PART 1
Altis Sdn Bhd manufactures and sells breadmaker sets. Recently, the management noticed that the amount of time and resources spent on making one of its components named CX-2 under Division A is increasing. Therefore, Division A is negotiating with another supplier regarding outsourcing component CX-2. Currently Division A manufactures 20,000 units per annum of the component CX-2. The costs currently assigned to the components are as follows:
Currently Division A manufactures 20,000 units per annum of the component CX-2. The costs currently assigned to the components are as follows:
There is table here, I’ve upload in word file named “Unit cost (RM)”.
Case 1
The above costs are expected to remain unchanged if Division A continues to manufacture the components. The supplier has offered to supply 20,000 components per annum at a guaranteed price of RM18 per unit. If Altis Sdn Bhd outsources component CX-2, no redundancy costs will be incurred for direct labour force. Direct materials and variable overheads are avoidable if component CX-2 is outsourced. Fixed manufacturing overhead costs would be reduced by RM14,500. Assuming the capacity that is required for component CX-2 has no alternative use.
Case 2
Assuming now that the extra capacity that will be made available from outsourcing component CX-2 can be used to manufacture and sell 20,000 units of part B-1 at a price of RM20 per unit. All the labour force required to manufacture component CX-2 would be used to make part B-1. The variable and fixed manufacturing overheads would be the same as the costs incurred for manufacturing component CX-2. The materials required to manufacture component CX-2 would not be required but additional materials required for making part B-1 would cost RM7.50 per unit.
Required:
a. As a management accountant, you are required to prepare financial information in evaluating to make or buy decision for;
i. Case 1: By showing total cost of continuing to make, total cost of buying and the different of the relevant cost, stated whether Altis Sdn Bhd should make or buy the component CX- 2.
ii. Case 2: By showing total cost to make component CX-2, total cost of buying component CX-2 and total cost of buying component CX-2 with making of part B-1, advise the management which decision should they undertake.
b. The production manager of Altis Sdn Bhd recently said:
‘Qualitative factors do not play an important role in relevant cost analysis. We should focus more on quantitative factors as outcomes can be measured in numerical terms.’
With reference to the production manager’s statement above, please provide your comments by stating the relevancies of the quantitative and qualitative factors for flexibility in making decision related to cost analysis. Give an example to illustrate your answer.
PART 2
Hakim Sdn Bhd manufacturers water filtration system products that are used in both residential and commercial building. One of its products named product B is made using two different raw materials and two types of labour. The company operate a standard absorption costing system and now preparing its budgets for the first quarter for the year ending 31 December 2020.
In order to produce one unit of product B, two types of materials are required namely material X and Y. One unit of product B needs 5 kgs of material X at cost RM4 per kg. As for material Y, 3 kgs are needed at cost RM7 per kg.
Annual overheads are RM280,000. 40% of these overheads are fixed and the reminder for variable overhead. Fixed overheads are absorbed on a unit basis.
As for company’s inventory policy, closing inventory of finished goods is 30% of the following month’s sales volume and closing inventory of materials is 45% of the following month’s materials usage. Opening inventory as of 31 December 2019 for finished goods are 500 units, material X and Y are 1,500 kgs and 1,700 kgs respectively.
The selling price of the Product B is RM220 per unit. The following information has been identified for Product B.
The sales forecast for the year 2020 are as follows:
There is table here, I’ve upload it in a word file named “Sales Volume (units)”
The management team are concerned that Hakim Sdn Bhd has recently faced intense competition in the marketplace for Product B. Consequently, there have been issues concerning the availability and costs of specialized materials and employees needed to manufacture Product B, and there is concern that these might cause problem in the current budget setting process.
Required:
a. Prepare the following budgets of Hakim Sdn Bhd for each month of the first quarter for the year ending 31 December 2020.
i. Production Budget in units.
ii. Raw material budget in kgs and value for material X.
b. Almost every organization, regardless of size, complexity or sector, depends heavily on budgets and budgetary systems to achieve their strategic goals since it involves the establishment of predetermined goals, the reporting of actual performance results and evaluation of performance. in terms of the predetermined goals. Define and discuss the functions of budget committee that can be implemented in Hakim Sdn Bhd to improve the preparation of their budgeting process.
PART 3
The Balanced Scorecard (BSC) is a strategic planning and management system that is used extensively in business and industry, government and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. BSC is a framework that focuses on shareholder/financial, customer, internal processes and learning requirements of a business in order to create a system that linked the objectives, measures, targets and initiatives which collectively describe the strategy of an organization and how that strategy can be achieved.
Required:
You are expected to search THREE (3) journal research articles related to the Balance Scorecard (BSC). Based on these research articles, you are required to give your opinion with justification on the questions below.
Research acknowledges that the implementation of BSC has a significant impact on organizational performance. Discuss what benefits will the company receive from using BSC as a tool for measuring its performance? How does BSC help improve organizational performance? What are the factors influencing the implementation of BSC in organizations?