For intermediate management accouting 324.

Not sure if anyone is familiar with The Boston Bar Chocolate Company (BBCC) project. Need help if anyone has done one before.

You are Cindy, completing the analysis and developing a final report to Alan, President of BBCC. The report should analyze BBCCs current cost allocations and give advice for the future. It should be formatted as a memo and include the following: 1. (12 marks) Prepare a brief overview of the 20X7 results as an introduction to the report. Discuss any significant differences between the 20X7 budget and the actual figures. A full variance analysis is not expected or required. 2. (20 marks) a) (2 marks) BBCC has adopted a normal costing approach with manufacturing overhead costs allocated based on direct labour hours. However, the Actual Cost of Product Manufactured report presented in the project details document appears to have included an allocation of actual manufacturing overhead based on a percentage of sales. Revise this report so the normal costing approach adopted by the company is properly reflected. Work-in-process beginning and ending inventory for all three products is as follows: The-Bar Alamonde Salt-Lick Beginning inventory $1,196 $837 $0 Ending inventory 1,207 815 0

Prepare a revised income statement using the cost of goods manufactured in part a) and adjusting for over- or underapplied overhead. It is the companys policy to write off any over- or underapplied overhead to cost of goods sold during the period in which it is incurred. Comment on the change in gross margin overall, and for each product individually, as a result of the changes applied. The finished product beginning and ending inventory for all three products is as follows: The-Bar Alamonde Salt-Lick Beginning inventory $17,561 $10,702 $0 Ending inventory 18,292 10,497 0 c) (3 marks) Prepare an analysis of utilities costs using the data provided. Using the high-low method, determine how much of the monthly utilities costs for the year are fixed versus variable. Your answer should consist of a cost formula. Determine the accuracy of this formula by applying it to the totals in the 20X7 data and comparing the result to the actual cost. Consider that management is acceptable of a discrepancy of 3% on this cost estimation. (Note: Round the final fixed cost answer to the nearest dollar; however, do not round the variable cost figure when calculating total costs.)

d) (8 marks) i) Prepare an analysis that highlights idle capacity costs by analyzing manufacturing overhead as a whole, similar to the approach in Topic 2.3-10. Practical capacity is 12,000 direct labour hours (Note: Round the manufacturing overhead costs to the nearest dollar, however, do not round the MPH rate calculated when calculating the total costs.) (4 marks) ii) Explain the purpose of this analysis to management and the information it provides in relation to capacity utilization. (4 marks) e) (2 marks) Briefly comment on the results of parts a) and d) above

3. (8 marks) a) (4 marks) Based on the information provided by the cocoa bean processing division manager, assess the profits and gross margin percentage of each of the following options: i) Current sales of cocoa butter and cocoa cakes ii) Proposed sales of cocoa butter and canned, powdered baking cocoa iii) Proposed sales of chocolate liquor Comment on which of the three options is most desirable for the company to pursue. b) (4 marks) Allocate joint costs using the following options and methods: i) Based on the current sales of cocoa butter and cocoa cakes, use the sale value at split-off method. ii) Based on the proposed sales of cocoa butter and canned, powdered baking cocoa, use the net realizable method.

THE PROJECT DETAILS:

The profit margins on our current products can be found below. The most profitable product is the Salt-Lick bar at 25.9%, followed by Alamonde at 19.3% and The-Bar at 18.8%. Budgeted margins were 14.3%, 27.5% and 35.2% for The-Bar, Alamonde and Salt-Lick, respectively.

Actual operating income statement

For the year ended December 31, 20X7 The-Bar		Per bar			Alamonde			Per bar		Salt-Lick			Per bar			Total
Volume			776,000				528,000				302,500				1,606,500
Sales	$ 1,164,000			$1.50		$ 897,600			$1.70			$ 605,000		$2.00			$ 2,666,600
Cost of goods sold			945,593				724,674				448,187				2,118,454
Gross margin			$ 218,407				$ 172,926				$ 156,813				$ 548,146
Selling and administrative expenses									541,681
Operating income									$ 6,465
Gross margin %			18.8%				19.3%				25.9%				20.6%

Budgeted operating income statement

For the year ended December 31, 20X7 The-Bar		Per bar			Alamonde			Per bar		Salt-Lick			Per bar			Total
Volumes			774,400				529,100				301,400				1,604,900
Sales	$ 1,161,600			$1.50		$ 952,380			$1.80			$ 602,800		$2.00			$ 2,716,780
Cost of goods sold			996,034				690,755				390,298				2,077,087
Gross margin			$ 165,566				$ 261,625				$ 212,502				$ 639,693
Selling and administrative expenses									542,554
Operating income									$ 97,139
Gross margin %			14.3%				27.5%				35.2%				23.5%

Actual cost of product manufactured

For the year ended December 31, 20X7 The-Bar		Alamonde		Salt-Lick		Total
Direct ingredients used	$ 333,506		$ 232,724		$ 129,948		$ 696,178
Direct labour	135,876		123,926		70,338		330,140
Manufacturing overhead	476,954		367,795		247,901		1,092,650
Total manufacturing costs	$ 946,336		$ 724,445		$ 448,187		$ 2,118,968
Add: Beginning work-in-process	1,196		837				2,033
Deduct: Ending work-in-process	(1,207)		(815)				(2,022)
Cost of goods manufactured	$ 946,325		$ 724,467		$ 448,187		$ 2,118,979

Budgeted cost of product manufactured

For the year ended December 31, 20X7 The-Bar		Alamonde		Salt-Lick		Total
Direct ingredients used	$ 330,271		$ 231,513		$ 128,695		$ 690,479
Direct labour	147,744		101,736		57,996		307,476
Manufacturing overhead	518,685		357,165		203,607		1,079,457
Total manufacturing costs	$ 996,700		$ 690,414		$ 390,298		$ 2,077,412
Add: Beginning work-in-process	2,991		2,094				5,085
Deduct: Ending work-in-process	(2,885)		(1,949)				(4,834)
Cost of good manufactured	$ 996,806		$ 690,559		$ 390,298		$ 2,077,663

