ASSESSMENT BRIEF
Subject Code and Name ACCT6004 Management Accounting
Assessment Assessment 2 - Case Study and Video Presentation
Individual/Group Individual
Length Part A) Case Study - 800 Words +/- 10% Part B) Presentation - 5 minutes
Learning Outcomes
c) Categorise and identify the nature of various types of costs, cost objects and cost behaviours and use cost estimation techniques to develop cost functions.
d) Apply cost accounting techniques to calculate the cost of a range of cost objects, as well as analyse costs.
Submission Week 8
Weighting Case Study 10%
Presentation 5%
Total Marks 100 Marks (Part A 67 Marks, Part B 33 Marks)
Context:
This case study will assess students’ understanding of the management accounting concepts, techniques and processes, as well as how management accounting information is applied to decision making within an organization.
Instructions:
Students will work in this case study individually and write a report based on the questions listed in the case study. They will be required to submit a five-minute recorded video presentation.
Submission Instructions:
The assessment needs to be submitted though the submission link available on the Blackboard. Students will need to submit a Word document and a video file. Both parts of the assessment are compulsory.
Important Note:
Assessments missing the video part will not be marked since it proves the authenticity of the student’s work and individual approach to the case study problems as a replacement for the invigilated Class Test 2.
ACCT6004_Assessment Brief 2_Individual Case Study Page 1 of 4
Gibson Fabricators Corporation
Gibson Fabricators Corporation manufactures a variety of parts for the automotive industry. The company uses a job-order costing system with a plantwide predetermined overhead rate based on direct labour-hours. On the December 10, 2019, the company’s controller made a preliminary estimate of the predetermined overhead rate for 2020. The new rate was based on the estimated total manufacturing overhead cost of $2,475,000 and the estimated 52,000 total direct labourhours for 2020:
Predetermined overhead rate = $2,475,000/ 52,000 hours
= $47.60 per direct labour-hour
This new predetermined overhead rate was communicated to top managers in a meeting on the December 11. The rate did not cause any comment because it was within a few pennies of the overhead rate that had been used during 2019.
One of the subjects discussed at the meeting was a proposal by the production manager to purchase an automated milling machine centre built by Central Robotics. The president of Gibson Fabricators, Kevin Robinson, agreed to meet with the regional sales representative from Central Robotics to discuss the proposal. On the day following the meeting, Mr. Robinson met with Jay Warner, Central Robotics’ sales representative. The following discussion took place:
Robinson: Larry Winter, our production manager, asked me to meet with you since he is interested in installing an automated milling machine centre. Frankly, I am sceptical. You’re going to have to show me this isn’t just another expensive toy for Larry’s people to play with.
Warner: That shouldn’t be too difficult, Mr. Robinson. The automated milling machine centre has three major advantages. First, it is much faster than the manual methods you are using. It can process about twice as many parts per hour as your present milling machines. Second, it is much more flexible. There are some up-front programming costs, but once those have been incurred, almost no setup is required on the machines for standard operations. You just punch in the code of the standard operation, load the machine’s hopper with raw material, and the machine does the rest.
Robinson: Yeah, but what about cost? Having twice the capacity in the milling machine area won’t do us much good. That centre is idle much of the time anyway.
Warner: I was getting there. The third advantage of the automated milling machine centre is lower cost. Larry Winters and I looked over your present operations, and we estimated that the automated equipment would eliminate the need for about 6,000 direct labour-hours a year. What is your direct labour cost per hour?
Robinson: The wage rate in the milling area averages about $21 per hour. Fringe benefits raise that figure to about $30 per hour.
Warner: Don’t forget your overhead.
ACCT6004_Assessment Brief 2_Individual Case Study
Robinson: Next year the overhead rate will be about $48 per hour.
Warner: So including fringe benefits and overhead, the cost per direct labour-hour is about $78.
Robinson: That’s right.
Warner: Since you can save 6,000 direct labour-hours per year, the cost savings would amount to about $468,000 a year.
Robinson: That’s pretty impressive, but you aren’t giving away this equipment are you?
Warner: Several options are available, including leasing and outright purchase. Just for comparison purposes, our 60-month lease plan would require payments of only $300,000 per year.
Robinson: Sold! When can you install the equipment?
Shortly after this meeting, Mr. Reynolds informed the company’s controller of the decision to lease the new equipment, which would be installed over the Christmas vacation period. The controller realised that this decision would require recalculation of the predetermined overhead rate for the year 2020 since the decision would affect both the manufacturing overhead and the direct labourhours for the year. After talking with both the production manager and the sales representative from Central Robotics, the controller discovered that in addition to the annual lease cost of $300,000, the new machine would also require a skilled technician/programmer who would have to be hired at a cost of $45,000 per year to maintain and program the equipment. Both of these costs would be included in factory overhead. There would be no other changes in total manufacturing overhead cost, which is almost entirely fixed. The controller assumed that the new machine would result in a reduction of 6,000 direct labour-hours for the year from the levels that had initially been planned.
