Stylish Chairs Stylish lChairs is a small company which makes and sells copies of an Ian-century rooooo chair. The company Is owned by the couple Anni-Frid and Benny; 'i'ou are an intern working at Stylish Chair's. For the sake of simplicity. this assignment does not consider canes and other fees and there is no stock orworlt In process in the beginning or end of every year. you might have to use Information from previous questions for answering information for following questions and whenever possible support your arguments with your caloJIatlons. Question 1 Anni-Frld and liennydecided theyr need a management accountant for helping them understand their business and hire an old friend named Blurn for this role. Besides being an old friend of the couple, Bjdrn ls good at playing the guitar. However, Bjorn lacks the qualications for fulfilling the role of a management accountant Mum Please state one of the ethical standards. as provided by the Institute of Management Accountants th-lli Smfemenroffticfmkssionaf Practice'. which is beingieopardlced by Anni-Fricl and Benny hiring Bjorn and Justify why this standard is being jeopardized. {There might be more than one ethical standard being Jeopardle but only one Is required for this question]. {Chapter 1, 1i: marks] Question 2 First Bjorn is examining the activities for the past year. Stylish Chairs rents a small administrative office in Melbourne's central business district {CED} for $20,000 per year and a large warehouse in Dandenong for 530.000 per year. The cost with staff In the administrative office in the CED handling all the bureaucracy is $100,000 per year, Stylish Chairs has hired a firm for managing the sales and this firm charges a commission of 570 for each completed sale. The invoicing system used by Stylish Chairs is outsourced and for each sale completed the firm charges 51. The administrative office had In the past year other miscellaneous costs of $4,000. mostly costs with the lease of material and stationery, and this yearly cost Is expected to remain the same amount for years to come. a full-time employee gets paid $80,000 per year for supervising the casual staff working in the warehouse in Dandenong. Like the administrative office. the warehouse had other miscellaneous costs of $5,000 in the past year and is expected to remain the same amount for years to come. Stylish Chairs has a contract with a delivery firm for delivering the copies of the 18"'-century rococo chair to their clients, but BJdrn is not able to find the contract and is not sure how much the firm charges per transaction. The only information he can gather is regarding past year's quarterly costs: Table 1 - Quarterly delivery costs Quarter | Delivery Cost | Units Delivered First $360 125 Second $400 150 Third $340 125 Quarter $300 100 Total $1,400 500 This is the additional reading for this unit. Below is a table listing all the material used during the past year to manufacture 500 copies of 18" century rococo chairs and the costs incurred. There was no stock or work in process in the beginning or end of the year. Table 2 - Material costs Material Quantity Total Cost Fabric 1,500 m $3,000 Timber 6,000 Units $36,000 Foam 500 Kilograms $150 Button stud 4,500 Units $450 Varnish 500 Litres $10,000 Bolt 5,000 Units $500 The manufacturing activity is made by casual staff. The first stage is the woodworking, where a carpenter is hired by $35 per hour for working with the timber. This task is very labour intensive and for preparing the material a carpenter takes 5 hours per chair. Once the timber is ready for being assembled a casual staff is paid $25 per hour for assembling the chair with the bolts and adding the paddings (fabric, foam, and button studs). The assembling takes only 1 hour per chair. The final stage of manufacturing is varnishing the chair. A casual staff is paid $35 per hour for varnishing the chairs and this task takes 2 hours. Required a) Bjorn is having some trouble crunching the numbers and has asked for your help identifying and classifying all the costs between (a) fixed, mixed, or variable, (b) direct or indirect, and (c) product cost or period cost. (Chapter 2, 10 marks) b) Use the high-low method for estimating the cost function for annual delivery costs. (Chapter 9, 10 marks)c) Bjorn is also having trouble computing the total product cost and unit product cost for the past year and asked for your help in calculating the total product cost and unit product cost for the past year for Stylish Chairs. (Chapter 2, 10 marks) Question 3 To have a better picture of what has happened during the previous year Anni-Frid and Benny want to see Stylish Chairs operating profit, and Bjorn has asked for your help preparing this information. The copies of the 18th-century rococo chair are sold for $1,000 each. Required ) Prepare a variable-costing income statement for the previous year for Stylish Chairs. (e.g., Panel A, Exhibit 7.3, Chapter 7, 5 marks) b) Prepare an absorption-costing income statement for the previous year for Stylish Chairs. (e.g., Panel B, Exhibit 7.3, Chapter 7, 5 marks) Question 4 In the current year, Anni-Frid and Benny were approached by Agnetha who wants to buy 20 copies of the 18th- century rococo chair. Anni-Frid and Benny want to know the manufacturing costs for this job, considering Stylish Chairs has a production budget of 600 chairs for the current year. For allocating the manufacturing overhead (i.e., indirect cost pool) Stylish Chairs uses the direct labour-hours (i.e., cost-allocation base), but Bjorn is struggling with job costing in manufacturing and has asked for your help. Required a) Calculate the direct manufacturing costs, the indirect manufacturing costs, and the total manufacturing costs of this job. (Job costing in manufacturing, Chapter 3, 10 marks) b) Considering the current cost-allocation base of direct labour-hours and using a direct allocation method, which of the three activities (assembling, woodworking, and varnishing) has the higher allocated manufacturing overhead and why? (Direct allocation method, Chapter 5, 10 marks)Question 5 Bjorn wants to propose to Anni-Frid and Benny a new product for Stylish Chairs, the 21"-century chair. This new product is the standard product manufactured by Stylish Chairs (i.e., a copy of the 18*-century rococo chair) with an extra coat of fancy varnish. Applying this extra coat of fancy varnish takes more 2 hours of direct manufacturing activity (varnishing) for each chair and 1 litre of fancy varnish is used for each chair. This fancy varnish is 50% more expensive than the normal varnish used for the standard product. Whereas a copy of the 18"-century rococo chair is sold by $1,000, Bjorn says the 21"-century chair could be sold by $1,250 and Stylish Chairs would make more money with this new product. Required Anni-Frid and Benny are sceptical about this new product and have asked you to crunch the numbers and show whether it is worth processing the standard product into this new product, the 21"-century chair, and selling it for $1,250. (Sell or process further, Chapter 6, 10 marks) Question 6 Stylish Chairs has a production budget of 600 chairs for the current year and for allocating the manufacturing overhead (i.e., indirect cost pool) Stylish Chairs uses the direct labour-hours (i.e., cost-allocation base). Anni- Frid and Benny are not sure whether the production budget will be met and some of its consequences. Required a) If the quantity produced in the current year reaches the budgeted amount of 600 chairs whereas in the past year the production was 500 chairs, Bjorn says the unit product cost in the current year will decrease when compared to the previous year because the production has increased. Is Bjorn right or wrong in his statement and why? (Chapter 2, 10 marks) b) Considering Stylish Chairs uses budgeted indirect costs during the year, if the quantity produced in the current year is only 500 chairs whereas the production budget for the current year is 600 chairs, Bjorn says there will be an overallocation of indirect costs. Is Bjorn right or wrong in his statement and why? (Budgeted indirect costs and end-of-period adjustments, Chapter 3, 10 marks)