1 ACCT 2013 Cost Management and Control Systems Major Assignment: Case Study Due date: 8 October 2018, 4.00pm Word Limit: 2000 words ( 10%) Individual Assignment This case study must be considered equivalent to 2,000 words (including PART A and B). The assignment must be submitted via the online submission portal. Disclaimer: The information used in this assignment is fictitious and does not represent any business or industrys actual financial performance or position. Case Study: Background BlindsforShine Limited manufactures luxury Blinds for residential and commercial use. The company sells exclusively to distributors, who in turn sell to independent stores and retail chains. With the recent downturn in the Blinds market, BlindsforShine experienced a decline in financial performance. BlindsforShines CEO, Charlie Chan is concerned and asked for a budget report from the management accountant on its performance during November 2018. The management team is in the process of preparing and analysing the 2018 budget and put together the following information. Annual sales are expected to be 15,000 luxury Blinds (Residential Blinds: 11 000 units; Commercial Blinds: 4 000 units). Budgeted sales for the period of October and November 2018 are provided below (Table 1). All sales are on credit basis. A 3% discount is offered if payment is made in the month of sale. Table 1: Standard/Budgeted Sales in Units and Dollars for October and November 2018 Residential Blinds Commercial Blinds Units Price Units Price October 1050 $1785 400 $2625 November 1010 $1755 455 $2660 The annual production is expected to be 15,000 Blinds (Residential: 11 000 units; Commercial: 4 000 units). Table 2 identifies the material requirements and costs for each Blind. These costs are not expected to change during the budgeted period. Assume that all units manufactured in November are sold in November. Table 2: Standard/Budgeted Direct Materials Inputs and Costs as at November 2018 Residential Blinds Commercial Blinds Quantity* Cost** Quantity* Cost** Fabric 3.5 m $35.50 5 m $75.00 Faux Wood 2.5 m $28.00 3.5 m $70.00 Vinyl 5.5 m $18.50 5.5 m $25.50 *metre **per metre 2 All direct materials are purchased and used in the same budget period. There are no inventories of direct materials, work in process or finished goods at either the beginning or the end of the period. The cost per Blind is determined by the standard costs for direct materials, direct labour and variable overhead and fixed overhead. Direct labour for Blinds is divided into two processes: Manufacturing and Assembly and it is expected that direct labour hours for 2018 to be 25,000 hours. The following information is provided for all classes of direct labour for each of the Blinds. Table 3: Standard/Budgeted Direct Manufacturing Labour Inputs and Costs for November 2018 Residential Blinds Commercial Blinds Hours* Cost** Hours * Cost** Labour Manufacturing 5 $40.00 10.5 $40.00 Labour Assembly 2.5 $52.00 4 $52.00 * direct labour hours **per hour BlindsforShine is currently using an Activity Based Costing system to allocate cost more effectively between the two types of Blinds manufactured in order to remain competitive as far as their pricing is concerned. It classifies variable overhead into three activity pools: setup (based on batch set-up time); machine maintenance (based on machine time) and engineering (based on Engineering cost/Salaries). Variable manufacturing overheads are currently allocated between the two types of Blinds based on the number of units sold. Other information with regard to variable manufacturing overhead is as follows: Residential Blinds is a high volume product and requires no special engineering, 12 batch setups per year and 15 minutes of machine time to manufacture each unit. Commercial Blinds on the other hand requires special engineering in order to keep up with the latest technology, 200 batch setups per year and 30 minutes of machine time in order to manufacture each unit. Manufacturing overheads consisting of: o Batch setup costs $500 000 o Machine maintenance $6 000 000 o Engineers salaries/cost $700 000 Actual variable manufacturing overhead rate per unit: o Residential Blinds: $325 o Commercial Blinds: $901 3 BlindsforShines actual results for November 2018 are as follows: Table 4: Actual Sales in Units and Dollars for October and November 2018 Residential Blinds Commercial Blinds Units Price Units Price October 1010 $1750 406 $2500 November 850 $1700 415 $2415 Table 5: Actual Direct Materials Inputs and Costs as at November 2018 Residential Blinds Commercial Blinds Quantity* Cost** Quantity* Cost** Fabric 3.70 m $33.50 6 m $73 Faux Wood 3.5 m $32 3.8 m $71 Vinyl 5 m $20 5 m $27 *metre **per metre Table 6: Actual Direct Manufacturing Labour Inputs and Costs for November 2018 Residential Blinds Commercial Blinds Hours* Cost** Hours* Cost** Labour Manufacturing 7 $42 11 $42 Labour Assembly 2.4 $50 3.8 $50 * direct labour hours **per hour BlindsforShilne do not assume fixed cost to be driven by any activity. Management estimated the fixed cost to be $1 680 000 per year. However, $1 740 000 fixed cost was incurred during the year. 4 Required: PART A: Budget Report (30%) Calculate the flexible budget variances and sales volume variances for November 2018 based on the information provided in the Tables above in both dollars and percentages using the below format which is prescribed by BlindsforShines management. F-favourable variances; U-unfavourable variances BlindsforShine Limited Budget Report for November 2018 Actual Results Flexible Budget Variance F/U % Flexible Budget Sales Volume Variance F/U % Static Budget Units Sold: Residential Commercial Revenues: Residential Commercial Total Sales Revenues Direct Materials: Fabric (Residential) Faux Wood (Residential) Vinyl (Residential) Fabric (Commercial) Faux Wood (Commercial) Vinyl (Commercial) Total direct Materials Direct Labour Residential: Labour Mfg. Labour Assembly Commercial: Labour Mfg. Labour Assembly Total Direct Labour Variable Overhead Residential Variable Overhead Commercial Total Variable Costs Contribution Margin Fixed Manufacturing Costs Operating Profit 5 PART B: Variance Analysis (70%) Write a report (1200 words) which analyses the variances calculated in requirement PART A. Your report must include the following: Executive Summary (Max: 150 words) Potential causes of any variance above 5% including both favourable