Your question
Subject: Managerial AccountingCourse: 22000 D: ACCG
There are two parts for the project:
Writing part, and presentation part. I’ll put the writing part with the answers I have done, but just help me with the presentation part please.
Case:
Oxford Concrete Inc. (OCI) processes and distributes various types of cement. The company buys
quarried local rock, limestone, and clay from around the world and mixes, blends, and packages the
processed cement for resale. OCI offers a large variety of cement types that it sells in one-kilogram
bags to local retailers for small do-it-yourself jobs. The major cost of the cement is raw materials.
However, the company’s predominantly automated mixing, blending, and packaging processes
require a substantial amount of manufacturing overhead. The company uses relatively little direct
labour. Some of OCI’s cement mixtures are very popular and sell in large volumes, while a few of the recently
introduced cement mixtures sell in very low volumes. OCI prices its cements at manufacturing cost
plus a 25% markup, with some adjustments made to keep the company’s prices competitive. For the coming year, OCI’s budget includes estimated manufacturing overhead cost of $4,400,000.
OCI assigns manufacturing overhead to products on the basis of direct labour-hours. The expected
direct labour cost totals $1,200,000, which represents 100,000 hours of direct labour time. Based on
the sales budget and expected raw materials costs, the company will purchase and use $10,000,000
of raw materials (mostly quarried rock, limestone, and clay) during the year. The expected costs for direct materials and direct labour for one-kilogram bags of two of the
company’s cement products appear below: Normal
Portland
High Sulphate
Resistance Direct materials $9.00 $5.80 Direct labour (0.02 hours per bag $0.24 $0.24 OCI’s controller believes that the company’s traditional costing system may be providing misleading
cost information. To determine whether this is the case, the controller has prepared an analysis of the
year’s expected manufacturing overhead costs, as shown in the following table:
Activity Cost Pool
Activity Measure
Expected Activity for
the Year
Expected Cost
for the Year Purchasing Purchase orders 4,000 hours $1,120,000 Material Handling Number of setups 2,000 setups 386,000 Quality Control Number of batches 1,000 batches 180,000 Mixing Mixing hours 196,000 mixing hours 2,090,000 Blending Blending hours 64,000 blending hours 384,000 Packaging Packaging hours 48,000 packaging hours 240,000 Total manufacturing overhead cost $4,400,000 Data regarding the expected production of Normal Portland and High Sulphate Resistance cement
mixes are presented below:
Normal Portland
High Sulphate
Resistance Expected sales 160,000 kilograms 8,000 kilograms Batch size 10,000 kilograms 500 kilograms Setups 4 per batch 4 per batch Purchase order size 20,000 kilograms 500 kilograms Mixing time per 100 kilograms 3 mixing-hours 3 mixing-hours Blending time per 100 kilograms 1 blending-hour 1 blending-hour Packaging time per 100 kilograms 0.6 packaging-hours 0.6 packaging-hours
Required: 1. Using direct labour-hours as the base for assigning manufacturing overhead cost to
products, do the following: a. Determine the predetermined overhead rate that will be used during the year. b. Determine the unit product cost of one kilogram of the Normal Portland cement
and one kilogram of the High Sulphate Resistance cement. 2. Using ABC as the basis for assigning manufacturing overhead cost to products, do the
following: a. Determine the total amount of manufacturing overhead cost assigned to the
Normal Portland cement and to the High Sulphate Resistance cement for the year. b. Using the data developed in 2(a) above, compute the amount of manufacturing
overhead cost per kilogram of the Normal Portland cement and the High Sulphate
Resistance cement. Round all computations to the nearest whole cent. c. Determine the unit product cost of one kilogram of the Normal Portland cement
and one kilogram of the High Sulphate Resistance cement. 3. Write a brief memo to the president of OCI explaining what you found in (1) and (2) above,
and discuss the implications to the company of using direct labour as the base for assigning
manufacturing overhead cost to products.
Case Answers:
11.
A
Predetermined OH Rate using direct labor hours
=4,400,000/100000
=$44
B
Unit Product costs per kg
2
A
Manufacturing Over Head assigned using Activity Based Costing
2
B
Average overhead per kg
2
C
Unit product Costs
3.
To:
The President
OCI
From: Management accountant
Subject: Explanation of Using different costing methods
Dear Sir,
The conventional costing technique allocates all overheads based on the number of hours worked by the employees. Overheads are first assigned to activities and then assigned to goods depending on their utilization of the activity.
Under activity-based costing, the per-unit cost of both items is greater. Assigning overheads based on direct labor hours considerably undervalues the strong sulphate resistance of a product.
The selling price per kilogram is determined by the corporation using the cost-plus markup approach. The selling price will be lower if the costing technique utilized undervalues the goods. For example, the conventional costing technique yields a selling price of 6.32 x 1.25 = 7.9 for a kilogram bag with high sulphate resistance, but the activity-based costing method yields a lower cost per kilogram. Because direct labor was used as the foundation, the product and its selling price were undervalued.
In case of any further assistance, you can ask me.
Thank you
Presentation Part:
Presentation Guidelines
Your group will either prepare a video that is a summary of the key findings and case points or
arrange to meet with the professor virtually to present the summary no later than the deadline. If
preparing a video, it must be submitted to the Assignment Box on SLATE along with the written
report. If presenting to the professor, webcams for group members presenting must be open. Use
PowerPoint or another type of presentation software. Try to be creative.
1. The minimum length is 5 minutes and the maximum length of the presentation is 10
minutes.
2. Each group member must contribute to the presentation. The presentation can either be a
submitted video recording or be presented at a pre-arranged time to the professor. Any
group member that is not in the video or present for the presentation to the professor will not
receive a grade for the presentation portion of the project.
3. The quality of the information and your presentation skills will be evaluated.
4. Your presentation materials (PowerPoint, Prezi or another form) must be no longer than the
equivalent of seven (7) slides maximum with the following content:
1. First slide should have the case name, group number, and the group members listed.
2. Second slide brief description of the role of your group.
3. Third slide should state the main problem or issue and any sub-issues: this should be
a summary only.
4. Next slide or two should provide the main points of the analysis: both qualitative and/or
quantitative in summary format only.
5. Next slide should present the suggested solutions in summary form
6. Last slide should state the recommended solution.
In each case, when you are speaking, you will be expanding on the information given in the
slides.
5. The presentation will be marked out of 40. Please see the separate grading rubric.
