I have preliminary work done but I am looking for some comparison for a case study:

BUAD 5107: Module 6 Part 1: The Paint Shop (20 points) The Rookery Company, a large financial services organization, owns and occupies many facilities including a property that is listed on the National Register of Historic Places. Rookery maintains a Paint Shop. The Paint Shop employs a dozen people including painters who are especially skilled. Department executives in the various divisions of Rookery have the decision rights regarding the choice of painters they engage. At Rookery, it has never been the case that all painting is done by the in-house Paint Shop. Over the years outside painting contractors have been hired in various circumstances. For example, outside contractors were brought in for some major projects and when the Paint Shop was overwhelmed or not equipped to tackle jobs. The Paint Shop is organized as a profit center as are all of the units of Rookery that would engage the Paint Shop to provide painting services. When a department needs painting work, they can contact the paint shop for an estimate. If the Paint Shop contracts to do the work, Rookery's accounting department charges an expense against the profit of the department requesting the work and credits the revenue of the Paint Shop. The Paint Shop is a captive supplier, that is, the paint shop does not do work for any customers outside of the Rookery Company. Department heads have not always been pleased with the turn-around times of the in-house Paint Shop. Also, some in-house customers have been displeased with the price charged and the attitude of some of the staff members in the Paint Shop. As a result, department heads have increasingly been turning to outside painters instead of using the Paint Shop. The CFO noticed the falling revenues and the resulting fall in profits of the Paint Shop. They are a high fixed cost unit. In response the CFO sent memos to the department executives who have decision rights over painting contracts to strongly urge them to always give the Paint Shop the \"rightof-first-refusal\" whenever painting work needs to be done. The CFO is a strong supporter of the Paint Shop and believes that Rookery needs to maintain the inhouse paint shop. However, his repeated requests to the department executives to use the Paint Shop have not succeeded in creating work. To be candid, many jobs are being out-sourced to independent contractors and it appears that the CFO's memos are being ignored. In fact, the Paint Shop's revised pricing structure necessitated by the need to raise prices to improve their bottom line has only aggravated their situation. The CFO is angry. At best he feels ignored, at worst he regards the decision of Rookery units to use outside painters as a disloyal act. But, the CFO lacks authority to require the departmental executives to use the Paint Shop. If he had the authority, he would require every department within the company to use the Paint Shop unless he decides that for some reason the Print Shop is not able to do the work. BUAD 5107: Module 6 To put an end to the practice of Rookery units selecting outside painting contractors, the CFO has recently communicated to the outside painting contractors who have been doing most of the work for Rookery units. He indicated that he does not want the outside contractors to accept painting work from any Rookery department that he has not authorized. Of course, the CFO will not authorize any work to go to outside contractors unless the Paint Shop is unable to complete the work. The consequence to an independent contractor of performing work not authorized by the CFO as outlined by the CFO is that when Rookery does need to employ an outside contractor for a major project the CFO will remember those who are his friends and those who did cooperate with his wishes. Of course, the CFO has access to all invoices making it a simple task to identify any who do not comply with his wishes. Required: 1. (10 points) Speculate on why the department heads are ignoring the CFO's wishes with regards to using the services of the Print Shop. 2. (10 points) When the volume of work declined at the Paint Shop, to maintain profitability the Paint Shop increased bid prices. The increase in bid prices resulted in further decreasing the number of jobs the Paint Shop was winning and the spiral continued downwards. This is an illustration of what some refer to as the \"death spiral.\" What other responses could the Paint Shop in collaboration with the CFO have made to feedback received within the management control system when the Paint Shop was no longer competitive with outside contractors? Also, speculate on why it seems to be the case that the leadership of the Paint Shop did not initiate any of the responses you discussed. Be certain to give a comprehensive response. Part 2: Miami Valley Architects Inc. (20 points) Miami Valley Architects Inc. provides a wide range of engineering and architectural consulting services through its three branch offices in Columbus, Cincinnati, and Dayton, Ohio. The company allocates resources and bonuses to the three branches based on the net income reported for the period. Presented below are the results for the 2016 fiscal year ($ in thousands). Columbus Cincinnati $1,500 $1,419 $1,067 Direct labor (382) (317) (317) (1,016) Direct