The managerial accounting system at Bridgeton, as it is presented, seems to be lacking detail necessary for efficient analysis. The sections used are sales, direct material, direct labor and overhead by account number, each divided into individual accounts and summed to find totals. There is no separation of fixed and variable costs in any of the accounts, making it difficult to analyze exactly where operations are costing money and, therefore, how they could possibly be improved. The presentation of the information groups all sales together and the different categories of costs together and does not provide for individual product analysis. The products are analyzed (categorized into classes) based on their costs, with no consideration …show more content…
The changed rates are due to the fact that the overhead reported in the accounts is not based solely on variable labor, but rather has other (including fixed) components. It is difficult to predict without more detailed accounting numbers and without interview employees exactly which of the overhead costs are fixed and which are variable, as well as which account is mixed. In reality, most of the accounts will have both fixed and variable costs. They will have initial costs to get started and ensure that they are available (i.e. fixed costs), and the more they are necessary (used), the more the costs will increase (i.e. variable costs). We can, however, make educated guesses as to which accounts are mostly variable, mostly fixed, and which have much of both (mixed). To do this, we look at two things. First is the cost structure of each account and how they change each year (Exhibit 2). However, it is difficult to estimate based on regression analysis or high-low methods because the change in direct labor is not significant other than between years with production and years with outsourcing. Therefore, we will probably learn more from guessing based on the descriptions of the accounts themselves (Exhibit 3).
Once we delve into each account, we see that many have a fixed portion. Regression analysis shows largely positive y-intercepts for many of the accounts.
Hilton, R. (2011). Managerial accounting: Creating value in a dynamic business environment (9th Ed.). McGraw-Hill. Hardcover ISBN: 9780073526928.
The current cost system allocates overhead costs once a year, as a function of direct labor dollars. This allocation strategy results in:
OPERATING EXPENSES 57500 Freight 4,302,951.46 1.79% 4,236,263.09 1.84% (66,688.37) -1.55% 60000 Advertising Expense 897,140.01 0.37% 986,854.01 0.43% 89,714.00 10.00% 61000 Auto Expenses 208,974.39 0.09% 214,502.80 0.09% 5,528.41 2.65% 62000 Research & Development 31,212,334.17 12.97% 543,870.44 0.09% (30,668,463.73) -98.26% 64000 Depreciation Expense 133,000.00 0.06% 446,000.00 0.19% 313,000.00 235.34% 64500 Warehouse Salaries
3. For each of the individual overhead accounts at Bridgeton, do you believe the given cost is variable, fixed, or something else? Why? (Use information or evidence from the case to support your evaluation, if possible. For most of these costs, there is no single right answer from the case information, so the goal is to come up with a reasonable estimate.)
In this table, it reflects the changes in fixed plant overhead from $420,000 to $378,000. The company still has the fixed selling and administrative expense per quarter of $118,000. The new company fixed overhead is now at $496,000 from the past $538,000 ($42,000) change from past to
Machine hours, direct labor hours, and direct labor costs can all be used to allocate manufacturing overhead.
Overhead costs include rent, office staff, depreciation, and other. Once the flexible budget was complete, variances between the actual and flexible budget could be calculated (Exhibit B). The variance for frame assembly was favorable with actual costs being $82,663 less than in the flexible budget. The variances for wheel and final assembly however were both unfavorable. Wheel assembly had an unfavorable variance of $50,650, while final assembly variance was the highest at an unfavorable variance of $231,200. Taking into account these three aspects of direct cost, direct cost has an unfavorable variance $199,187. Although most overhead costs are fixed, 2/3 of other costs are variable and increase with the increased production. As shown in Exhibit B, overhead variance is unfavorable at $60,000. The direct cost variance and overhead variable together lead to a total unfavorable variance of $259,187.
Bhimani, A., Horngren, C., Datar, S., Rajan, M. et al. (2012) Management and Cost Accounting. 5th ed. Edinburgh: Prentice Hall, p.369 - 378.
The board of directors of the Cortez Beach Yacht Club (CBYC) is developing plans to acquire more equipment for lessons and rentals and to expand club facilities. The board plans to purchase about $50,000 of new equipment each year and wants to begin a fund to purchase a $600,000 piece of property for club expansion.
Would factory security and assembly activities be best classified at an appliance manufacturing plant as unit-level, batch-level, product-level, or organization-sustaining?
All the costs by a company can be broken into two categories, fixed costs and variable costs. Costs that are independent of output are called fixed costs. Fixed costs remain constant throughout the relevant range and are usually considered sunk for the relevant range. Buildings and machinery are included inputs that cannot be adjusted in the short term. They are only fixed in relation to the quantity of production for a certain time period. The cost of all inputs is variable, in the long run.
The accounting system we use today started in Venice in renaissance period over 520 years ago. The trade business increased hugely during this time and all the financial recordings had to be written down to help people see how their business is doing. During that time in 1494 the first book about was published in accounting by Luca Paciolli and was called “The Collected Knowledge of Arithmetic, Geometry, Proportion and Proportionality”. He was called “The father of Accounting” and most of his described principles have been used up until this day.
Erin should notify Smart Worx of the postponement as it is consistent with ethical principles of integrity and professional competence. As Erin is complying with these codes of ethics, she has nothing to lose or suffer as she followed the guidelines of the code and therefore cannot be
Management in business and human organization activity, in simple terms means the act of getting people together to accomplish desired goals. Management comprises planning, organizing, ->resourcing, leading or directing, and controlling an organization (a group of one or more people or entities) or effort for the purpose of accomplishing a goal. Resourcing encompasses the deployment and manipulation of human resources, financial resources, technological resources, and natural resources.
Cost accounting is a type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step of production as well as fixed costs such as depreciation of capital equipment. Cost accounting will first measure and record these costs individually, then compare input results to output or actual results to aid company management in measuring financial performance (Cost Accounting, n.d.).