Required:
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:
Overview of 20X7 results (6marks)
Prepare overview of the 20X7 results. Discuss any significant differences between the 20X7 budget and the actual figures (Exhibits 2 to 4). Base the analysis on the revised figures from requirement 1. Your analysis should include a discussion of the following:
- difference between actual and budgeted sales quantities for each product
- changes in unit selling price and effect on sales
- change in gross margin
- overall unit cost changes in direct ingredients
- changes in direct labour in relation to sales dollars
A full variance analysis is not expected or required. Brief numerical summaries are encouraged to highlight changes.
Exhibit 2 Actual operating income statement For the year ended December 31, 20X7 The-Bar Alamonde Salt-Lick Total Per bar Per bar Per bar 776,000 $1,164,000 $1.50 945,595 528,000 $ 897,600 724,672 $1.70 302,500 $ 605,000 $2.00 448,187 1,606,500 $2,666,600 2,118,454 $ 218,405 $ 172,928 $ 156,813 Volume Sales Cost of goods sold Gross margin Selling and administrative expenses Operating income Gross margin % $ 548,146 541,681 $ 6.465 18.8% 19.3% 25.9% 20.6% Budgeted operating income statement For the year ended December 31, 20X7 The-Bar Alamonde Salt-Lick Per Total Per bar Per bar bar 774,400 $1,161,600 $1.50 996,034 529,100 $952,380 690,756 $1.80 301,400 $ 602,800 $2.00 390,297 1,604,900 $2,716,780 2,077,087 $ 165,566 $ 261,624 $ 212,503 Volumes Sales Cost of goods sold Gross margin Selling and administrative expenses Operating income Gross margin % $ 639,693 542,554 $ 97,139 14.3% 27.5% 35.2% 23.5% In order to properly analyze the financial statements, the following information is also provided: Exhibit 3 Actual cost of product manufactured For the year ended December 31, 20X7 Salt-Lick Direct ingredients used Direct labour Manufacturing overhead Total manufacturing costs Add: beginning work-in-process Deduct: ending work-in-process Cost of goods manufactured The-Bar $ 333,507 135,876 476,954 $ 946,337 1,196 (1,207) $ 946,326 Alamonde $ 232,724 123,926 367,795 $ 724,445 837 (815) $ 724,467 $ 129,948 70,338 247,901 $ 448,187 Total $ 696,179 330,140 1,092,650 $ 2,118,969 2,033 (2,022) $ 2,118,980 $ 448,187 Budgeted cost of product manufactured For the year ended December 31, 20X7 The-Bar Alamonde Total Direct ingredients used Direct labour Manufacturing overhead Total manufacturing costs Add: beginning work-in-process Deduct: ending work-in-process Cost of good manufactured $ 330,271 147,744 518,685 $ 996,700 2,991 (2,885) $ 996,806 $ 231,514 101,736 357,165 $ 690,415 2,094 (1,949) $ 690,560 Salt-Lick $ 128,694 57,996 203,607 $ 390,297 $ 690,479 307,476 1,079,457 $2,077,412 5,085 (4,834) $ 2,077,663 $ 390,297 Exhibit 4 Other budgeted and actual schedules are provided below to help with the analysis. Actual quantity and cost of direct ingredients For the year ended December 31, 20X7 Ingredient Price Chocolate liquor Cocoa butter Cocoa powder Cane sugar Emulsifier Vanilla Almonds Himalayan salt Cost of ingredients Wrappers Total cost $5.55/kg $6.10/kg $1.18/kg $0.70/kg $0.80/kg $70/litre $10/kg $5.50/kg The-Bar Quantity Cost 27,160 $150,738 10,321 62,957 5.432 6,410 10,321 7,225 462 369 625 43,728 Alamonde Quantity Cost 18,480 $102,564 7,022 42,837 2,218 2,617 7,022 4,916 739 590 370 25,872 1,109 11,088 Salt-Lick Total Quantity Cost Quantity Cost 8,894 $49,359 54,534 $302,661 2,753 16,792 20,096 122,586 2,118 2,499 9,768 11,525 6,247 4,372 23,590 16,513 212 169 1,413 1,129 424 29,645 1,418 99,245 1,109 11,088 529 2,912 529 2,912 $105,748 $567,659 302,500 24,200 1,606,500 128,520 $129,948 $696,179 $0.08/bar 776,000 $271,427 62,080 $333,507 528,000 $190,484 42,240 $232,724 Budgeted quantity and cost