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Costing Analysis for FancyPants and GobStandard

   

Added on  2019-09-25

12 Pages2280 Words287 Views
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A4awayPerformance Measurement and Management
Costing Analysis for FancyPants and GobStandard_1

Table of Contentsa.How to change costing system.................................................................................................2Aber plant.....................................................................................................................................2Falmouth plants 3b.Cost calculation........................................................................................................................3Cost of Gobstandard.....................................................................................................................3Cost of fancypants........................................................................................................................3a.Cost of GobStandard.............................................................................................................4b.Cost of fancypants................................................................................................................4c.Cost of smartphone wallets...................................................................................................4C.Calculation of profitability under each type of briefcase.........................................................5Old system....................................................................................................................................5Alternative system........................................................................................................................5Recommendations........................................................................................................................5D.Calculation of agenda item 1....................................................................................................6Effect on actual performance.......................................................................................................6Cost of GobStandard....................................................................................................................7Cost of FancyPants.......................................................................................................................7Reconciliation of Budgeted and actual gross margin...................................................................8GobStandard.................................................................................................................................8FancyPants...................................................................................................................................8E.Recommendation on producing satchel...................................................................................8F.Reservations regarding the appropriateness of linear allocation of non-unit-level activities toindividual units................................................................................................................................9
Costing Analysis for FancyPants and GobStandard_2

a.How to change costing systemThe existing costing system needs to be changed because the extra cost has occurred in both the plants. The Aber plant produces two type of briefcase in which the structure is similar which can be used under single setup to reduce the costing per unit. Similarly, Falmouth plant also requires changing the existing cost system because extra cost is occurring in quality assurance and employing a number of labors which impacts on the profitability.Aber plantThere are two types of a briefcase which are produced by Aber plant, namely, GobStandard and FancyPants. The GobStandard produced standard products, but the new setup is required at everymodification in the briefcase which increases the budget of costing and machine hours of GobStandard are 4,500 which impacts on the profitability. The second product is FancyPants which is a customized product which requires high costing due to change in setup for every new briefcase. The existing costing system can be changed through using the standard setup in which the briefcase is prepared in a modified manner, and the modifications are inbuilt in the machine which is set up by considering the consumers taste and preference which helps to build standard setup. The standard setup eliminated the costs of new setup for every modification, and by using single set up the machinery expense will also reduce which helps to increase the profit margin. The standard modified setup helps to produce FancyPants by selecting the options according to the consumer’s demand which removes the problem of extra costs in setting new setup. The single setup will work because the structure of both the products is similar only the appearance ischanged which will be fulfilled by inbuilt the modification in the setup machines and it helps to
Costing Analysis for FancyPants and GobStandard_3

produce the FancyPants in a customized manner by reducing the costing per product. The unit costing method is recommended because the method is suitable for the industry in which the manufacturing is continued, and units are identical. In this case, the structures of both the products are identified, so unit costing method is recommended which helps to reduce the non-valuable cost by managing the cost per unitFalmouth plantUnder this plant specialized product is produced, namely, Smartphone wallets which are produced through labors without any setup. The quality is assured by assembly line workers because the material is manufactured by local manufacturers. The existing costing system can be changed by selecting the single manufacturer with the least cost and best quality among the various manufacturers which helps to reduce the time and cost on checking the quality with the production of specialized products. Single setup for assembling helps to reduce the cost and time of labors by reducing the number of labors required which impacts on the profitability and helps to provide standard quality products. The single setup helps to improve the quality of the productwhich can't be achieved through handmade work.b.Cost calculationParticularCost of GobstandardCost of fancypantsCost of smartphone walletsProduction(Units)9,0002,0003,000Material costs54,00014,00024,000Direct labor36,00010,00024,000
Costing Analysis for FancyPants and GobStandard_4

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