and unfavourable variances. Recommended possible courses of action to address the potential causes of significant variances, where this is within the control of BlindsforShine Ltd. PART B Report should be within the word limit of 1200 words ( 10%) 6 Preparation and Submission Details: This is an individual assignment Students must use excel to perform the calculation in PART A flexible budget and sales volume variances and the Report i.e. PART B should be prepared using a Word document. An Excel file containing PART A should be prepared using the format prescribed by the management. A Word file containing PART B the Report should include (at least) executive summary, causes for variances and recommendations. Students are required to use cell references/sheet references/formulas/functions as required. Marks will be deducted if numbers are entered manually. There is no further requirement to provide/show separate calculations (calculations/formula links/cell references/worksheet references in the excel file will be checked by the markers). The students need to submit both word and excel files. Additional information: PDFs will not be accepted. Students must submit their assignments using the submission link on the course website. The language used should be concise and appropriate for a professional environment. Marks will be deducted for poor presentation. Please make sure that PART B Report does not exceed 1200 ( 10%) words limit. The assignment should be submitted via the online submission link. Backup for assignments: Please keep hard and soft copies of work submitted. An extension will not be granted on the basis that the assignment soft copy has become corrupted and cannot be accessed by the computer. Students are expected to keep backups to ensure that a corrupted file (or lost assignment) will not affect the submission of the assignment. Students will not be given extra time to complete an assignment as a result of a corrupted computer a backup of your assignment will negate the need to have extra time to complete your assignment. These rules will be imposed without recourse. Important! Please make sure you have checked the file you upload BEFORE you submit. We have had instances in the past when students have submitted the wrong version of their assignment. It is expected that students have checked the file before uploading. If the wrong version of the assignment has been up loaded and the deadline has passed, students will not be able to submit a new file. The file which has been submitted by the deadline will be the one which is marked. If however, a replacement file is submitted, penalties will apply from the original due date until the replacement file has been submitted. In accordance with the Division of Business guidelines, assignments submitted late without permission from the course coordinator/s will attract a penalty of 10% of the total possible marks for the assignment per day for each day late, or part thereof, after the due date. 7 Academic integrity Plagiarism is an offence in a tertiary education environment so ensure that you use in-text referencing where appropriate. The University of South Australia wants its students to display academic integrity so that its degrees are earned honestly and are trusted and valued by its students and their employers. To ensure this happens and that students adhere to high standards of academic integrity and honesty at all times, the University has policies and procedures in place to promote academic integrity and manage academic misconduct for all students. Work submitted electronically by students for assessment will be tested using the text comparison software Turnitin. More information about academic integrity and what constitutes academic misconduct can be found in Section 9 of the Assessment Policies and Procedures Manual (APPM) at: http://w3.unisa.edu.au/policies/manual/ Receiving assistance when not permitted: What the policy says: Inclusion of material in individual work that has involved significant assistance from another person, where such assistance is not expressly permitted in the course outline (UniSA 2014). What this means: When you produce an assignment, it is expected that the assignment is your own work. If you submit work that has involved significant assistance from another person, it would be considered misconduct. Assistance for assignments does not only relate to writing, but can include solving problems, doing calculations, writing computer code, and designing creative work and images. Examples of significant assistance can include, but are not limited to: paying someone to write, rewrite or produce your assignment asking anyone to write, rewrite or produce your assignment receiving assistance to the extent that it no longer resembles your original work doing assignments with others when this is not specified as part of the task. Plagiarism Plagiarism is a specific and serious form of academic misconduct, and includes: a) direct copying of the work of other persons, from one or more sources, without clearly indicating the origin. This includes both paper based and electronic sources of material from websites, books, articles, theses, working papers, seminar and conference papers, internal reports, lecture notes or tapes, and visual materials such as photographs, drawings and designs b) using very close paraphrasing of sentences or whole passages without due acknowledgment in the form of referencing the original work c) submitting another students work in whole or in part, where such assistance is not expressly permitted in the course outline d) use of another persons ideas, work or research data without acknowledgment e) submitting work that has been written by someone else on the students behalf f) copying computer files, algorithms or computer code without clearly indicating their origin g) submitting work that has been derived, in whole or in part, from another students work by a process of mechanical transformation (e.g. changing variable names in computer programs) h) in any way appropriating or imitating anothers ideas and manner of expressing them where such assistance is not expressly permitted in the course outline (UniSA 2014). If you read any article to inform your analysis then full referencing is required. References: http://w3.unisa.edu.au/policies/manual/2014/S9AcademicIntegrity_2014.pdf
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