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ACC512 Assessment 2 Divine denim

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Assessment item 2 – Divine Denim case study

Value: 15%

Due Date: 10-Apr-2020

Return Date: 06-May-2020

Length: See individual questions for word length

Submission method options: Alternative submission method

TASK

Read the background information on the fictitious business, Divine Denim Pty Ltd, and then apply the knowledge you have gained in this subject to answer the various questions.

Background

Helen Croker owns Divine Denim, a growing company making made to measure, designer denim jeans and jackets. She uses organic yarn-dyed cotton denim of different weights depending on the garment that she is making. Although she prefers to take the measurements herself, she is now making denim clothes for international customers using the self-measuring system she has developed and put online. For her custom clients, she takes measurements or uses the measurements supplied through her customers’ online application. She uses these measurements to alter the pattern for the design chosen by the client. The pattern is sent to the Cutting Department and the cut material then transferred to the Machining Department.

Helen has recently expanded into a Ready to Wear (RTW) collection which is made in Australia and sold online at a cheaper price point than the made to measure clothing.

ACC512 Assessment 2 Divine Denim
ACC512 Assessment 2 Divine Denim

Helen designs the RTW clothes and sends the designs to a pattern maker. She previously had two machinists working for her and has just expanded to 8 machinists and a cutter in an expanded factory to manufacture the RTW clothing. One of the machinists uses the riveting and buttonhole machines. Helen has the latest computerised machines enabling her to complete a single setup for all machines from an iPad. She has an administrator who manages the payroll, orders,

creditors, delivery and invoicing. An IT expert works 2.5 days a week and manages the company’s website, other IT issues and online presence including monthly podcasts. A bookkeeping service is used for basic bookkeeping, GST returns and preparing information for the tax agent.

Helen decided that she needs better cost control and regular information and has asked your firm of accountants, Good Numbers, to provide her assistance to maintain and grow her expanding business.

Question 1 Business background (25 marks)

As part of your initial meeting with Helen, you are concerned to find out as much as possible about the business and the strategies that she plans to use. To start this discussion, you explain to her Porter’s Five Forces and Porter’s Strategy Model and how these can affect her costs and sales. You ask Helen to explain to you how she thinks the forces in Porter’s model affect the custom clothing and the RTW businesses and the strategies she will take with these different products.

Required:

  1. Prepare an explanation of Porter’s Five Forces model and of Porter’s broad-based organisational strategies for Helen. (10 marks)
  2. Prepare a statement from Helen setting out how she sees the forces affecting both the made to measure clothing and the RTW business and the general strategies that she is adopting for each of these businesses. Ensure that you use the background information above to support Helen’s approach to Porter’s Five Forces model and Porter’s broad-based organisational strategies. (15 marks)

Presentation:

Record your answer to part i. in point form in one column. In the next column, record Helen’s evaluation (part ii.) of the impact that each of the points on the Five Forces and the Organisational Strategies (PFFOS) have on the made to measure business. In the last column record Helen’s evaluation of the impact that each of the PFFOS points have on the RTW businesses. See format below.

Porter’s Five Forces and Organisational Strategies (PFFOS) Summary How PFFOS affect the made to measure business How PFFOS affect the RTW business
     

(max 750 words)

Question 2 Cost allocation (25 marks)

You have explained to Helen the importance of understanding how indirect costs can be allocated to the cost of finished goods and the problems of using a cost of goods manufactured statement to apply these costs and appropriately cost and price her products. Divine Denim has 2 production departments (Cutting and Machining), and 3 support departments (Administration, IT and Design).

The IT Department’s costs are allocated based on the number of computers. The Administration Department’s costs are allocated based on the number of employees. The Design Department’s costs are allocated 50% to cutting and 50% to Machining. Allocate the support department costs in the following order: Administration then IT. Helen has provided some estimates of costs for the current year (see below).

INPUT DATA          
Direct costs Administration IT Design Cutting Machining
Materials & Labour 55,000 35,000 45,000 50,000 400,000
Indirect costs 10,000 7,500 10,000 7,500 25,000
Total 65,000 42,500 55,000 57,500 425,000
Allocation base          
No of computers 1   1 1 9
Designs       0.5 0.5
No. of employees 1 1 1 1 8

Required:

  1. Allocate the support department costs to the operating departments using the direct method. (3 marks)
  2. Allocate the support department costs to the operating departments using the step- down method. Allocate first the costs for the support department with the largest direct costs. (8 marks)
  3. Allocate the support department costs to the operating departments using the reciprocal method. Use Excel Solver to prepare your answer. (14 marks)

Presentation: The input data above can be copied directly from the online subject outline into a spreadsheet. Cut and paste your spreadsheet results and formula view into your Word document. The formula view should include the column letters and the row numbers. See the ‘Getting Started’ menu tab on the Interact subject sitefor advice on spreadsheet layout and utilities.

