ACCT204 Management Accounting Assessment Task 2

All assignments must be handed in on the due date. Late assignments will be penalised. Assignments submitted after the due will incur a 10% penalty of the maximum marks available for that assignment. Assignments received more than three calendar days after the due date will not be allocated a mark.

Due dates will be strictly adhered to and extensions will be granted only in cases of extreme circumstances. A student may apply to the NLiC (email to elsie.chan@acu.edu.au) for an extension to the submission date of an assignment. Requests for extension must be made on the appropriate form on or before the due date for submission, and must demonstrate exceptional circumstances which warrant the granting of an extension.

Each student is to submit an individual assignment based on the given case below. The individual assignment should be around 900 words (numerical data as part of the calculations is not included in the word count).

Please note that the topic of the case study is covered only in Week 8 (Chapter 8) and the due date of this assessment is in Week 11 (14/05/2018, 11PM). Student is expected to acquire the knowledge/ learn the topic of the case study on his / her own in advance of week eight, so that there is ample time for preparation of assessment Task 2.

As this assessment Task 2 is of individual basis, collaboration between students in the assignment is prohibited. Submission showing similar format of presentation in calculations among students may indicate presence of plagiarism and implicated students may have committed academic misconduct knowingly or unknowingly.

ACCT204 Management Accounting Assessment Task 2

Task 2 must:
 be typed using 1.5 lines spacing left justified.  use Ariel or Times New Roman font size 12.
 Display a 2.5 cm margin on all sides.

ACCT204 Sem 1, 2018 Assessment Task 2 1

 include a page number on each page.

 name the Microsoft word file as “your student number_ACCT204_Task2”. Case

Happy Traveller Ltd. is a manufacturing company which is in the process of determining the product costs using traditional costing system as well as ABC system. Sufficient cost data information is provided in the case so that you are able to derive the product costs of its two main types of upscale luggage. The requirements listed at the end of the case are the main points that your report must cover.

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Happy Traveller Ltd has historically had a simple costing system that allocates indirect costs using a single indirect-cost rate. The Company produces mainly two types of luggage, namely Simple luggage and Complex luggage, and undisclosed amount of other types of luggage. The annual overhead costs for the Happy Traveller Ltd, which involves three production centres (two machine centres and one assembly centre) and two service centres (materials procurement and general factory support), are as follows:

ACCT204 Management Accounting Assessment Task 2

The following cost information is also available:

ACCT204 Sem 1, 2018 Assessment Task 2 2

‘Stores’ above is used specifically for materials procurement purposes and ‘Maintenance’ refers to general factory support.

Rodney Laing, the management accountant of Happy Traveller Ltd, has revealed that the expenses of lighting and heating, insurance of buildings and property taxes are likely to be driven by area occupied; employee-related expenditure (salaries of works management) is likely driven by number of employees, and depreciation and insurance of machinery are likely to be allocated based on book value (BV) of the machinery.

Besides, Rodney assumes that the overhead rates for machine production centres should be based on machine hour rate and assembly centre should be based on direct labour hour rate.

ACCT204 Management Accounting Assessment Task 2

Details of total materials issues (direct and indirect materials) to the production centres are as follows:

The expenses in the service centres are to be allocated to production centres based on value of materials issued for ‘materials procurement’ and direct labour hours for ‘general factory support’.

Happy Traveller Ltd has recently experienced with lower profits and ‘complex’ luggage type product seemed to have much lower profit margin than the ‘simple’ luggage type. Rodney has learned about the Activity Based Costing (ABC) systems and found that the three production centres established for the traditional costing system can also be assumed to be the activity cost centres with the ABC system. However, the materials procurement cost centre, the following activity centres’ data have been established:

The general factory support has the following three activity cost centres’ data:

ACCT204 Sem 1, 2018 Assessment Task 2 3

The Simple luggage has direct costs of $80 and is manufactured in batches of 100 units. Each unit of Simple luggage requires 4 hours in Machine Centre A, 10 hours in Machine Centre B and 10 hours in the Assembly Centre. The Complex luggage has direct costs of $200 and is manufactured in batches of 200 units. Each unit of Complex luggage requires 10 hours in Machine Centre A, 20 hours in Machine Centre B and 20 hours in the Assembly Centre.

There will be one order, one material receipt and one inspection per batch of luggage (all types) produced. The set-up time for one batch of Simple luggage is 50 set-up hours and the set-up time for one batch of Complex luggage is 10 set-up hours. Besides, a batch of 100 units of Simple luggage requires five production runs, while a batch of 200 units of Complex luggage requires only one production run.

ACCT204 Management Accounting Assessment Task 2

Required:

1. 1)  Perform overhead analysis systematically firstly based on traditional costing system. The overhead analysis under traditional costing system involves two-stage allocation process by assigning all manufacturing overheads to production and service cost centres, and followed by reallocating the costs assigned to service cost centres to production cost centres. Provide the calculations of the manufacturing costs assigned to the two products (Simple luggage and Complex luggage).
2. 2)  Perform again the overhead analysis using Activity-based costing (ABC) system. The overhead analysis under ABC system involves assigning costs to activity cost centres. Provide the calculations of the manufacturing costs assigned to the two products (Simple luggage and Complex luggage) based on ABC system.
3. 3)  Compare the product costs calculated under the traditional costing system and ABC system and explain the rationale behind the differences in product costs calculated under the two costing systems.
4. 4)  Analyse the cost versus benefit considerations in adopting ABC system in Happy Traveller Ltd.
5. 5)  Explain in details in what ways the ABC cost management can be applied in Happy Traveller Ltd besides assigning costs to its products.

Your report:

There are four sections in your report.

Introduction 15%

Explain the purpose of this report
The significance of traditional costing systems and activity based costing Cite references to support your discussion in the section

Discussion 60%
For Happy Traveller Ltd case, show the workings of the above requirements 1) to 3)

Requirement Requirement Requirement

1) traditional costing system
2) ABC
3) compare traditional costing system and ABC

20% 30% 10%

ACCT204 Management Accounting Assessment Task 2

ACCT204 Sem 1, 2018 Assessment Task 2

4

Conclusion 15%
For Happy Traveller Ltd case, give answers for the above requirements 4) to 5)

Requirement 4) Analysis the cost and benefit 10% Requirement 5) Apply ABC to the company 5%

References 10%
Provide a reference list here. You are expected to use journals and textbooks published

after 2008. Cite references in Harvard referencing style.

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