student association has hired a band and a caterer for a graduation party. The band will charge a fixed fee of $1 000 for an evening of music, and the caterer will charge a fixed fee of $600 for the party set-up and an additional $9 per person who attends. Snacks and soft drinks will be provided by the caterer for the duration of the party. Students attending the party will pay $5 each at the door. Required 1. Draw a graph depicting the fixed cost, the variable cost and the total cost to the student association for different attendance levels. 2. Suppose 100 people attend the party. What will be the total cost to the student association? What will be the cost per person? 3. Suppose 500 people attend the party. What will be the total cost to the student association and the cost per attendee? 4. Draw a graph depicting the cost per attendee for different attendance levels. As president of the student association, you want to request a grant to cover some of the party costs. Will you use the per attendee cost numbers to make your case? Why or why QUESTION 3 Job costing Home Construction Ltd builds units in retirement complexes in remote communities. It uses a job- costing system with two direct-cost categories (direct materials and direct labour) and two indirect- cost pools (building support and logistics). Direct labour-hours is the cost driver for building- support costs and direct materials costs is the cost driver for logistics. In December 2018, Home Construction budgets 2019 building-support costs to be $8 800 000, and direct labour-hours to be 220 000. At the end of 2019, management is comparing the costs of several jobs that were started and completed in 2019: Construction period Direct materials costs Direct labour costs Direct labour-hours Grandvista model Feb-June 2019 $106 550 $ 36 250 970 Sunnylook model May-Oct 2019 $127 450 $ 41 130 1 000 Direct materials and direct labour are paid for on a contract basis. The costs of each are known when direct materials are used or when direct labour-hours are worked. The 2019 actual building- support costs were $8 525 000, the actual direct labour-hours were 155 000 and actual direct materials costs were $82 500 000. Required 1. Calculate: (a) the budgeted cost-driver rate and (b) the actual cost-driver rate. Explain the difference between them. 2. Calculate the job costs of the Grandvista model and the Sunnylook model using: (a) normal costing and (b) actual costing. 3. Explain why managers might prefer normal costing over actual costing. Page 2 of 6 AC211 Management Accounting - Assessment 2 QUESTION 4 Weighted-average method Process Costing Comfy Ltd manufactures car seats. Each car seat passes through the assembly department and the testing department. This problem focuses on the assembly department. The process-costing system at Comfy Ltd has a single direct-cost category (direct materials) and a single indirect- cost category (conversion costs). Direct materials are added at the beginning of the process. Conversion costs are added evenly during the process. When the assembly department finishes work on each car seat, it is immediately transferred to testing. Comfy Ltd uses the weighted-average method of process costing. Data for the assembly department for October 2018 are as follows: Physical units (car seats) Direct materials Conversion costs Work-in-process, October 1a Started during October 2018 Completed during October 2018 Work-in-process, 31 Octoberb Total costs added during October 2018 4 000 22 500 26 000 500 $1 248 000 $4 635 000 $241 650 $2 575 125 a Degree of completion: direct materials,100%; conversion costs, 45%. b Degree of completion: direct materials,100%; conversion costs, 65%. Required 1. For each cost category, calculate equivalent units in the assembly department. Show physical units in the first column of your schedule. 2. What issues should the manager focus on when reviewing the equivalent unit's calculation? 3. For each cost category, summarise total assembly department costs for October 2018 and calculate the cost per equivalent unit. 4. Assign costs to units completed and transferred out and to units in ending work-in- QUESTION 5 Activity-based Costing Pastel Bags (PB) is a designer of high-quality backpacks and purses. Each design is made in small batches. Each spring, PB comes out with new designs for the backpack and for the purse. The company uses these designs for a year and then moves on to the next trend. The bags are all made on the same fabrication equipment that is expected to operate at capacity. The equipment must be switched over to a new design and set-up to prepare for the production of each new batch of products. When completed, each batch of products is immediately shipped to a wholesaler. Shipping costs vary with the number of shipments. Budgeted information for the next financial year is: Pastel Bags: budgeted costs and activities Direct materialspurses Direct materialsbackpacks Direct production labourpurses Direct production labourbackpacks Set-up Shipping Design Plant utilities and administration Total Other budget information follows: $319 155 454 995 99 000 113 000 64 000 73 000 169 000 221 000 $1 513 150 Total 9 250 4 250 200 4 Number of bags Hours of production Backpacks 6 175 1 665 120 2 Purses 3 075 2 585 80 2 Number batches Number designs of of Required Prepare a report of the budgeted total costs and cost per unit for each product line using the ABC system for presentation to management. In the report: (1) identify the activity-cost drivers that you have selected and the related level in the hierarchy of activities, together with an explanation; (2) recommend to managers how they could use the information to reduce costs. QUESTION 6 Cost Volume Profit - Sales Mix (20 marks) The Kenosha Company has three product lines of beer mugsA, B and Cwith contribution margins of $5, $4 and $3, respectively. The chief executive officer foresees sales of 175 000 units in the coming period, consisting of 25 000 units of A, 100 000 units of B and 50 000 units of C. The company's fixed costs for the period are $351 000. Required 1. What is the company's break-even point in units, assuming that the given sales mix is maintained? 2. If the sales mix is maintained, what is the total contribution margin when 175 000 units are sold? What is the operating profit? 3. What would operating income be if the company sold 25 000 units of A, 75 000 units of B and 75 000 units of C? What is the new break-even point in units if these relationships persist in the next period? 4. Comparing the break-even points in requirements 1 and 3, is it always better for a company to choose the sales mix that yields the lower break-even point? Explain