ACCT6004: Gibson Fabricators Corporation - Management Accounting Assignment Help

Assignment Task:

Learning Outcomes 
a) Categorise and identify the nature of various types of costs, cost objects and cost behaviours and use cost estimation techniques to develop cost functions.
b) Apply cost accounting techniques to calculate the cost of a range of cost objects, as well as analyse costs.

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 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 labour- hours 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. 

Part A – Report
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. 
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 
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. 
 

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