the question is on the first page "4."

4. On a separate note I was thinking that we clearly have saved money overall on our material variances (it shows on your variances on 2- Wood club an overall 680,064 which is favourable). I know this is primarily because we made and sold less clubs, thus revenues being down. However, we can choose simply not to explain this to the directors - we can misinform them it was a big cost saving and then award ourselves large bonuses because of this. What are your thoughts on this? MN2405 January 2021 Background You work for Pro Club Ltd: Pro Club Ltd (PCL) manufacture and sell golf clubs. PCL have successfully marketed themselves to be placed within the premium golf club sector. PCL spends a large amount of money in research and development and are constantly changing the design and material used to make each golf club. PCL have 5 major divisions across Europe: you work for the Scottish Division. Each division concentrates on the design, production and distribution of specific clubs allocated to their division. The Scottish division oversees the 'Driver' club and the 2-Wood' club: They create a new model each year for these two clubs. This year has been very exciting as a new material, graphite fibre-reinforced epoxy HFP (HFP), has been incorporated to make the 2020 models. This material has been sourced from Europe. In November 2020 the Scottish procurement manager highlighted an issue to you that had come to his attention for the production of the two golf clubs in December 2020. He wrote to you (management accountant): "Dear Management Accountant, As you know COVID and Brexit has affected all manufacturers in Europe, thus there is a delay of manufacturing HFP. Unfortunately, we will be limited to 12,000,000 grams of HFP to produce our two new 2020 models of clubs in December." Tasks It is now January 2021 and your new line manager Ray Whinestone, Senior Accountant is reviewing the information you produced in light of the above issue in December. Ray sends you the following email: Tasks It is now January 2021 and your new line manager Ray Whinestone, Senior Accountant is reviewing the information you produced in light of the above issue in December. Ray sends you the following email: "Dear Management Accountant, I realise you have worked so hard over the last few months creating information to overcome the shortage of our new material HFP. I have forwarded the information you sent to me back in November looking at limiting factor analysis and what golf clubs to focus on in December's production. (see appendix 1) CONTINUES NEXT PAGE Page 2 of 5 MN2405 January 2021 As you know I am new to this job and thus I am a little confused what the information means. I need to explain to the board of directors what happened in December, so can you email me explanations on the following points below (Please bear in mind I want specific reference to the numbers and details around this (PCL) company, please do not give me generic explanations as that is not going to interest the directors.) Appendix 1: Limiting Factor Analysis Material HFP cost per unit (0.5 per gram) Driver 100 0.5 per gram 200 grams 50,000 10.000.000 2-WOOD 84 0.5 per gram 168 grams 20,000 3,360,000 Gram used per club (unit) Budgeted Units demanded Total grams needed Total grams for all products Shortfall in HFP grams 13,360,000 1,360,000 Contribution per unit Contribution per gram Ranking Driver 130 0.65 2-WOOD 91 0.54 2 Production plan (units) Grams used in production plan 50,000 units 11.904 units 10,000,000 grams 2,000,000 grams Variances on 2 Wood Club Material Price Variance Material Usage Variance 10,000 Adverse 12,000 favourable 2 Wood club units Material Cost Original Budget 20,000 units 1,680,000 Flexed Budget Actual 11.904 units 11.904 units $999.936 997.936 Overall Material Variance: Original vs Actual 680,064 Favourable 4. On a separate note I was thinking that we clearly have saved money overall on our material variances (it shows on your variances on 2- Wood club an overall 680,064 which is favourable). I know this is primarily because we made and sold less clubs, thus revenues being down. However, we can choose simply not to explain this to the directors - we can misinform them it was a big cost saving and then award ourselves large bonuses because of this. What are your thoughts on this? MN2405 January 2021 Background You work for Pro Club Ltd: Pro Club Ltd (PCL) manufacture and sell golf clubs. PCL have successfully marketed themselves to be placed within the premium golf club sector. PCL spends a large amount of money in research and development and are constantly changing the design and material used to make each golf club. PCL have 5 major divisions across Europe: you work for the Scottish Division. Each division concentrates on the design, production and distribution of specific clubs allocated to their division. The Scottish division oversees the 'Driver' club and the 2-Wood' club: They create a new model each year for these two clubs. This year has been very exciting as a new material, graphite fibre-reinforced epoxy HFP (HFP), has been incorporated to make the 2020 models. This material has been sourced from Europe. In November 2020 the Scottish procurement manager highlighted an issue to you that had come to his attention for the production of the two golf clubs in December 2020. He wrote to you (management accountant): "Dear Management Accountant, As you know COVID and Brexit has affected all manufacturers in Europe, thus there is a delay of manufacturing HFP. Unfortunately, we will be limited to 12,000,000 grams of HFP to produce our two new 2020 models of clubs in December." Tasks It is now January 2021 and your new line manager Ray Whinestone, Senior Accountant is reviewing the information you produced in light of the above issue in December. Ray sends you the following email: Tasks It is now January 2021 and your new line manager Ray Whinestone, Senior Accountant is reviewing the information you produced in light of the above issue in December. Ray sends you the following email: "Dear Management Accountant, I realise you have worked so hard over the last few months creating information to overcome the shortage of our new material HFP. I have forwarded the information you sent to me back in November looking at limiting factor analysis and what golf clubs to focus on in December's production. (see appendix 1) CONTINUES NEXT PAGE Page 2 of 5 MN2405 January 2021 As you know I am new to this job and thus I am a little confused what the information means. I need to explain to the board of directors what happened in December, so can you email me explanations on the following points below (Please bear in mind I want specific reference to the numbers and details around this (PCL) company, please do not give me generic explanations as that is not going to interest the directors.) Appendix 1: Limiting Factor Analysis Material HFP cost per unit (0.5 per gram) Driver 100 0.5 per gram 200 grams 50,000 10.000.000 2-WOOD 84 0.5 per gram 168 grams 20,000 3,360,000 Gram used per club (unit) Budgeted Units demanded Total grams needed Total grams for all products Shortfall in HFP grams 13,360,000 1,360,000 Contribution per unit Contribution per gram Ranking Driver 130 0.65 2-WOOD 91 0.54 2 Production plan (units) Grams used in production plan 50,000 units 11.904 units 10,000,000 grams 2,000,000 grams Variances on 2 Wood Club Material Price Variance Material Usage Variance 10,000 Adverse 12,000 favourable 2 Wood club units Material Cost Original Budget 20,000 units 1,680,000 Flexed Budget Actual 11.904 units 11.904 units $999.936 997.936 Overall Material Variance: Original vs Actual 680,064 Favourable