of direct ingredients For the year ended December 31, 20X7 Ingredient Price Chocolate liquor $5.50/kg Cocoa butter $6.00/kg Cocoa powder $1.15/kg Cane sugar $0.70/kg Emulsifier $0.80/kg Vanilla $70/litre Almonds $10/kg Himalayan salt $5.50/kg Cost of ingredients Wrappers $0.08/bar Total cost The-Bar Quantity Cost 27,104 $149,072 10,300 61,797 5,421 6,234 10,300 7,210 461 369 623 43,637 Alamonde Quantity Cost 18,519 $101,852 7,037 42,222 2,222 2.556 7,037 4,926 741 593 370 25,926 1,111 11,111 Salt-Lick Quantity Cost 8,861 $48,736 2,743 16,456 2,110 2,426 6,224 4,357 211 169 422 29,537 Total Quantity Cost 54,484 $299,660 20,079 120,476 9,753 11,216 23,560 16,492 1,412 1,130 1,416 99, 101 1,111 11,111 527 2,901 $562,087 1,604,900 128,392 $690,479 527 $268,319 61,952 $330,271 774,400 2,901 $104,582 24,112 $128,694 $189,186 42,328 $231,514 529,100 301,400 Actual direct labour For the year ended December 31, 20X7 The-Bar Alamonde Salt-Lick Total Direct labour hours Cost per direct labour hour Total actual direct labour costs 4,105 $ 33.10 $ 135,876 3,744 $ 33.10 $ 123,926 2,125 $ 33.10 $ 70,338 9,974 $ 33.10 $ 330,140 Budgeted direct labour For the year ended December 31, 20X7 The-Bar Alamonde Salt-Lick Total Direct labour hours Cost per labour hour Total budgeted direct labour cost 4,560 $ 32.40 $ 147,744 3,140 $ 32.40 $ 101,736 1,790 $ 32.40 $ 57,996 9,490 $ 32.40 $ 307,476 Actual manufacturing overhead For the year ended December 31, 20X7 $ 103,584 89,566 $ 193,150 $ Variable Plant utilities Plant maintenance Fixed Quality control Computer and supplies Plant and equi ent amortization Research and development Indirect plant salary and wages Plant lease Total manufacturing overhead 37,500 188,000 150,000 135,000 193,000 196,000 899,500 $ 1,092,650 Budgeted manufacturing overhead For the year ended December 31, 20X7 $ 101,876 91,081 $ 192,957 $ Variable Plant utilities Plant maintenance Fixed Quality control Computer and supplies Plant and equipment amortization Research and development Indirect plant salary and wages Plant lease Total manufacturing overhead 39,000 189,000 150,000 120,000 192,500 196,000 886,500 $ 1,079,457 Predetermined overhead rate = $1,079,457/9,490 direct labour hours = $113.74678 per direct labour hour Exhibit 2 Actual operating income statement For the year ended December 31, 20X7 The-Bar Alamonde Salt-Lick Total Per bar Per bar Per bar 776,000 $1,164,000 $1.50 945,595 528,000 $ 897,600 724,672 $1.70 302,500 $ 605,000 $2.00 448,187 1,606,500 $2,666,600 2,118,454 $ 218,405 $ 172,928 $ 156,813 Volume Sales Cost of goods sold Gross margin Selling and administrative expenses Operating income Gross margin % $ 548,146 541,681 $ 6.465 18.8% 19.3% 25.9% 20.6% Budgeted operating income statement For the year ended December 31, 20X7 The-Bar Alamonde Salt-Lick Per Total Per bar Per bar bar 774,400 $1,161,600 $1.50 996,034 529,100 $952,380 690,756 $1.80 301,400 $ 602,800 $2.00 390,297 1,604,900 $2,716,780 2,077,087 $ 165,566 $ 261,624 $ 212,503 Volumes Sales Cost of goods sold Gross margin Selling and administrative expenses Operating income Gross margin % $ 639,693 542,554 $ 97,139 14.3% 27.5% 35.2% 23.5% In order to properly analyze the financial statements, the following information is also provided: Exhibit 3 Actual cost of product manufactured For the year ended December 31, 20X7 Salt-Lick Direct ingredients used Direct labour Manufacturing overhead Total manufacturing costs Add: beginning work-in-process Deduct: ending work-in-process Cost of goods manufactured The-Bar $ 333,507 135,876 476,954 $ 946,337 1,196 (1,207) $ 946,326 Alamonde $ 232,724 123,926 367,795 $ 724,445 837 (815) $ 724,467 $ 129,948 70,338 247,901 $ 448,187 Total $ 696,179 330,140 1,092,650 $ 2,118,969 2,033 (2,022) $ 2,118,980 $ 