At a recent professional conference, two accountants discussed

Question 1 (5 marks)At a recent professional conference, two accountants discussed product costing problems in theirrespective companies. Both accountants are familiar with ABC systems, but neither of their firmsutilise this method.Accountant A reported that part of the problem in product costing in his firm is majordifferences between product lines as to volume of units, utilisation of various activities, qualityassurance requirements established by customers and size of the products.Accountant B noted that in her firm, which produces consumer products, all products undergothe same basic production processes and in the same sequence, but in an increasing variety ofcolours and packaging modes.Both accountants are worried about the potential distortion of product costs under theirconventional product costing systems.Required: Which accountant should be more concerned about the potential distortion?Explain.(5 marks)Question 2 (5 marks)1) Explain the fundamental characteristics of a balanced scorecard. 2.5 marks2) Explain the different ways in which benchmarking may be achieved and the limitationsof each. (2.5 marks)Question 3 (5 marks)In the not too distant future XYZ enterprises will introduce a new printer for desktop computers.This printer is expected to compete successfully with other models that are anticipated to sell for$300. Hampton’s printer has several unique features and management believes that a slightlyhigher price(10 per cent) is justified. The company’s normal profit margin is 25 per cent of selling price.Required1. What is the printer’s target selling price, target cost and target profit? ( 2.5 marks)2. Suppose that XYZ engineers and cost accountants conclude that the present design of theprinter will result in a unit cost of $260. Explain the concept of value engineering and how itmay assist XYZ to achieve its goals. (2.5 marks)Question 4 (5 marks)Bath Products Ltd manufactures a variety of bath and beauty products for specialty stores.The company has recently introduced the concept of identifying cost of quality and has identifiedthe following costs for the month:Training of quality control supervisors $10,800Customer complaints $5,500Inspection of purchased ingredients $3,600Rework time $7,000Cost of defective products that cannot be reused $6,000Laboratory testing for safety $9,000Product liability $500Required: Prepare a cost of quality report.Question 5 10 marksPizza Company delivers pizzas to the residential halls and units near a major university.The company’s annual fixed expenses are $20,000. The sales price of a pizza is $8, and it coststhe company $4 to make and deliver each pizza. (ignore income taxes.)Required1. Using the contribution margin approach, calculate the company’s break-even point inunits (pizzas).2. What is the contribution margin ratio?3. Calculate the break-even sales revenue. Use the contribution margin ratio in yourcalculation.4. How many pizzas must the company sell to earn a target net profit of $50,000? Use theequation method.Question 6 (10 marks)The accountant for Photographic Company has established the following overhead cost poolsand activity drivers.Overhead Cost Pool Budgeted Overhead Cost Activity DriverMachine set-ups $100,000 Number of setupsMaterial handling $50,000 Weight of raw materialHazardous wasteControl $25,000 Weight of hazardous chemicals usedQuality controlInspection $37,500 Number of inspectionsOther overhead costs $100,000 Machine hoursTotal $312,500Overhead Cost Pool Budgeted Level for Activity OVERHEAD RATE Driver Machine set-ups 100 $1,000 per setupMaterial handling 50,000 kilos $1 per kiloHazardous wasteControl 10,000 kilos $2.50 per kiloQuality controlInspection 1,000 $37.50 per inspectionOther overhead costs 20,000 $5 per machine hourAn order for 1,000 boxes of film development chemicals has the following productionrequirements:Machine set-ups 4 Set-upsRaw material l0,000 kilosHazardous materials 2,000 kilosInspections 10 inspectionsMachine hours 500 machine hoursREQUIRED1. Calculate the total overhead that should be assigned to the development chemical order.2. What is the overhead cost per box of chemicals?3. Suppose Photographic Company was to use a single, predetermined overhead rate basedon machine hours. Calculate the rate per hour.4. Using the single plantwide rate, what is the total overhead assigned and the overhead costper box of chemicals?5. Discuss the merits of an activity-based overhead costing system.

 

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