materials (281) (421) (185) ( 887) Overhead (710) (589) (589) (1,888) $92 ($24) $195 Sales Dayton Total $3,986 Less: Net Income $127 BUAD 5107: Module 6 Overhead items are accumulated in one overhead pool for the entire firm and then allocated to the branches based on direct labor dollars. For fiscal 2016 this predetermined rate was $1.859 for every direct labor dollar incurred by an office. The overhead pool includes rent, depreciation, taxes, etc. regardless of which office incurred the expense. Management is concerned with the results of the fiscal 2016 performance reports. During a review of the overhead, it became apparent that many items of overhead were not correlated with the direct labor dollars. Management decided to apply overhead based on direct tracing where possible and to apply Activity Based Costing (ABC) to model the profitability of each branch. Results of Overhead Analysis An analysis of the overhead revealed that facility sustaining costs for rent, utilities, depreciation, property taxes, etc. could be traced directly to the office where the costs were incurred ($ in thousands). Columbus Direct Overhead $180 Cincinnati $270 Dayton $177 Total $627 Activity pools and activity drivers determined from the accounting records and staff surveys are presented in the table on the next page1. 1 This case is adapted from material prepared by Beth M. Chaffman, CPA and Professor John Talbott, Ph.D., CMA. BUAD 5107: Module 6 # Activities by Location Activity Pools Activity Driver Columbus Cincinnati Dayton General Administration $409,000 Direct Labor Dollars $382,413 $317,086 $317,188 Project Costing $48,000 # of Timesheet Entries 6,000 3,800 3,500 Accounts Payable/Receiving $139,000 # of Vendor Invoices 1,020 850 400 Accounts Receivable $47,000 # of Client Invoices 588 444 96 Payroll/Mail Sort & Delivery $30,000 # of Employees 23 26 18 Personnel Recruiting $38,000 # of New Hires 8 4 7 Employee Insurance Processing $14,000 # of Claims Filed 230 260 180 Proposals Accepted by Clients $139,000 # of Proposals Accepted 200 250 60 Sales Meeting/Sales Aids $202,000 Contracted Sales $1,824,439 1,399,617 $571,208 Shipping $24,000 # of Projects 99 124 30 Ordering $48,000 # of Purchase Orders 135 110 80 Duplicating Costs $46,000 # of Copies Duplicated 162,500 146,250 65,000 Blueprinting $77,000 # of Blueprints 39,000 31,200 16,000 $1,261,000 BUAD 5107: Module 6 REQUIRED: 1. (4 points) Assume each job Miami Valley Architects completes required a proposal. Furthermore, assume proposals can involve talent from any of the three offices and from central administration who can make proposals to clients located anywhere the firm does work. Using ABC and the data provided above as presented in this case, what amount will be charged to a job completed by Miami Valley Architects for the cost of developing and making a proposal? 2. (8 points) Activity based costing is one approach to the difficult problem of cost allocation. However, the results may still be arbitrary and too imprecise for some applications. Consider the case of a large, national architectural firm with offices located throughout the country. Assume this firm needs to establish a transfer price to charge different profit centers across the country for their use of a centralized Personnel Recruiting service located within a centralized Human Resources group. Using the example of Personnel Recruiting in this problem, discuss reasons why activity based costing as it is implemented in this model by Miami Valley Architects for Personnel Recruiting lacks the precision needed for the large, national architectural firm seeking to establish a transfer price. 3. (8 points) In the first analysis the net incomes attributed to the Columbus, Cincinnati, and Dayton offices were $127,000; $92,000; and, ($24,000), respectively. If profits for the offices are calculated using the ABC approach, the profits attributed to the Columbus, Cincinnati, and Dayton offices are $128,000; ($42,000); and, $109,000, respectively - these computations were made to save you the need to spend time doing the arithmetic, they do not need to be verified and you should accept these numbers as correct. After the reviewing the revised data, Don Johnson, the head of Miami Valley's executive committee takes you out to lunch to discuss the committee's new plan for closing the Cincinnati office and continuing to serve some remaining loyal Cincinnati clients from the Columbus office. Don begins the conversation by telling you how you saved the company from making a disastrous mistake. Don said that the executive committee knew something wasn't right and before your ABC project Dayton was targeted for closure within the next six months. Now, the numbers make it clear that the problem is with the Cincinnati office and this is the office that should be closed within the coming six months. Don is a person of action and he is ready to prune when and where pruning is needed. The new ABC numbers show that Cincinnati is reporting an operating loss of $42,000. Don believes that closing the Cincinnati office will avoid this loss and overall firm profit will increase by $42,000 or more. Explain why a more careful study of the impact of closing Cincinnati must be undertaken because it is unlikely that Don's expected increase in firm profit of $42,000 will actually occur if Cincinnati is closed