When the revised predetermined overhead rate for the year 2020 was circulated among the company’s top managers, there was considerable dismay.
Required:
Part A – Report (67 Marks)
Write a report addressing the following questions to be submitted to the president of Gibson Fabricators, Kevin Robinson.
1. Recalculate the predetermined rate assuming that the new machine will be installed. Explain why the new predetermined overhead rate is higher (or lower) than the rate that was originally estimated for the year 2020.
2. The company has received a job order from Fairfield corporation. The estimated direct material costs for delivering the order is $45,800. The new machine will be used for this job. The expected labour cost will be $8,400 for 400 hours of direct labour. What will be the estimated total production cost of this job under the new predetermined rate?
3. Analyse the effect of the new rate on the cost of jobs that do not use the new automated milling machine.
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4. Explain whether the managers should be concerned about the new overhead rate.
5. After seeing the new predetermined overhead rate, the production manager admitted that he probably wouldn’t be able to eliminate all of the 6,000 direct labour-hours. He had been hoping to accomplish the reduction by not replacing workers who retire or quit, but that would not be possible. As a result, the real labour savings would be only about 2,000 hours—one worker. In the light of this additional information, evaluate the original decision to acquire the automated milling machine from Central Robotics.
Part B – Video Presentation (33 Marks)
Record a five-minute video presentation explaining the steps you have followed to conduct the analyses and rationale behind the selected accounting tools and processes. Summarise your major findings.
Additional requirements:
The video has to show your face, so we can identify you as the student completing the assessment. Please show visibly your student card at the beginning of the video for identification purposes. Video recordings from your phone will be sufficient for this purpose.
ACCT6004_Assessment Brief 2_Individual Case Study
Learning Rubric: Assessment 2
Assessment Criteria Fail
(Unacceptable) 0-49% Pass
(Functional)
50-64% Credit
(Proficient) 65-74% Distinction
(Advanced)
75 -84% High Distinction
(Exceptional)
85-100%
Content and purpose of assessment
questions
10%
No or little awareness of the content and/or requirements of the
assessment questions.
Understanding some questions requirements, and relating the requirements to relevant study modules covered in the subject.
Identifying and understanding the rationale of questions requirements.
Being able to relate most questions and requirements to relevant modules.
Sound and correct interpreting and explaining of the rationale of requirements, how these requirements
relate to different management accounting concepts, techniques and processes covered across relevant modules.
Excellent understanding of the requirements of management accounting concepts, techniques and processes relevant to the case study.
Advanced interpreting and linking of technical and ethical aspects of assessment questions to the relevant modules.
Knowledge and understanding of management
accounting concepts, techniques and processes
27% Limited awareness of relevant management accounting information required for business decisions.
Difficulty and/or confusion in identifying correct management accounting concepts, tools and processes required for assessment questions. Understanding and being able to identify relevant accounting information for business decisions.
Understanding a range of management accounting techniques and processes available for generating and analysing information.
Ability to select appropriate
management accounting
techniques and processes. Understanding rationale
for selecting specific
management accounting tools and processes.
Understanding and being able to explain quantitative and qualitative
characteristics of management accounting information useful for business decisions. Thoroughly understanding the management accounting concepts, techniques and processes.
Being able to justify selection of specific accounting tools and processes. Excellent understanding of management accounting concepts, techniques and processes, and accounting information required for solving practical problems
Being able to critically justify selection of applicable accounting tools and processes.
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Analysis and application of relevant
management
accounting concepts, techniques and processes
30% No or little use of
management accounting information for decision making.
Difficulty and/or confusion in applying correct accounting procedures to the case study problems presented. Analysing some of the relevant quantitative and qualitative
characteristics of management accounting information and partially correct application of the management accounting concepts, techniques and processes to the case study problems presented. Good analysis and explaining of both quantitative and qualitative
characteristics of management accounting information and mostly correct application of the management accounting concepts, techniques and processes to the case study problems presented. Sound analysis of both quantitative and qualitative characteristics of accounting information, and correctly applying analysis to solve practical case study problems.
Critically justifying business decisions using relevant management accounting information. Excellent application of relevant management accounting concepts, techniques and processes supported by sound reasoning and
critical analysis, utilising both quantitative and
qualitative characteristics of accounting information.
Presentation
33% Difficulty/failure in explaining rationale for selected accounting tools and processes.
Minimal or no summary of major findings. Evidence of attempts to communicate clearly the rationale and application of selected accounting tools and processes.
An average attempt to summarize the major findings. Mostly clear and understandable presentation proving a good understanding of the relevant accounting tools and processes with minor errors.
Sufficient summary of the major findings. Clearly presented and adequately
justified, proving advanced understanding of the relevant accounting tools and processes.
Good summary of the major findings. Clearly presented and adequately
substantiated, indicating an excellent understanding and application of relevant accounting tools and processes.
Excellent summary of the major findings.
ACCT6004_Assessment Brief 2_Individual Case Study