Requirements:

1: Identify the root issues (First, make a list of the issues. Second, Arrange and assemble similar issues into groups.for example, all issues related to inaccurate financial information would go into one group)

2: Conduct analysis based on the identified issues. ( required quantitative analysis, e.g., cost-volume-profit variance analysis)

Major Electronics is a multi-plant assembler of computers and computer products, It his 40 plants located in southern Ontario and greater Montreal. In recent years, there have been concerns that its traditional method for allocating manufacturing overhead [MOH) is no longer relevant. Direct labour costs now average 6 percent of manufac turing costs for its 40 plants, with 35 percent for direct materials, and 39 percent for manufacturing overhead. The corporate management accounting branch is investigating alternative cost driv. ers. MOH is divided into three groups: procurement, production, and support. The standard chart of accounts for Major further classifies these costs into sub-classes (see Exhibit 1), which are ranked in order of importance. The corporate management accounting branch surveyed manufacturing manag ers at all 40 plants to obtain a list of the most important cost drivers for MOH. Exhibit i Sub clanification of Manafactoring Overhead Costs Support " Pabortion capingcring * Purchasing Maturinh * Manufacturing Direct Ishour supervision Other indirect labour Quality asiumaace . Production caniral Operating cystmoves * Material specification . Amanicake . Inbound freight . Productora management * Traffic and moogiving . Equipment expenses . Corporate malcalais charges Shipping 2510 Group Case Exhibit 2 Coit Driver Total Moll Procareonat Production Support Toul manufacturing Boy 0.49 Average intal head-out in manufacturing 0.44 Direct labour dallara 1.73 1.45 Direct material choilars -4.17 -144 Number of part numbers 1.13 0.45 0.16 Percent of parts inspooked on receipt Number of products 0.14 Number of customer unders per month -0104 Average gule time in has 1.10 -0.21 0.19 1.21 With these coal drivers, an analysis was done to ascertain their correlation coeffi- cient (r) with MOH in total and each of the three major groups. Each r is shown in Exhibit 2 These results were presented to a group of plant managers that was formed to provide advice to the corporate management accounting branch on the development of alternative oust drivers The committee was not surprised at the correlations. However, they had two concerns that could not be immediately resolved First, the committee was unclear about how a positive r in regression analysis implied that the respective costs were driven by a cost driver, With regression analysis, there is a constant for alpha or intercept) and a slope (or beta). The slope coefficient is comparable to ward- able costs per unit of the cost driver. The constant is comparable to the fixed costs. Many members of the advisory group were puzzled about whether total indirect costs from a pool should be allocated, or just the variable costs. Second, some overhead costs have been incurred for capacities much greater than current production. For example, in most plants the materials specifications units operate at 50 percent of their full capacity Many members thought underutilized capacity should not be allocated to existing products, It was thought that this would not be fair when facing competitors that were operating at full capacity. Required As the project manager for the alternative cost drivers project, prepare a report using the case approach that makes recommendations for a successful project