Question 3 Process costing (25 marks)

As part of your role, you provide Helen with the costs of running her Cutting and Machining departments in July. Only skinny jeans were manufactured in July. All work is commenced in the Cutting Department and output is then transferred to the Machining Department. No direct material is added in the Machining Department but labour and overhead costs, including thread, rivets, buttons, and zippers are incurred uniformly throughout the process. Overhead is allocated based on 125% of direct labour cost. For the Machining Department, the following work in process information for 1 March 2020 is available: 100 units, 75% complete. Costs of this work in process include:

  $
Cutting department costs transferred in 3,330
Machining department costs  
Direct labour 32,000

During March 200 units were completed and transferred to Administration for dispatch. Units transferred from the Cutting Department to the Machining Department were charged to Machining at $44.50 each. Direct labour costs in March for the Machining department were

$32,000.

On 31 March 35 units were in process in Machining and these were estimated to be 45% complete.

Required:

For the Machining Department calculate, for the month of March, the cost of work completed and the cost of work in process as at 31 March 2020, using:

  1. The weighted average cost method, and (8 marks)
    1. FIFO. (12 marks)

Use the example in Figure 7.4 of the text and the information in the Background to Divine Denim, design a job cost record for a pair of custom-made jeans. (5 marks)

Presentation: Use Excel to prepare your answers to parts i and ii. Cut and paste your spreadsheet results and formula view into your word document. The formula view should include the column letters and the row numbers.

Question 4 Budgets (25 marks) Part A

On 1 February 2020 Divine Denim has a cash balance of $40 000. Sales for the next six months are expected to be:

Feb March April May June July
$50,000 $70,000 $130,000 $210,000 $260,000 $300,000

The gross margin on sales is expected to be 50%. The company plans to carry a finished goods inventory equal to expected sales for the next two months. Purchases are paid in the month following purchase.

Variable selling expenses are expected to equal 15% of sales. Fixed selling and administrative expenses are expected to be $30 000 per month, including $2,000 depreciation. Eighty percent of the expenses will be paid in the month incurred, the balance in the month following.

Sixty percent of sales are expected to be cash sales. Twenty-five percent of credit sales are collected in the month of sale and 75% in the month following sale.

Required:

  1. As an accountant working for Good Numbers you have been asked to prepare a cash budget for the months of March, April, May and June. Comment on the results. (150 words) (12 marks)
  2. In light of your findings in i. Good Numbers have been told that the company has arranged to borrow funds whenever necessary in order to maintain a minimum cash balance of $10,000. A line of credit has been arranged with the bank requiring interest of 1% per month on borrowed cash. Interest will be paid at the time the loan is repaid. The loan will be repaid as soon as there is enough cash to do so. Using this information, revise the cash budget. (5 marks)

Presentation: Use Excel to prepare your answers to parts i. and ii. Cut and paste your spreadsheet results and formula view into your word document. The formula view should include the column letters and the row numbers.

Part B

Explain to Helen how the budget is related to the organisational strategies outlined in your answer to Question 1. (max 300 words) (8 marks)

Online submission via Turnitin is required for this assignment. Details will be provided by your subject lecturer.

RATIONALE

This assessment task will assess the following learning outcome/s:

  • be able to apply cognitive skills in the design and operation of costing systems.
    • be able to explain the role of management accounting in organisational contexts and the implications for management accounting of different paradigms.
    • be able to apply analytical and synthetical skills in report writing, and use quantitative techniques and computer software including using the Internet as a professional source.
    • be able to create and implement computerised decision models.
    • be able to critique how managers make decisions.

The purpose of Assessment item 2 is to establish the skills needed in the workplace for costing products and services using the appropriate processes and tools and applying analytical processes to construct accounting systems and models using workplace tools. Each question uses realistic data and the professional practices similar to that found in workplaces.

