DANANG UNIVERSITY OF ECONOMICS BTEC HND IN BUSINESS (MANAGEMENT)

ASSIGNMENT COVER SHEET

NAME OF STUDENT REGISTRATION NO. UNIT TITLE ASSIGNMENT TITLE ASSIGNMENT NO NAME OF ASSESSOR SUBMISSION DEADLINE

Unit 9: Management Accounting: Costing and Budgeting Cost Information Analysis 1 of 2 Duong Nguyen Hung 5th November, 2012

I, __________________________ hereby confirm that this assignment is my own work and not copied or plagiarized from any source. I have referenced the sources from which information is obtained by me for this assignment.

________________________________ Signature

_________________________ Date

----------------------------------------------------------------------------------------------------------------

FOR OFFICIAL USE

Assignment Received By: Date:

MACB A1 QCF Sept 2012 DUE

Unit Outcomes
Outcome Evidence for the criteria Feedback Assessors decision
First Attempt Rework

Internal Verification

Classify different types of cost

1.1

Be able to analyse cost information within a business LO1

Use different costing methods

1.2

Calculate costs using appropriate techniques

1.3

Analyse cost data using appropriate techniques

1.4

Prepare and analyse routine cost reports

2.1

Be able to propose methods to reduce costs and enhance value within a business LO2

Use performance indicators to identify potential improvements

2.2

Suggest improvements to reduce costs, enhance value and quality

2.3

Merit grades awarded Distinction grades awarded

M1 D1

M2 D2

M3 D3

MACB A1 QCF Sept 2012 DUE

Outcome

Evidence for the criteria

Feedback

Assessors decision

Internal Verification

Assignment
( ) Well-structured; Reference is done properly / should be done (if any) Overall, youve

Areas for improvement:

ASSESSOR SIGNATURE

DATE

NAME: ..........................................................................................

(Oral feedback was also provided) STUDENT SIGNATURE DATE / /

NAME : .............................................................................
FOR INTERNAL USE ONLY VERIFIED YES NO DATE : ........................................................................... VERIFIED BY : ........................................................................... NAME : ...........................................................................

MACB A1 QCF Sept 2012 DUE

SCENARIO Founded in 1979, Seagate is the leading provider of hard drives and storage solutions. From the videos, music and documents that we share with friends and family on social networks, to servers that form the backbone of enterprise data centres and cloud-based computing, to desktop and notebook computers that fuel our personal productivity, Seagate products help more people to store, share and protect their valuable digital content. Seagate offers the industrys broadest portfolio of hard disc drives, solid state drives and solid state hybrid drives. In addition, the Company offers an extensive line of retail storage products for consumers and small businesses, along with data recovery services for any brand of hard drive and digital media type. Recently Seagate introduced GoFlex Pro ultra-portable drive delivers high performance along with premium styling and data protection. This external hard drive provides access to customer content anytime, anywhere when combined with other GoFlex devices. You are newly appointed Assistant to Management Accountant of Seagate approached you to compile a report related to manufacturing costing system of the product GoFlex Pro are as below: The following items (in millions) pertain to Seagate Technology LLC:
For Specific Date
Work-in-process inventory, Jan. 1, 2011 Direct materials inventory, Dec. 31, 2011 Finished goods inventory, Dec. 31, 2011 Accounts payable, Dec. 31, 2011 Accounts receivable, Jan. 1, 2011 Work-in-process inventory, Dec. 31, 2011 Finished goods inventory, Jan 1, 2011 Accounts receivable, Dec. 31, 2011 Accounts payable, Jan. 1, 2011 Direct materials inventory, Jan. 1, 2011 18 8 11 24 52 3 47 38 49 32 Plant utilities Indirect manufacturing labour Depreciationplant and equipment Revenues Miscellaneous manufacturing overhead Marketing, distribution, and customerservice costs Direct materials purchased Direct manufacturing labour Plant supplies used Property taxes on plant

For Year 2011

9 27 6 355 15 94 84 42 4 2

Seagates manufacturing costing system uses a three -part classification of direct materials, direct manufacturing labour, and manufacturing overhead costs. Classify different types of cost incurred in Seagate Technology with an appropriate cost classification (1.1) Use different costing methods on the information given the above scenario (1.2)
4

MACB A1 QCF Sept 2012 DUE

(Hints: Prepare an income statement and a supporting schedule of cost of goods manufactured. Calculate total prime costs and total conversion costs. Calculate total inventoriable costs and period costs. Design costs and R&D costs are not considered product costs for financial statement purposes. Suppose that both the direct materials used and the depreciation on plant and equipment are related to the manufacture of 2 million units of product. Determine the unit cost for the direct materials assigned to those units and the unit cost for depreciation on plant and equipment. Assume that yearly depreciation is computed on a straight-line basis. Assume that the implied cost-behavior patterns in requirement above persist. That is, direct material costs behave as a variable cost and depreciation on plant and equipment behaves as a fixed cost. Repeat the computations in requirement above, assuming that the costs are being predicted for the manufacture of 3 million units of product. Determine the effect on total costs.)

Cost Measurement Seagate Technology makes two products, Drive A and Drive B. Information relating to each of these products is set out below.
Drive A Selling price per unit Annual sales volume Number of sales invoices issued each year Labour time per unit Labour rate per hour Material cost per unit Size of each production batch Bought-in parts per unit Machine set-ups per batch 52 15,000 units 200 2 hours 10 25 750 2 2 Drive B 91 18,000 units 800 5 hours 10 30 1,000 1 5

The Finance Director of Seagate Technology has recently produced the following analysis of overheads and their relevant cost drivers.
Type of overhead Bought-in parts handling costs Materials handling costs Sales invoicing costs Machine set-up costs All other overheads Total overhead costs Cost driver Number of bought-in parts Number of production batches Number of invoices issued Number of machine set-ups Labour hours 96,000 38,000 20,000 26,000 60,000 240,000

Calculate costs using appropriate techniques for the products Drive A and B (1.3)
(Hints: You are required to calculate the total cost per unit and profit per unit for each product using: the traditional full cost method of overhead absorption (based on labour hours) the activity-based costing method and comment on your findings.)

