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Assignment 3- Assignment 3: Management Accounting Case - Help

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Assignment 3: Management Accounting Case: West Island Products;Due Week 8, Day 7 (100 points);The specific course learning outcomes associated with this assignment are;? Apply key techniques and concepts in measuring the cost of producing goods and services.;? Apply management accounting concepts to identify and process relevant financial information for;decision-making purposes.;? Use technology and information resources to research issues in financial management.;? Write clearly and concisely about financial management using proper writing mechanics.;Assignment;West Island Products (WIP) is a divisionalized furniture manufacturer. The divisions are autonomous;segments with each division responsible for its own sales, cost of operations, and equipment acquisition.;Divisional performance is evaluated annually based on ROI. Each division serves a different market in the;furniture industry. Because the markets and products of the divisions are so different, there have never;been any transfers between divisions.;The Commercial Division of WIP, manufacturers furniture for the restaurant industry. The Commercial;Division plans to introduce a new line of counter chair units featuring a cushioned seat. Roberta Katz, the;Commercial Division manager, has discussed the manufacturing of the cushioned seats with Nathan;Danielson of the Office Division. They both believe a cushioned seat currently made by the Office Division;for use on its deluxe office stool could be modified for use on the new counter chair. Consequently, Katz;asked Danielson for a price for 100-unit lots of the cushioned seats. The following conversation took;place about the price to be charged for the cushioned seats.;Danielson: ?Roberta, we can make the necessary modifications to the cushioned seat easily. The;raw materials used in the new counter chair seat are slightly different and should cost;about 10 percent more than those used in our deluxe office stool. However, the labor;time should be the same because the seat fabrication process is the same. I would price;the cushioned seat at our regular rate: full cost plus a 30 percent mark-up. According to;my calculations, that would be $2,053 per lot of 100 seats.?;Katz: ?That?s higher than I expected, Nathan. I was thinking that a good price would be your;variable manufacturing cost. After all, your fixed costs will be incurred regardless of this;job. In addition, I have received a quote from one of the Commercial Division?s regular;suppliers to provide us with the counter seats at $1,900 per lot of 100 seats.?;Danielson: ?Roberta, I am at full capacity. By making the cushioned seats for you, I have to cut my;production of deluxe office stools. Thankfully, the labor time freed by not having to;fabricate the frame and assemble the deluxe stool can be shifted to the production of an;economy stool. I would like to sell the cushioned seats to you at my variable cost, but I;have excess demand for both products. I don?t mind changing my product mix to the;economy model and producing the cushioned seats for you as long as I don?t change my;division?s overall profitability. Here are my standard costs for the two stools and a;schedule of my manufacturing overhead.? (See Exhibits 1 and 2.);Exhibit 1 ? Office Division Standard Costs and Prices;Deluxe;Office Stool;Economy;Office Stool;Direct materials;Framing................................................................................... $ 7.35.........................$...6...5..0............................................................................................................;Cushioned seat....................................................................... 6.40 ?;Molded seat (purchased)......................................................... ?............................6...0..0............................................................................................................;Direct Labor;Frame fabrication (0.5 hrs. @ $7.50/hr.)................................. 3.75............................3...7..5............................................................................................................;Cushion fabrication (0.5 hrs. @ $7.50/hr.).............................. 3.75...............................?..............................................................................................................;Assembly (0.5 hrs. @ $7.50/hr.).............................................. 3.75............................3...7..5............................................................................................................;Manufacturing overhead ($10.00/DLH)......................................... 15.00..........................1..0...0..0............................................................................................................;Total standard cost........................................................................ $ 40.00.......................$...3..0...0..0............................................................................................................;Selling price (including 30% mark-up)........................................... $ 52.00.......................$...3..9...0..0............................................................................................................;Exhibit 2 ? Office Division Manufacturing Overhead Budget;Overhead Item Description Amount;Supplies..................................... Variable.............................................................................$...3..7..0..,.0..0..0.....................................;Indirect labor.............................. Variable................................................................................3..7..5..,.0..0..0.....................................;Supervision................................ Fixed.....................................................................................1..5..0..,.0..0..0.....................................;Power......................................... Variable................................................................................1..8..0..,.0..0..0.....................................;Heat and light............................. Fixed.....................................................................................1..2..0..,.0..0..0.....................................;Property tax & insurance........... Fixed.....................................................................................1..3..0..,.0..0..0.....................................;Depreciation............................... Fixed..................................................................................1..,.1..0..0..,.0..0..0.....................................;Employee benefits..................... Variable................................................................................5..7..5..,.0..0..0.....................................;Total overhead................................................................$...3..,.0..0..0..,.0..0..0.....................................;Capacity in direct labor hours (DLH)....................................3..0..0..,.0..0..0.....................................;Overhead rate per direct labor hour......................................$...1..0...0..0.....................................;JWI 530: Financial Management I;Academic Submissions and Evaluations;?2014 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may;not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University.;JWMI 530 Course Guide ? Summer 2014;Page 22 of 31;Required;Your goal is to examine this situation and recommend a course of action for Roberta Katz and Nathan;Danielson.;1. In an Excel spreadsheet or neatly hand-written notes uploaded as a PDF file;a. Demonstrate your calculations of a transfer (selling) price for the cushioned seats to the;Commercial Division. You should re-examine Nathan Danielson?s calculation and also;calculate one that meets Roberta Katz?s request for a price based on variable and net;opportunity costs Based on information provided, determine/confirm a transfer price that;meets Danielson?s objective regarding maintaining the profitability of the Office Division.;2. In a Word document;a. Discuss pros and cons of each option (i.e., in-sourcing and out-sourcing). Include in your;discussion what you believe the corporate controller is likely to recommend and why.;b. Discuss how you would suggest that the company handles such transfer disputes in the;future (i.e., what policies would you suggest putting in place). Make sure your;recommendation includes financial policies around setting a transfer price range. Support;your suggestion by examining the advantages and disadvantages of its adoption;Note- I need to deliver 2 documents one excel and one word, Note-the word document should be in the format - Sample Professional Paper Jan 2014 -attached.;if any questions les me know. (The excel format I shall attach in a couple days);Also be noted- i have attatched a PDF that entails in detail what I need for Assignment 3: Management Accounting Case: West Island Products- please search in the PDF only for items related to Assignment 3: Management Accounting Case: West Island Products;The Dead line is August 8th 2014***

 

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