ACC 207 Final Project Milestone Three-Classifying a company’s costs allows

ACC 207Final ProjectMilestone ThreeGuidelines and RubricOverview: Classifying a company’s costs allows for an in-depth analysis of the impact that changes in output have on revenues, costs, and net income or net loss. A cost-volume-profit analysis will be completed in order to determine the breakeven point. Relevant costs will be used to prepare a flexible budget. Additionally, an appropriate costing system should be selected and the choice should be substantiated with reasonable rationale. Finally, a memo should be prepared for management that summarizes the results of the quantitative analysis and makes recommendations for an optimal costing system to be ethically used by key decision makers.For Milestone Three, you will make a recommendation to the MDE management team on whether the company should switch from process costing to activity-based costing (ABC) for the bird feeder division. This is an exploratory discussion, but management would like to know more about the differences between the two costing systems and if a different costing system might work better for the company. Using the Excel spreadsheet with the completed data that is attached. Submit a 2–3 page Word document that addresses all of the critical elements below of Section III.Specifically, the following critical elements must be addressed:III. Main Costing Systems – Activity-Based Costing vs. Process Costinga) Identify the cost allocation system that would benefit this company most. Justify your response.b) Does this cost allocation system meet management planning and control goals? Explain.c) What are the ethical implications that should be considered with this cost allocation system?d) Describe the ethical implications of direct costs versus indirect costs. What considerations should be made when selecting one of these two?Guidelines for Submission:Your paper must be submitted as a 2–3 page Microsoft Word document with double spacing, 12-point Times New Roman font, and one-inch margins.Milestone One, Part I Product CostsMaterials – CedarMaterials – PlasticFactory Worker LaborMaterials – IndirectFactory DepreciationFactory UtilitiesFactory Maintenance and Repairs Product costs consist of all of the materials, labor and other coststhat can be directly connected to a product being manufactured.These costs also include indirect costs that are incurred inmanufacturing that specific product. These costs are assets onthe balance sheet and when the product is sold they are countedin Costs of Goods Sold. Period CostsShipping ($2.25/each)Sales Commissions ($2.00/unit sold)Office RentAdvertisingLiability InsuranceOffice DepreciationOffice Salaries Period costs are the costs assocaited with supporting themanufacturing and can not be directly related to the product thatis being manufactured. Period costs are expensed in the periodthey are incurred and are not on the balance sheet. labor and other costsbeing manufactured.are incurred incosts are assets onsold they are counted upporting theed to the product thatensed in the periode sheet. Milestone One, Part IIUse Table I on the MDE Manufacturing Budget to complete your calculations. 