Question :
ESSAY.
Write your answer in the space provided or a separate : 1196161
ESSAY.
Write your answer in the space provided or on a separate sheet of paper. 119)Things are not going well for the widget industry this year.
The well-known cyclical nature of widget sales is in a downturn and your plant has been ordered to cut costs by its American parent corporation.
The plant manager explains that he has shown the lead by negotiating a $1.50 hourly wage decrease with the production workers, based on a formula that pegs a $1.50 per hour wage increase/decrease to sales volume, and since sales are down this year, so are hourly wage costs.
In the quarterly management meeting, the sales manager complained that sales could have been higher, but that somehow costs had increased, at least that’s what the reports out of your office in management accounting, indicated.
The Purchasing manager assured everyone that she was able to obtain raw materials at the same price as last year, and unfortunately, you as the management accountant, were not in attendance at the meeting.
Your assistant, a new employee attended in your place, and promised at the meeting to redo the reports and find the errors.
Your assistant has come to you as he cannot find any errors in the reports. Consequently, the plant manager wants you to redo the reports, find the error reports produced by your department for the last quarter and to explain to your boss, the plant manager, why average costs have increased.
Required:
Assuming there are no errors in the cost reports, explain to the plant manager how direct labour costs could be decreased and direct materials costs could
be the same as last year, and yet the selling price cannot be lowered without sacrificing net income for the plant.
120)Why is it possible that a raw material such as glue might be considered as an indirect material for one
furniture manufacturer and as a direct material for another furniture manufacture?
121)A new employee in the accounting department is having difficulty understanding two sets of accounting terms?variable and fixed costs as opposed to period and product costs. He understands that variable costs change during an accounting period while fixed costs do not. However, he explains that a period cost implies that it is for a period of time and is, therefore, also fixed. Does his assumption imply that all product costs are then variable?
Required:
As part of your responsibility to train new staff, explain the difference between these terms.
122)The vice president of production has just completed the January meeting with all production department heads. Everyone is upset that the production variances for the month were unfavourable. They do not understand why everything was unfavourable. January is typically the company’s lowest production month of the year.
The company uses annual average unit costs for production evaluation purposes. The average costs are based on the prior year’s actual performance with adjustments for any predicted changes in the coming year. Both production and economic items are considered in setting the averages for each new year.
Required:
Explain the problems with using average costs in evaluating production.
123)Explain the difference between an inventoriable cost and a period cost.
What potential problems does an
inaccurate classification of product and period costs cause?
124)A manufacturing company contracts with the labour union to guarantee full employment for all employees with at least 10 years seniority.
The Company expects to be working at capacity for the next 2 years (the life of the contract), so this was seen as a bargaining concession without any cost to the company.
On average, an employee earns $30 per hour, including benefits.
The work force consists of 800 employees, with seniority ranging from 1 year to 18 years.
Required:
