Ассоunting Writing Assignment: Bonza Handtools Ltd. (Term Paper Sample)

Accounting for Managers
Student’s Name
Institution
Accounting for Managers
Question 1
The accountant, the production manager, and the sales manager gave some recommendations on how Bonza Handtools Ltd. could increase the profitability of the power drills. First, the accountant suggested that the price of the power drills should be increased by $10 from $130 and that an additional $125,000 should be spent on national advertising and contends. Using his or her proposal, Bonza Handtools Ltd. would be able to increase profitability by $75,000. However, its weaknesses are that the company would realize a decline in demand and an increase in advertising.
Second, the production manager suggested that an increase of 25% should be made on the sales volume, an additional $50,000 should be spent on advertising costs targeting on tradespeople and home renovators and the variable manufacturing costs should be increased by $5 per unit. Besides, he or she suggested that the price should remain constant at $130 and it should not be changed Using his or her proposal, the profitability of the power drills would be expected to increase by $225,000. However, the variable manufacturing costs of the business would increase as well as the advertising cost.
Lastly, the sales manager recommended that the sales volume could be improved to 10,000 units for the three months beginning April. However, a rebate of $10 per unit would be offered, and an additional $40,000 advertising cost would be incurred. Using the sales manager’s proposal, Bonza Handtools Ltd. is expected to realize an increase in profitability by $1,460,000 and the demand would increase to 40,000 units from 20,000 units. However, the variable manufacturing costs would increase, additional advertising would be incurred, and the company would have to suffer a rebate cost of $10 per unit. From the above analysis, the sales manager’s proposal seems to be the better option.
Question 2
Part A
Given that Tassie Company factory has a capacity of 200,000 units, the company should not bid for supply since it has enough capacity, it will have excess supply if it bids, and it will incur additional direct material, direct labor, and variable factory overhead costs. The following is illustrative.
If Tassie bids for extra units: 150,000+40,000=190,000 unitsproducedandsold
The capacity of Tassie: 200,000 unitsproduced
Excess units available to Tassie: 200,000-190,000=10,000 units
Part B
If Tassie has a capacity of 180,000 units, it should bid for additional 10,000 units since it has a shortage of 10,000 units.
If Tassie bids for extra units: 150,000+40,000=190,000 unitsproducedandsold
The capacity of Tassie: 180,000 unitsproduced
Shortage of Tassie: 180,000-190,000=-10,000 units
Question 3
Part A
Since the process is labor-intensive, the budgeted allocation hours would be the direct labor hours.
OverheadAllocationRate=BudgetedOverheadsDirectlabor hours
Details

Amount ($)

Direct material cost

$327,600

Direct labor cost

$193,200

Indirect costs

$98,400

Total budgeted overheads

$619,200

OverheadAllocationRate=$619,20025,795 directlabour hours=$24 per hour
Part B
Computation of direct labor cost per unit
Directlabourcostperunit=TotaldirectlabourcostTotaldirectlabour hours=$327,60025,795=$12.70 perdirectlabour hour
Details

Amount ($)

Direct material cost ($16.10 ×2,100 units)

$33,810

Direct labor cost ($12.7 × 1,400 units)

$17,780

Overhead costs ($24 ×1,400 units)

$33,600

Total cost

$85,190

Part C
Since the process is machine intensive, the budgeted allocation hours would be the machine hours. Here, we will assume that the indirect costs related to machine hours.
OverheadAllocationRate=$619,2009,840 machine hours=$62.9 per hour
Details

Amount ($)

Direct material cost ($16.10 ×2,100 units)

$33,810

Machine cost ($10 × 525 units)

$5,250

Overhead costs ($62.9 ×525 units)

$33,037

Total cost

$72,097

Computation of machine cost per unit
Machinecostperunit=TotalmachinecostTotalmachine hours=$98,4009,840=$10 permachine hour
Part D
To calculate the minimum price per trailer, one would determine the cost per trailer at both labor-intensive and machine intensive process as shown below.
At labor-intensive process
Costpertrailer=$85,190...