Project 3 Objectives:
1. Analyze manufacturing overhead
2. Develop a comparison of application of manufacturing overhead using a traditional and an ABC approach.
3. Recommend a course of action on how to apply manufacturing overhead.
4. Develop scattergraphs, simple regression output tables, and multiple output table.
5. Develop cost estimation based on your regression analysis.
6. Analyze results and recommend the best approach for the cost estimation.
7. Perform Breakeven Analysis
Part 1 -
Industries Inc. manufactures 2 products: A and B. A review of the company's accounting records revealed the following per-unit costs and production volume:
|
Product A
|
Product B
|
|
Production volume(units)
|
2500
|
5000
|
|
Direct labor hours used
|
2.0
|
3
|
|
Direct material cost per unit
|
$32
|
$50
|
|
Direct Labor cost: $14 per hour
|
|
|
|
2 hours at $14
|
$28
|
|
|
3 hours at $14
|
|
$42
|
|
Manufacturing overhead
|
|
|
|
2 hours at $86.10
|
$172.20
|
|
|
3 hours at $86.10
|
|
$258.30
|
|
Manufacturing overhead is budgeted at :
|
$1,722,000
|
|
Required:
a. Using direct labor hours as the base for assigning manufacturing overhead cost to products, compute the direct labor needed and the predetermined overhead rate using direct labor hours.
b. Using the predetermined overhead rate you determined in "a" above, determine the unit product cost of each product.
c. You are a recent hire to Industries Inc. and you have made it known that you just recently completed an MBA program that had a management accounting course that taught you about another costing system that might be appropriate. During a meeting, you suggested that an ABC system might be a more accurate costing system. Management has asked you to re-compute the unit cost using the ABC costing approach, since the company is showing declining profits.
d. Complete the following table to determine the unit product costs from ABC.
e. Write a short report (at least 75 words) that identifies factors that may account for the company's declining profits.
Part 2 -
Food services company is looking at the costs involved with their catering services. In the past the company has used meals produced as the cost driver for Overhead costs, but you have been recently hired as a consultant and have decided to use your new MBA skills to make a recommendation to management on what should be the cost driver(s) for overhead costs. You have decided to include number of deliveries in your analysis, too.
|
Month
|
eliveries
|
Meals
produced
|
Total
Overhead
Cost
|
|
1
|
1,340
|
12,690
|
$ 69,094
|
|
2
|
1,180
|
11,980
|
64,927
|
|
3
|
1,050
|
10,950
|
60,332
|
|
4
|
930
|
10,280
|
57,953
|
|
5
|
840
|
9,020
|
55,984
|
|
6
|
780
|
8,130
|
53,119
|
|
7
|
700
|
7,540
|
52,706
|
|
8
|
630
|
6,980
|
53,874
|
|
9
|
680
|
8,930
|
53,445
|
|
10
|
760
|
9,800
|
54,869
|
Required:
1. Prepare 2 scatter graphs and 2 simple regression analyses to estimate the Overhead costs using each of the cost drivers above. Make sure you show the equation of the line and R-squared on each of your scatter graphs.
2. Prepare a multiple regression table the 2 independent variables-Deliveries and meals produced. Do not try to prepare a scatter graph, since you can make a chart with multiple X's.
3. Assuming the following level of cost-driver volume, what is the estimated overhead cost using simple regression for each of the cost drivers and using multiple regressions to estimate the cost of overhead?
4. Using the simple and multiple regression analyses above, what would you recommend estimating the Overhead Costs? Why? Make sure you discuss the Coefficient of Determination in your response. Your comments should be at least 75 words.
Part 3
DATA
ABC, Inc. is a newly organized manufacturing business this year.
The following company's costs and expenses are:
Required: Use the information in the DATA field above using cell referencing to answer the following requirements.
1. Calculate the breakeven point in units.
2. Calculate the breakeven point in sales dollars.
3. Calculate the safety margin. What does the margin of safety mean?
4. What if the direct labor cost per unit increases from $7 a unit to $9, what will be the new breakeven in units? Explain why it changed.
You should only have to change the direct labor in the data area and actually all your answers should be updated. Please put the direct labor cost back to the original number once you have answered the question?
5. What if the manufacturing overhead cost decreases from 100,000 to 90,000, what will be the new breakeven in units? Explain why it changed.
You should only have to change the fixed MOH in the data area and actually all your answers should be updated. Please put the fixed MOH cost back to the original number once you have answered the question?
Attachment:- Project Assignment.rar