ACC 207 MDE Manufacturing Budget: Bird Feeder I. Sales and Manufacturing Expenses

The final project for this course is the creation of a quantitative analysis with a memo to management.Classifying a company’s costs allows for an in-depth analysis of the impact that changes in output have on revenues, costs, and net income or net loss. A costvolume-profit(CVP) analysis will be completed in order to determine the breakeven point. Relevant costs will be used to prepare a flexible budget. Additionally,an appropriate costing system should be selected and the choice should be substantiated with reasonable rationale. Finally, a memo should be prepared formanagement that summarizes the results of the quantitative analysis and makes recommendations for an optimal costing system to be ethically used by keydecision makers.The project is divided into three milestones, which will be submitted at various points throughout the course to scaffold learning and ensure quality finalsubmissions. These milestones will be submitted in Modules Two, Four, and Five. The quantitative analysis with a memo to management will be submitted inModule Seven.In this assignment, you will demonstrate your mastery of the following course outcomes: Utilize cost behavior and cost analysis to assist decision makers in planning and adding value to the business Prepare a flexible budget for supporting informed managerial decision making Interpret variances for determining the optimal costing system to fit an organization’s internal accounting needs Interpret the role of ethics in cost accounting for determining its impact on decision makingPromptIn this assignment, multiple analyses will be conducted in order to obtain a company’s financial information specific to company costs.MDE manufactures outdoor garden items such as lawn ornaments and bird feeders. MDE uses a standard costing system to set standards for direct materials,labor, and overhead costs. MDE reviews and revises standards as necessary. Recently, budget variances for bird feeders have caused some concern. You, thecompany’s cost accountant, have been asked to examine the numbers for the product, explain the variances, and suggest ways to improve performance.Specifically, the following critical elements must be addressed:You will begin by using the MDE Manufacturing Budget (Table I) to analyze costs, contribution margin, and breakeven point for the bird feeder division. You willthen analyze the actual costs and complete a cost-volume-profit (CVP) analysis to determine how many bird feeders must be sold at the current cost and salesprice level to earn a 10% profit and how much the sales price would have to increase to earn a 10% profit at the same cost and sales volume level. Use Tabs 1and 2 of the Student Workbook.I. Costsa) Classify all product and period costs appropriately.b) Compute a cost-volume-profit analysis. What are the implications of this analysis?c) Compute contribution margin per unit and contribution margin ratio.d) Determine the breakeven quantity and the breakeven revenue accurately.e) Determine if the company is breaking even. What are cost-volume-profit analysis implications on short-term planning?Your next step is to use the MDE Manufacturing Budget (Tables I, II, III, IV) to compare the budget and actual costs. Determine where variances occurred andexplain why. Use Tabs 3 and 4 of the Student Workbook to present your budgets/variances and Tabs 5 and 6 for all budget/variance calculations.II. Prepare and Performa) What are your fixed costs? Segregate them in the budget model.b) Determine how variable costs change as activity measures change. How can this information be applied?c) Create the budget model, ensuring fixed costs are hard coded into the model (variable costs are stated as a percentage of the relevant activitymeasures or as a cost per unit of activity measure).d) Add actual activity measures to the model. Make sure all information is added accurately.e) Add the flexible budget calculations to the budget model. Make sure all information is accurate.f) Compare the flexible budget to the actual expenses. What does this inform? Be sure to discuss the following variances:i. Static budget variance, including sales volume and flexible budget variancesii. Price and efficiency variances for direct materials and direct laboriii. Spending and efficiency variances for variable manufacturing overheadg) Determine the aspects of the budgeting process that are in need of improvement. Justify your response.h) Interpret what budget variances represent. Should all variances be investigated?You have also been asked to give management a recommendation on whether the company should switch from process costing to activity-based costing (ABC).This is an exploratory discussion, but management would like to know more about the difference between the two costing systems and if a different costingsystem might work better for the company.III. Main Costing Systems – Activity-Based Costing vs. Process Costinga) Identify the cost allocation system that would benefit this company most. Justify your response.b) Does this cost allocation system meet management planning and control goals? Explain.c) What are the ethical implications that should be considered with this cost allocation system?d) Describe the ethical implications of direct costs versus indirect costs. What considerations should be made when selecting one of these two?After all of your calculations and research, you are now ready to prepare your report.IV. Prepare a Memo to Managementa) Summarize your quantitative analysis based on your findings (include answers to all questions in Sections I, II, and III).b) Report the parts of the budgeting process that are in need of improvement. Provide suggestions to improve those parts.c) Report overall improvement recommendations to management. Consider the ethical implications when communicating sensitive information.MilestonesMilestone One: Draft of Costs (Section I)In Module Two, you will submit a draft of the costs section of the final project. Use the MDE Manufacturing Budget (Table I) to analyze costs, contributionmargin, and breakeven point for the bird feeder division of the company. In Tab 1 of your Student Workbook, classify costs as either product or period costs.Briefly explain the difference between the types of costs. Then, analyze the actual costs and, using Tab 2 of your Student Workbook, complete a cost-volumeprofitanalysis to determine how many bird feeders must be sold at the current cost and sales price level to earn a 10% profit and how much the sales price wouldhave to increase to earn a 10% profit at the same cost and sales volume level. Submit the Student Workbook with Tabs 1 and 2 completed with your costcalculations and a 1-2 page Word document that explains the implications of your findings and addresses all of the critical elements in Section I. This milestonewill be graded with the Milestone One Rubric.Milestone Two: Draft of Prepare and Perform (Section II)In Module Four, you will submit a draft of the prepare and perform section of the final project. Analyze the budget and actual costs using the MDEManufacturing Budget (Tables I, II, III, IV). Determine where variances occurred and why. Submit the Student Workbook with Tabs 3 and 4 completed with yourbudgets/variances calculations and a 1-2page Word document that discusses the implications of your findings on the company’s financial considerations. Explainwhich aspects of MDE’s budgeting process are in need of improvement and justify your response using your calculations. Address all critical elements in SectionII. Use Tabs 5 and 6 of the Student Workbook for your budget and variance calculations. This milestone will be graded with the Milestone Two Rubric.Milestone Three: Draft of Main Costing Systems (Section III)In Module Five, you will submit a draft of your main costing system recommendations. You have been asked to give management a recommendation on whetherthe bird feeder division should switch from process costing to activity-based costing. This is just an exploratory discussion, but management would like to knowmore about the differences between the two costing systems and if a different costing system might work better for the division. Submit a Word document thataddresses the critical elements of Section III. This milestone will be graded with the Milestone Three Rubric.Final Submission: Quantitative Analysis With a Memo to ManagementIn Module Seven, submit your quantitative analysis with a memo to management. It should incorporate all milestones and include ection IV of the criticalelements listed in the Final Project Document

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