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MAA262: Management Accounting- Wayco Leisure Pty Ltd Case Study- Accounting Assignment Help
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The three cost drivers that generate overheads are:
• Deliveries to retailers: the number of deliveries of caravans to retail showrooms
• Set-ups: the number of times the assembly line process is re-set to accommodate a production run of a different type of caravan.
• Purchase orders: the number of purchase orders.
The annual cost driver volumes relating to each activity and for each type of caravan are as follows:
The annual overhead costs relating to these activities are as follows:
All direct labour is paid at $20 per hour. The company holds no stocks. At a board meeting there was some concern over the introduction of activity-based costing.
The finance director argued: “I very much doubt whether selling the Unwind model is viable but I am not convinced that activity-based costing would tell us any more than the use of labour hours in assessing the viability of each product”.
The marketing director argued: “I am in the process of negotiating a major new contract with a caravan rental company for the Getaway model. For such a big order they will not pay our normal prices so we will need to ensure very competitive pricing, and therefore accurate costing. I am not convinced that activity-based costing would achieve this as it merely averages costs for our entire production”.
The managing director argued: “I believe that activity-based costing would be an improvement but it still has its problems. For instance, if we carry out an activity many times surely, we get better at it, and costs fall rather than remain constant. Similarly, some costs are fixed and do not vary either with labour hours or any other cost driver”. The chairman argued: “I cannot see the problem. The overall profit for the company is the same no matter which method of allocating overheads we use. It seems to make no difference to me”.
REQUIRED:
(a) Calculate the product cost and profitability of each of Wayco Leisure’s three types of product using each of the following methods to attribute overheads:
(I) The existing methods based upon labour hours.
(II) Activity-based costing.
You are required to use Excel for your calculations. You should design your spreadsheet appropriately such that is in a logical format and the reader can clearly follow your calculations.
(b) You, as the consultant management accountant, are required to write a report to the directors of Wayco Leisure. The report should:
(I) Evaluate the labour hours and the activity-based costing methods in the circumstances of Wayco Leisure.
(II) Examine the implications of activity-based costing for Wayco Leisure, and in so doing evaluate the issues raised by each of the directors.
In drafting the report to directors, refer to your calculations in requirement (a) above where appropriate.
Question 2
In a recent article published in The Australian newspaper, experts claimed that the benefits of activity based costing in universities would be significant. The additional cost information would enable much better allocation of resources and funding outcomes.
You are required to undertake research to find two journal articles centred on the use of activity based costing in the service sector. Using these articles and what the authors’ findings, discuss how activity based costing could be used in a university. In your answer provide examples of cost pools that may be appropriate.
Accounting Assignment Help:
Task: Wayco Leisure Pty Ltd assembles three types of the caravan at the same factory in Geelong: the Getaway; the Relax and the Unwind. It sells the caravans throughout most of the world where there has been a big increase in demand for caravans and camper trailers catering to the growing number of retirees who wish to travel. In response to market pressures, Wayco Leisure has invested heavily in new manufacturing technology in recent years and, as a result, has significantly reduced the size of its workforce. Historically, the company has allocated all overhead costs using total direct labour hours but is now considering introducing activity-based costing (ABC). The accountant at Wayco Leisure has produced the following analysis.
The three cost drivers that generate overheads are:
• Deliveries to retailers: the number of deliveries of caravans to retail showrooms
• Set-ups: the number of times the assembly line process is re-set to accommodate a production run of a different type of caravan.
• Purchase orders: the number of purchase orders.
The annual cost driver volumes relating to each activity and for each type of caravan are as follows:
The annual overhead costs relating to these activities are as follows:
All direct labour is paid at $20 per hour. The company holds no stocks. At a board meeting there was some concern over the introduction of activity-based costing.
The finance director argued: “I very much doubt whether selling the Unwind model is viable but I am not convinced that activity-based costing would tell us any more than the use of labour hours in assessing the viability of each product”.
The marketing director argued: “I am in the process of negotiating a major new contract with a caravan rental company for the Getaway model. For such a big order they will not pay our normal prices so we will need to ensure very competitive pricing, and therefore accurate costing. I am not convinced that activity-based costing would achieve this as it merely averages costs for our entire production”.
The managing director argued: “I believe that activity-based costing would be an improvement but it still has its problems. For instance, if we carry out an activity many times surely, we get better at it, and costs fall rather than remain constant. Similarly, some costs are fixed and do not vary either with labour hours or any other cost driver”. The chairman argued: “I cannot see the problem. The overall profit for the company is the same no matter which method of allocating overheads we use. It seems to make no difference to me”.
REQUIRED:
(a) Calculate the product cost and profitability of each of Wayco Leisure’s three types of product using each of the following methods to attribute overheads:
(I) The existing methods based upon labour hours.
(II) Activity-based costing.
You are required to use Excel for your calculations. You should design your spreadsheet appropriately such that is in a logical format and the reader can clearly follow your calculations.
(b) You, as the consultant management accountant, are required to write a report to the directors of Wayco Leisure. The report should:
(I) Evaluate the labour hours and the activity-based costing methods in the circumstances of Wayco Leisure.
(II) Examine the implications of activity-based costing for Wayco Leisure, and in so doing evaluate the issues raised by each of the directors.
In drafting the report to directors, refer to your calculations in requirement (a) above where appropriate.
Question 2
In a recent article published in The Australian newspaper, experts claimed that the benefits of activity based costing in universities would be significant. The additional cost information would enable much better allocation of resources and funding outcomes.
You are required to undertake research to find two journal articles centred on the use of activity based costing in the service sector. Using these articles and what the authors’ findings, discuss how activity based costing could be used in a university. In your answer provide examples of cost pools that may be appropriate.