448,187 Budgeted cost of product manufactured For the year ended December 31, 20X7 The-Bar Alamonde Total Direct ingredients used Direct labour Manufacturing overhead Total manufacturing costs Add: beginning work-in-process Deduct: ending work-in-process Cost of good manufactured $ 330,271 147,744 518,685 $ 996,700 2,991 (2,885) $ 996,806 $ 231,514 101,736 357,165 $ 690,415 2,094 (1,949) $ 690,560 Salt-Lick $ 128,694 57,996 203,607 $ 390,297 $ 690,479 307,476 1,079,457 $2,077,412 5,085 (4,834) $ 2,077,663 $ 390,297 Exhibit 4 Other budgeted and actual schedules are provided below to help with the analysis. Actual quantity and cost of direct ingredients For the year ended December 31, 20X7 Ingredient Price Chocolate liquor Cocoa butter Cocoa powder Cane sugar Emulsifier Vanilla Almonds Himalayan salt Cost of ingredients Wrappers Total cost $5.55/kg $6.10/kg $1.18/kg $0.70/kg $0.80/kg $70/litre $10/kg $5.50/kg The-Bar Quantity Cost 27,160 $150,738 10,321 62,957 5.432 6,410 10,321 7,225 462 369 625 43,728 Alamonde Quantity Cost 18,480 $102,564 7,022 42,837 2,218 2,617 7,022 4,916 739 590 370 25,872 1,109 11,088 Salt-Lick Total Quantity Cost Quantity Cost 8,894 $49,359 54,534 $302,661 2,753 16,792 20,096 122,586 2,118 2,499 9,768 11,525 6,247 4,372 23,590 16,513 212 169 1,413 1,129 424 29,645 1,418 99,245 1,109 11,088 529 2,912 529 2,912 $105,748 $567,659 302,500 24,200 1,606,500 128,520 $129,948 $696,179 $0.08/bar 776,000 $271,427 62,080 $333,507 528,000 $190,484 42,240 $232,724 Budgeted quantity and cost of direct ingredients For the year ended December 31, 20X7 Ingredient Price Chocolate liquor $5.50/kg Cocoa butter $6.00/kg Cocoa powder $1.15/kg Cane sugar $0.70/kg Emulsifier $0.80/kg Vanilla $70/litre Almonds $10/kg Himalayan salt $5.50/kg Cost of ingredients Wrappers $0.08/bar Total cost The-Bar Quantity Cost 27,104 $149,072 10,300 61,797 5,421 6,234 10,300 7,210 461 369 623 43,637 Alamonde Quantity Cost 18,519 $101,852 7,037 42,222 2,222 2.556 7,037 4,926 741 593 370 25,926 1,111 11,111 Salt-Lick Quantity Cost 8,861 $48,736 2,743 16,456 2,110 2,426 6,224 4,357 211 169 422 29,537 Total Quantity Cost 54,484 $299,660 20,079 120,476 9,753 11,216 23,560 16,492 1,412 1,130 1,416 99, 101 1,111 11,111 527 2,901 $562,087 1,604,900 128,392 $690,479 527 $268,319 61,952 $330,271 774,400 2,901 $104,582 24,112 $128,694 $189,186 42,328 $231,514 529,100 301,400 Actual direct labour For the year ended December 31, 20X7 The-Bar Alamonde Salt-Lick Total Direct labour hours Cost per direct labour hour Total actual direct labour costs 4,105 $ 33.10 $ 135,876 3,744 $ 33.10 $ 123,926 2,125 $ 33.10 $ 70,338 9,974 $ 33.10 $ 330,140 Budgeted direct labour For the year ended December 31, 20X7 The-Bar Alamonde Salt-Lick Total Direct labour hours Cost per labour hour Total budgeted direct labour cost 4,560 $ 32.40 $ 147,744 3,140 $ 32.40 $ 101,736 1,790 $ 32.40 $ 57,996 9,490 $ 32.40 $ 307,476 Actual manufacturing overhead For the year ended December 31, 20X7 $ 103,584 89,566 $ 193,150 $ Variable Plant utilities Plant maintenance Fixed Quality control Computer and supplies Plant and equi ent amortization Research and development Indirect plant salary and wages Plant lease Total manufacturing overhead 37,500 188,000 150,000 135,000 193,000 196,000 899,500 $ 1,092,650 Budgeted manufacturing overhead For the year ended December 31, 20X7 $ 101,876 91,081 $ 192,957 $ Variable Plant utilities Plant maintenance Fixed Quality control Computer and supplies Plant and equipment amortization Research and development Indirect plant salary and wages Plant lease Total manufacturing overhead 39,000 189,000 150,000 120,000 192,500 196,000 886,500 $ 1,079,457 Predetermined overhead rate = $1,079,457/9,490 direct labour hours = $113.74678 per direct labour hour