Actual quantity and cost of direct ingredients

For the year ended December 31, 20X7 Ingredient			Price				The-Bar			Alamonde			Salt-Lick				Total
Quantity		Cost			Quantity			Cost		Quantity		Cost			Quantity			Cost
Chocolate liquor	$5.55/kg			27,160		$150,738			18,480	$102,564	8,894			$49,359		54,534			$302,661
Cocoa butter	$6.10/kg			10,321		62,957			7,022	42,837	2,753			16,792		20,096			122,586
Cocoa powder	$1.18/kg			5,432		6,410			2,218	2,617	2,118			2,499		9,768			11,525
Cane sugar	$0.70/kg			10,321		7,225			7,022	4,916	6,247			4,372		23,590			16,513
Emulsifier	$0.80/kg			462		369			739	590	212			169		1,413			1,129
Vanilla	$70/litre			625		43,728			370	25,872	424			29,645		1,418			99,245
Almonds			$10/kg				1,109			11,088			1,109				11,088
Himalayan salt			$5.50/kg				529			2,912			529				2,912
Cost of ingredients				$271,427					$190,484		$105,748					$567,659
Wrappers	$0.08/bar			776,000		62,080			528,000	42,240	302,500			24,200		1,606,500			128,520
Total cost				$333,506					$232,724		$129,948					$696,179

Budgeted quantity and cost of direct ingredients

For the year ended December 31, 20X7 Ingredient			Price				The-Bar			Alamonde			Salt-Lick				Total
Quantity		Cost			Quantity			Cost		Quantity		Cost			Quantity			Cost
Chocolate liquor	$5.50/kg			27,104		$149,072			18,519	$101,852	8,861			$48,736		54,484			$299,660
Cocoa butter	$6.00/kg			10,300		61,797			7,037	42,222	2,743			16,456		20,079			120,476
Cocoa powder	$1.15/kg			5,421		6,234			2,222	2,556	2,110			2,426		9,753			11,216
Cane sugar	$0.70/kg			10,300		7,210			7,037	4,926	6,224			4,357		23,560			16,492
Emulsifier	$0.80/kg			461		369			741	593	211			169		1,412			1,130
Vanilla	$70/litre			625		43,637			370	25,926	424			29,537		1,418			99,101
Almonds			$10/kg				1,109			11,111			1,109				11,111
Himalayan salt			$5.50/kg				529			2,901			529				2,901
Cost of ingredients				$268,319					$189,186		$104,582					$562,087
Wrappers	$0.08/bar			776,000		61,952			528,000	42,328	302,500			24,112		1,606,500			128,392
Total cost				$330,271					$231,514		$128,694					$690,479

Actual direct labour

For the year ended December 31, 20X7 The-Bar		Alamonde		Salt-Lick		Total
Direct labour hours	4,105		3,744		2,125		9,974
Cost per direct labour hour	$ 33.10		$ 33.10		$ 33.10		$ 33.10
Total actual direct labour costs	$ 135,876		$ 123,926		$ 70,338		$ 330,140

Budgeted direct labour

For the year ended December 31, 20X7 The-Bar		Alamonde		Salt-Lick		Total
Direct labour hours	4,560		3,140		1,790		9,490
Cost per labour hour	$ 32.40		$ 32.40		$ 32.40		$ 32.40
Total budgeted direct labour cost	$ 147,744		$ 101,736		$ 57,996		$ 307,476

Actual manufacturing overhead

For the year ended December 31, 20X7 Variable
Plant utilities		$ 103,584
Equipment maintenance	89,566		$ 193,150
Fixed
Quality control		$ 37,500
Computer and supplies		188,000
Plant and equipment amortization		150,000
Research and development		135,000
Indirect plant salary and wages		193,000
Plant lease	196,000		899,500
Total manufacturing overhead		$ 1,092,650

Budgeted manufacturing overhead

For the year ended December 31,20X7 Variable
Plant utilities		$ 101,876
Equipment maintenance	91,081		$ 192,957
Fixed
Quality control		$ 39,000
Computer and supplies		189,000
Plant and equipment amortization		150,000
Research and development		120,000
Indirect plant salary and wages		192,500
Plant lease	196,000		886,500
Total manufacturing overhead		$ 1,079,457

One of the cost issues faced by the company is understanding what the variable costs are and what the fixed costs are. The manufacturing overhead schedule shows plant utilities as a purely variable cost, yet even with no machinery running the company gets a bill. So a study was conducted on the plant utilities costs compared to direct machine hours. The information is provided below:

Utilities costs and machine hour data

The following are 23 months of data relating to monthly utilities costs and number of machine hours. Month	Plant utilities	Machine hours
February, 20X6	$ 8,674	650
March, 20X6	8,500	625
April, 20X6	8,750	629
May, 20X6	9,483	745
June, 20X6	9,497	664
July, 20X6	9,611	748
August, 20X6	8,687	653
September, 20X6	8,338	656
October, 20X6	8,703	699
November, 20X6	8,931	701
December, 20X6	7,870	610
January, 20X7	7,328	571
February, 20X7	8,084	620
March, 20X7	8,506	665
April, 20X7	8,591	662
May, 20X7	9,516	749
June, 20X7	9,431	656
July, 20X7	9,608	761
August, 20X7	8,674	656
September, 20X7	8,421	667
October, 20X7	8,674	690
November, 20X7	8,843	671
December, 20X7	7,908	621
Total	200,628	15,369