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PROJECT 1 (40 MARKS)

Before beginning work on the project, refer to the Project Formatting document for instructions on formatting and submitting the required work.

Project 1 is due at the end of Week 3. It is out of 40 marks. It is strongly suggested that you work through practice problem 13 in week 1 before attempting the Power BI question below.

Required:

You are Cindy, completing the analysis and developing a final report to Alan, president of BBCC. The report should analyze BBCCs current cost allocations and give advice for the future. It should be formatted as a memo and include the following:

1. Revised 20X7 income statement (7 marks) a) Manufacturing overhead allocation (2 marks)

BBCC has adopted a normal costing approach with manufacturing overhead costs allocated based on direct labour hours. However, the actual cost of product manufactured report in Exhibit 3 in the Project Details document appears to have included an allocation of actual manufacturing overhead based on a percentage of sales. Revise this report so the normal costing approach adopted by the company is properly reflected.

b) Income statement results (5 marks)

Prepare a revised 20X7 actual income statement (Exhibit 2) using the cost of goods manufactured in part (a) and adjusting for over- or underapplied overhead. It is the companys policy to write off any total over- or underapplied overhead to the total cost of goods sold rather than individual products during the period in which it is incurred. Comment on the change in gross margin overall, and for each product individually, as a result of the changes applied. The finished product beginning and ending inventory for all three products is as follows:

The-Bar Alamonde Salt-Lick

Beginning inventory $17,561 $10,702 $0

Ending inventory 18,292 10,497 0

2. Overview of 20X7 results (6 marks)

Prepare an overview of the 20X7 results. Discuss any significant differences between the 20X7 budget and the actual figures (Exhibits 2 to 4). Base the analysis on the revised figures from requirement 1. Your analysis should include a discussion of the following:

difference between actual and budgeted sales quantities for each product

changes in unit selling price and effect on sales

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change in gross margin

overall unit cost changes in direct ingredients

changes in direct labour in relation to sales dollars

A full variance analysis is not expected or required. Brief numerical summaries are encouraged to highlight changes.

3. Manufacturing overhead costs analysis (13 marks) a) Plant utilities cost analysis (3 marks)

Prepare an analysis of utilities costs using the data provided in Exhibit 5. Using the high-low method, determine how much of the monthly utilities costs for the year are fixed versus variable. Your answer should consist of a cost formula. Determine the accuracy of this formula by applying it to the total machine hours in the 20X7 data from Exhibit 5 and comparing the result to the actual utilities cost. Consider that a discrepancy of 3% on this cost estimation is acceptable to management. (Note: Round the final fixed cost answer to the nearest dollar; however, do not round the variable cost figure when calculating total costs.)

b) Capacity analysis

i) (4 marks)

Prepare an analysis that highlights idle capacity costs by analyzing 20X7 total manufacturing overhead costs (Exhibit 4), similar to the approach in Topic 2.3-10. Practical capacity is 12,000 direct labour hours (Note: Round the manufacturing overhead costs to the nearest dollar; however, do not round the MPH rate calculated when calculating the total costs.)

ii) (4 marks)

Explain the purpose of this analysis to management and the information it provides in relation to capacity utilization.

c) Based on the results of requirements 1, 2, and 3 above, briefly comment on the manufacturing costs. (2 marks)

4. Dashboard presentation of break-even options and analysis. (6 marks)

Prepare a presentation and analysis of the relationship between selling price and break-even units for The-Bar based on information provided in Exhibit 9. The purpose of the presentation is to assist the management team with cost and selling price planning for 20X8. The presentation will consist of a Power BI dashboard. The appendix at the end of this project provides instructions on how to find the data and create the dashboard using Power BI. The analysis should address the following:

a) Using the 20X8 budget data provided, create a Power BI dashboard similar to the one in the appendix to this project. Based on the dashboard created, prepare an analysis that addresses the following questions:

i) What is the break-even in batches?

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ii) Compare this to actual 20X7 sales of The-Bar. Your answer should include a brief discussion on the risk of loss including addressing the margin of safety.

b) Consider that the current selling price of The-Bar ($1.50 per bar) can increase by 10% before sales will begin to drop off. What effect will this increase in price have on break-even sales? Discuss any significant differences.

NOTE: The dashboard is interactive. Step 7 in the Appendix creates a slider that will allow you to change the total sales dollars per case. Move the slider to a point where the total selling price of a case at $1.65 (or $1.50 plus 10%) displays and answer the above question.

c) In reference to part a), assume BBCC has decided to only use product costs for their breakeven analysis. Use the interactivity of the dashboard as explained in Task 4 in the Appendix to display only product costs.

NOTE: Clicking on the Product Costs section of either of the pie charts will make the following changes:

All period costs on the bar chart become shaded.

The break-even point in units will be recalculated without the period costs.

This interactivity will help you answer this question.

d) Identify any concerns you have with the quality of the data being used in this analysis.

NOTE: Insert into your project a screenshot of the completed dashboard, illustrating the break-even point in units at a selling price of $6,000 ($1.50 per bar). Additionally, use screenshots of the dashboard to reinforce your discussion.

While the dashboard must consist of all elements displayed, your placement of the visualizations can be arranged differently.

5. Cocoa bean processing division options (8 marks) a) (4 marks)

Based on the information provided by the cocoa bean processing division manager from Exhibit 7, assess the total gross profits and total gross margin percentage of each of the following options (include total joint costs in your calculation, but do not allocate the joint costs to individual products):

i) Current sales of cocoa butter and cocoa cakes

ii) Proposed sales of cocoa butter and canned, powdered baking cocoa

iii) Proposed sales of chocolate liquor

Comment on which of the three options is most desirable for the company to pursue and why (consider other non-financial concerns that should also be taken into consideration).

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b) (4 marks)

Allocate joint costs using the following options and methods:

i) Based on the current sales of cocoa butter and cocoa cakes, use the sales value at split-off method.

ii) Based on the proposed sales of cocoa butter and canned, powdered baking cocoa, use the net realizable method.

Note on rounding: Use unrounded numbers for all calculations and round the final answer to the nearest dollar.