MACB A1 QCF Sept 2012 DUE

On the basis of your cost classification in the above, present your analysis in graphical format such as histogram or other format which you deem is appropriate as well as prepare and analyse routine cost reports (1.4 & 2.1)

Reduce Costs and Enhance Value The output from a manufacturing process is 3.6 tonnes per productive hour. The product is sold for 110 per tonne. Costs of production include: Direct materials Process wages Rework Repairs to machinery 45 per tonne of materials input 4,700 per week (for a normal working week of 37 hours) 70 per week 950 per week

10% of materials input are currently lost in the process and some of the output has to be reworked in another department, at times as a result of customer complaints. On average, six hours per week are being lost due to breakdown of machinery leaving only 31 productive hours. Sales are being lost as a consequence. Investment in new machinery is not feasible at the present time but, with a view to improving the current situation, management has undertaken a value analysis exercise and is introducing quality control and assurance procedures. As a consequence of this, it is now expected that output tonnage can be increased from 90% of materials input to 92% and that the need for rework can be eliminated. Additional Information: The factory manager has suggested that a system of routine preventative maintenance be considered. This would take the form of a maintenance team, working outside normal working hours. This could be either on a night shift or by Saturday working. Incremental costs would be incurred on the routine maintenance team but reductions would be expected in: (i) Machine breakdown time with a corresponding increase in productive time; (ii) Machine repair costs; The table below summarises the forecast effect of the introduction of routine preventative maintenance. Routine preventative maintenance Night shift Saturday working Maintenance team: Incremental cost per week Machine breakdown time Machine repair costs reduced to 1,200 75% saving 350 per week 600 40% saving reduced by 40%

MACB A1 QCF Sept 2012 DUE

Use performance indicators to identify potential improvements (2.2) Suggest improvements to reduce costs, enhance value and quality (2.3)

(Hints: Calculate the cost of direct materials per week in the current situation; Calculate the cost of direct materials per tonne of output: if output tonnage is increased to 92% of materials input. Calculate the increase in weekly profit that will be expected to result from the improvement in materials efficiency and the elimination of product rework. Recommend whether routine preventative maintenance should be introduced, and if so whether on a night shift or by Saturday working. Assume: No change to the current levels of material wastage or rework; Process wages remain at 4,700 per week; Additional output can be sold.)

MACB A1 QCF Sept 2012 DUE

GRADING Pass is achieved by meeting all the requirements defined in the assessment criteria. (Refer page 2 of the assignment brief) Identify and apply strategies to find appropriate solutions. (M1)

Merit

Characteristics / Possible Evidence relevant cost theories, methods (contract, service cost etc) and techniques like absorption, marginal or ABC costing etc have apply to collect and analyse cost information and proposed a suitable methods to reduce costs within Seagate Technology. Select and apply appropriate techniques. (M2)

Characteristics / Possible Evidence Appropriate costing methods (contract, service cost etc) and techniques (absorption, marginal or ABC costing) have applied to given situation and justified the results as well as indicators of productivity, efficiency and effectiveness. Present and communicate appropriate findings (M3)

Characteristics / Possible Evidence An appropriate structure and approach have been used to prepare cost reports. Present data using a range of methods e.g. tables, diagrammatical and graphical forms. Distinction Use critical reflection to evaluate own work and justify valid conclusions (D1) Characteristics / Possible Evidence creation have used to generate and justify valid comments on cost measurement like absorption and marginal costing, overhead absorption and activity-based costing as well as performance indicators and potential improvements in product quality. Take responsibility for managing and organising activities (D2)

Characteristics / Possible Evidence substantial activities have been planned, managed and organized to collect and analyse cost information using of appropriate techniques.

MACB A1 QCF Sept 2012 DUE

PRESENTATION 1. The assignment should have a cover page that includes the assignment title, assignment number, course title, module title, Lecturer/tutor name and students name. Attach all the pages of assignment brief/cover sheet with your report and leave them blank for official use. 2. Ensure that authenticity declaration has been signed. 3. This is an individual assignment. 4. Content sheet with a list of all headings and page numbers. 5. A fully typed up professionally presented report document. Use 12 point Arial or Times New Roman script. 6. Your assignment should be word-processed and should not exceed 2,500 words in length. 7. Use the Harvard referencing system. 8. Exhibits/appendices are outside this limit. 9. The assignment should be not contain a bibliography but should contain a list of any references used in the assignment. NOTES TO STUDENTS FOR SUMMISSION Check carefully the submission date and the instructions given with the assignment. Late assignments will not be accepted. Ensure that you give yourself enough time to complete the assignment by the due date. Do not leave things such as printing to the last minute excuses of this nature will not be accepted for failure to hand-in the work on time. You must take responsibility for managing your own time effectively. If you are unable to hand in your assignment on time and have valid reasons such as illness, you may apply (in writing) for an extension. Failure to achieve a PASS grade will results in a REFERRAL grade being given. Take great care that if you use other peoples work or ideas in your assignment, you properly reference them in your text and any bibliography. NOTE: If you are caught plagiarizing, the University policy and procedures will apply.