MARKING CRITERIA AND STANDARDS

Charles Sturt University Subject Outline ACC512 202030 S I

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Criteria High Distinction Distinction Credit Pass
Question 1 Explanation and analysis of Porter’s 5 forces model and organisational strategies in a specific management accounting context. Insightful explanation and analysis of Porter’s 5 forces model and organisational strategies for Divine Denim. Comprehensive and coherent explanation and analysis of Porter’s 5 forces model and organisational strategies for Divine Denim. Coherent explanation and analysis of Porter’s 5 forces model and organisational strategies for Divine Denim. Limited explanation and analysis of Porter’s 5 forces model and organisational strategies for Divine Denim.
Question 2 Accurate operation of cost allocation system and effective use of Excel in management accounting decision models. Correct application of cost allocation complying with all spreadsheet requirements. Application of cost allocation with a few minor errors complying with all spreadsheet requirements. Application of cost allocation with a few minor errors complying with most spreadsheet requirements. Partially accurate application of cost allocation and limited functionality of spreadsheet.
Question 3 Accurate operation of process costing, effective use of Excel in management accounting and evaluation of the design of a costing system. Accurate operation of process costing, effective use of Excel in management accounting and comprehensive and coherent evaluation of the design of a costing system. Accurate operation of process costing with a few minor errors, effective use of Excel in management accounting and comprehensive and coherent evaluation of the design of a costing system. Accurate operation of process costing with a few minor errors, complying with most spreadsheet requirements and demonstrates some understanding of the design of a costing system. Operation of process costing with some errors, complying with limited use of spreadsheet and demonstrates some understanding of the design of a costing system.
Question 4 Part A Accurate operation of budgeting process, creation Accurate operation of the budgeting process, creation of Excel decision model, Accurate operation of the budgeting process, creation of Excel decision Operation of the budgeting process with minor errors, creation Operation of the budgeting process with some errors, limited use

Charles Sturt University Subject Outline ACC512 202030 S I

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of Excel decision model, critical evaluation of management decision making. critical and comprehensive evaluation of management decision making. model and critical evaluation of management decision making. of Excel decision model and evaluation of management decision making. of Excel decision model and some understanding of management decision making.
Question 4 Part B Ability to explain the role of management accounting in organisational contexts.   Comprehensive and coherent explanation of the use of budgets to achieve Divine Denim’s strategies.   Comprehensive explanation of the use of budgets to achieve Divine Denim’s strategies. Demonstrate some understanding of the use of budgets in achieving Divine Denim’s strategies Demonstrate some understanding of the use of budgets in achieving general business strategies.
This last criterion relates to the whole of the assignment. NB. although this criterion is not given a separate mark, it will be considered when marking each of the previous criteria.
Academic writing skills. The discussion answers and business reports meet academic standards of referencing, syntax, vocabulary, spelling, and punctuation and reflects an awareness of audience needs. Accurate use of syntax, spelling, and punctuation; correctly refers to a variety of sources to support arguments, including the prescribed texts and a range of additional readings; reference list of the range of resources used, correctly acknowledged and formatted using APA style. Accurate use of syntax, spelling and punctuation; succinct and effective use of vocabulary; correctly refers to a range of sources to support arguments, including the prescribed text and a variety of further readings; reference lists of a range of relevant resources used, correctly acknowledged and formatted using APA style. Accurate use of syntax, vocabulary, spelling and punctuation; correctly refers to more than the minimum requirement of sources to support arguments, including prescribed texts and recommended readings; references used acknowledged and formatted in APA style with few or no errors affecting the transparency and Mostly accurate syntax, spelling and punctuation; correctly refers to the minimum number of sources to support arguments, including prescribed texts; reference list used, formatted in APA style, with few errors affecting the transparency or traceability of sources, or academic integrity.

Charles Sturt University Subject Outline ACC512 202030 S I

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      traceability of sources or academic integrity.  

Charles Sturt University Subject Outline ACC512 202030 S I

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PRESENTATION

Assessment tasks should be submitted through Turnitin as a Microsoft Word document. Do not submit your Excel file. Do not submit as a PDF document. Paste the spreadsheet solution in the word file, including column headings and row numbers. Your word file will provide a complete answer to every question. Use portrait orientation wherever possible.

REQUIREMENTS

This assignment must be submitted through Turnitin.

It is recommended that your name, student ID and page number are included in the header or footer of every page of the assignment.

Further details about submission in Turnitin are provided in On-line submission.

Charles Sturt University Subject Outline ACC512 202030 S I

Version 4 – Published 06 April 2020

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