ACC5213 - Direct materials - Fibreglass - Wood - Management Accountant - Accounting Assessment Answer

ACC5213 - Direct materials - Fibreglass - Wood - Management Accountant - Accounting Assessment Answer 

Task:

QUESTION 1:
Slopes Ltd manufactures and sells snowboards. Slopes Ltd manufactures a single model, the Pipex. In the summer of 2018, Slopes Ltd’s management accountant gathered the following data to prepare budgets for 2019:

Direct materials
Wood                                               1.25 board metres (b.m.) per snowboard
Fibreglass                                        4.8 metres per snowboard
Direct manufacturing labour            5 hours per snowboard

Slopes Ltd’s CEO expects to sell 1000 snowboards during 2019 at an estimated retail price of $700 per board. Further, the CEO expects a 2019 beginning inventory of 100 snowboards and would like to end 2019 with 200 snowboards in stock.

                                                                             Beginning inventory 1/1/2019                           Ending inventory 31/12/2019
Wood                                                                       500 b.m.                                                               375 b.m.
Fibreglass                                                                800 metres                                                         1600 metres

Variable manufacturing overhead is $14 per direct manufacturing labour-hour. There is also $132 000 in fixed manufacturing overhead costs budgeted for 2019. Slopes Ltd combines both variable and fixed manufacturing overhead into a single rate based on direct manufacturing labour-hours. Variable marketing costs are allocated at a rate of $250 per sales visit. The marketing plan calls for 30 sales visits in 2019. Finally, there is $30 000 in fixed non-manufacturing costs budgeted for 2019.

The inventoriable unit cost for ending finished goods inventory on 31 December 2018 is $580.80. Assume that Slopes Ltd uses a FIFO inventory method for both direct materials and finished goods. Ignore work in process in your calculations.

Cash                                                                 $10 000
Property, plant and equipment (net)                850 000
Current liabilities                                              17 000
Non-current liabilities                                       178 000
Shareholders’ equity                                        844 000

QUESTION 2:
As early as 1973, Cherrington and Cherrington state that it is not budgeted per se, that has an effect on people, but the positive and negative consequences associated with budgets. That is, it is not the numbers that form the budget that has behavioural effects on participants, but rather the intentions behind the numbers, the intentions that are read into the numbers by participants, personalities of parties involved and so on. Consider the budgeting technique used by Slopes Ltd in Question 1 above. On reflection, what benefits and negative consequences do you consider may result from the budgeting technique used by Slopes Ltd?

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