hye,

please assist me to find the correct answer based on file attach.

tqvm.

ACT 7023 - ACCOUNTING FOR MANAGERS Individual Assignment 1 (20%): Case Question on ABC Dynamic Berhad has operated two types of specializing businesses as follows and required what new insights are available with the ABC information and on how might Dynamic Berhad can use the information from the ABC system to manage its complex businesses. 1. Ocean Supermarket (OS) Ocean Supermarket (OS), a small subsidiary company of Dynamic Berhad, operates at capacity and decides to apply ABC analysis to three product lines: baked goods, milk and fruit juice and frozen foods. It identifies four activities and their activity cost rates as: Ordering Delivery and receipt of merchandise Shelf stocking Customer support and assistance RM100 per purchase order RM80 per delivery RM20 per hour RM0.20 per item sold The revenues, costs of goods sold, store support costs and activity-area usage of three product lines are: Financial data Revenues Cost of goods sold Store support Activity-area usage (cost-allocation base) Ordering (purchase order) Delivery (deliveries) Shelf stocking (hours) Customer support (items sold) Baked goods Milk and fruit juice Frozen products RM57000 RM38000 RM11400 RM63000 RM47000 RM14100 RM52000 RM35000 RM10500 30 98 183 15500 25 36 166 20500 13 28 24 7900 Under its simple costing system, OS allocated store support costs to products at the rate of 30% of cost of goods sold. Required 1. Use the simple costing to prepare a product-line profitability report for OS. For each product and in total, the report should calculate operating profit and operating as a percentage of revenue. 2. Use the ABC system to prepare another product-line profitability report for OS. 3. What new insights does the ABC system in requirement no: 2 provide to OS managers? @ACT7023/DrKalsom/Assignment 1/ABC 1 2. Eagle Electronics Eagle Electronics, a large subsidiary company of Dynamic Berhad, manufactures two LCD screen television models: The Topaz, which was has been produced since 2009 and sells for RM900, and the Jade, a newer model introduced in early 2013, that sells for RM1140. Based on the following income statement for the year ended 30 November 2015, senior management at Dynamic Berhad have decided to concentrate Eagle Electronics' marketing resources on the Jade model and to begin to phase out the Topaz model. Eagles Electronics Income statements for the financial year ended 30 November 2015 Topaz Jade Revenues RM19 800 000 RM4 560 000 Cost of goods sold 12 540 000 3 192 000 Gross margin 7 260 000 1 368 000 Selling and administrative expense 5 830 000 978 000 Operating profit RM1 430 000 RM390 000 Units produced and sold 22 000 4 000 Net income per unit sold RM65.00 Total RM24 360 000 15 732 000 8 628 000 6 808 000 RM1 820 000 RM97.50 Unit costs for Topaz and Jade are as follows: Direct materials Direct manufacturing labour Topaz (1.5 hours x RM12) Jade (3.5 hours x RM12) Machine costsa Topaz (8 hours x RM18) Jade (4 hours x RM18) Manufacturing overhead other than machine costsb Total cost Topaz RM208 Jade RM584 18 42 144 200 RM570 72 100 RM798 aMachine costs include lease costs of the machine, repairs and maintenance bManufacturing overhead was allocated to products based on machine - hours at the rate of RM25 per hour @ACT7023/DrKalsom/Assignment 1/ABC 2 Eagle Electronics' management accountant, Susan Church, is advocating the use of activity-based costing and activity-based management and has gathered the following information about the company's manufacturing overhead costs for the year ended 30 November 2105. Activity Centre (cost-allocation base ) Soldering (number of solder points) Shipments (number of shipments) Quality control (number of inspections) Purchase orders (number of orders) Machine power (machine - hours) Machine set-ups (number of set-ups) Total manufacturing overhead Total Activity Costs RM942000 860,000 1240000 950400 57600 750000 RM4800000 units of the cost-allocation base Topaz Jade Total 1185000 16200 56200 80100 176000 16000 385000 3800 21300 109980 16000 14000 1570000 20000 77500 190080 192000 30000 After completing her analysis, Susan shows the results to Roger White, Eagle Electronic's subsidiary managing director. Roger does not like what he sees. 'If you show headquarters this analysis, they are going to ask us to phase out the Jade line, which we have just introduced. This whole costing stuff has been a major problem for us. First Topaz was not profitable and now Jade. 'Looking at the ABC analysis, I see two problems. First, we do many more activities than the ones you have listed. If you had included all activities, maybe your conclusion would be different. Second, you used number of set-ups and number of inspections as cost-allocation bases. The numbers would be different had you used set-up hours and inspection-hours instead. I know that measurement problems precluded you from using these other cost-allocation bases, but I believe you ought to make some adjustments to our current numbers to compensate for these issues. I know you can do better. We can't afford to phase out either product.' Susan knows that her numbers are fairly accurate. As a quick check, she calculates the profitability of Jade and Topaz using more and different cost-allocation bases. The set of activities and activity rates she had used resulted in numbers that closely approximate those based on more detailed analyses. She is confident that headquarters, knowing that Jade was introduced only recently, will not ask Eagle Electronics to phase it out. She is also aware that a sizeable portion of Roger White's bonus is based on subsidiary revenues. Phasing out either product would adversely affect his bonus. Still, she feels some pressure from him to do something. Required 1. Using activity-based costing, calculate the gross margin per unit of the Jade and Topaz models. 2. Explain briefly why these numbers differ from the profitability of the Jade and Topaz models calculated using Eagle Electronic' existing simple costing system. 3. Comment on Roger White's concerns about the accuracy and limitations of ABC. 4. How might Eagle Electronics find the ABC information helpful in managing its business? 5. What should Susan Church do in response to Roger White's comments? @ACT7023/DrKalsom/Assignment 1/ABC 3