Suggest some possible areas of improvement that could improve the company's profitability 2