50,000UnitsSales Price per UnitVariable CostsMaterials – CedarMaterials – PlasticFactory Worker LaborMaterials – IndirectShipping ($2.25/ea)Sales Commissions ($2/unit sold) TotalsBudget$ 21.00 4.50 225,0000.75 37,500300,0003,000112,500100,000 Variable Cost per Unit 16 Contribution Margin 5.44 Fixed CostsFactory DepreciationFactory UtilitiesFactory Maintenance and RepairsOffice RentAdvertisingLiability InsuranceOffice DepreciationOffice SalariesTotal Fixed Costs Using Budgeted AmountsBreakeven Point – Using Actual Amounts+ 10,000 profit 78,00012,0005,00012,00020,0005,0001,00048,000181,000 Fixed CostsContribution Margin $$ 181,0005.44 (Fixed Costs + Target Profit)Contribution Margin $$ 190,5003.63 $ 1,011,49647,000 Using actual amounts(Fixed Cost + Target Profit + Current Variable Cost)+ 10,000 profitCurrent Total Units TotalsActual$ 21.10 248,16037,741332,7602,585105,75094,000 47,000Units 5.280.80 173.63 78,00012,0004,50012,00020,0005,0001,00048,000180,500 Breakeven Point – 33,272 Units at Current Sales Price – 52,450 New Contribution MarginCurrent Variable CostsNew Sales Price $ 21.52 Milestone Two, Part IUse Tables I through IV on the MDE Manufacturing Budget to complete your calculations.Refer to Exhibit 7-2 on page 253 of the text Budget Model Units SoldRevenuesVariable CostsDM-PlasticDM-CedarDirect Manuf. LaborVariable Manuf. OverheadTotal Variable CostsFixed Manuf. OverheadTotal CostsGross Margin Actual47,000 Flexible BudgetVariance Favorable/Unfavorable $991,700 $4,700 Favorable 37,741248,160332,7602,585621,24694,500715,746275,954 2,49136,66050,760(235)89,676(500)89,176(84,476) UnfavorableUnfavorableUnfavorableFavorableUnfavorableUnfavorableFavorable From FlexibleBudgetCalculationsSheetFlexible Budget47,000 Sales VolumeVariance $987,000 ($63,000) 35,250211,500282,0002,820531,57095,000626,570360,430 (2,250)(13,500)(18,000)(180)(33,930) Favorable/Unfavorable UnfavorableFavorableFavorableFavorableFavorableFavorable (33,430) Favorable(29,570) Favorable Static Budget50,000$1,050,00037,500225,000300,0003,000565,50094,500660,000390,000 Milestone Two, Part IIUse the variance supporting calculation tab to complete your calculations. Direct Materials – CedarDirect Materials – PlasticDirect Labor Variable Manufacturing Overhead Price Variance(22,560.00)(2,740.10)5,640.00Spending Variance(235.00) Efficiency Variance(14,100.00)(3,525.00)(56,400.00)Efficiency Variance470.00 RevenuesVariable CostsDM-PlasticDM-CedarDirect Manuf. LaborVariable Manuf. OverheadTotal Variable Manufacturing CostsFixed Manufacturing OverheadTotal Manufacturing CostsGross Margin Budgeted UnitAmounts$21.00$0.75$4.506.000.06 Actual Volume47,00047,00047,00047,00047,000 Flexible BudgetAmount$987,00035,250211,500282,0002,820531,57094,500626,070$360,930 Use Tables III and IV on the MDE Manufacturing Budget to complete your calculations. Development of Price and Efficiency Variances – Calculatio DM-PlasticDM-Cedar Actual Feet perUnit1.13.2 Direct Manuf. Labor Actual LaborCost per Hour$11.80 Actual Costs Incurred(Actual Input Qty. × Actual Price) Actual Feet perUnit Actual UnitsDirect MaterialPlastic 47,000$ Direct MaterialCedar 47,000$ Actual UnitsDirectManufacturingLabor 47,000 $$ Actual Price perUnit 1.1 $41,515$ 3.2 $248,160$ Actual Hours perUnit Actual Input Qty. × Budgeted Pric 0.80 47,000 (2,740)Price Variance 1.65 47,000 (22,560)Price Variance Actual Cost perHour 0.60 $332,760$ Actual Units Actual Units 11.805,640Price Variance 47,000 Actual Input Qty. × Budgeted Pric Actual CostsActual CostsVariablemanufacturingoverhead $$ Actual Units 2,5852,585 47000$ (235)Spending Variance e and Efficiency Variances – Calculations Actual FeetUsed51,700150,400 Actual Units47,00047,000 Actual Cost perActual CostUnit37,741 $0.80248,160 $5.28 Actual Labor Actual LaborActual LaborCostsHoursActual UnitsHours per Unit$332,76028,20047,0000.60 Flexible Budget(Budgeted InputQty. Allowed forActual Output× Budgeted Price) Actual Input Qty. × Budgeted Price Actual Feet per Budgeted CostUnitper Ounce $ $ 1.1 $38,775$ 3.2 $225,600$ Actual Hoursper Unit $$ 0.75 47,000 Budgeted Cost perOunce0.75 $ 1.0 $35,250 1.50 $ 3.0 $211,500 (3,525)Efficiency Variance 1.50 47,000 (14,100)Efficiency Variance Budgeted Costper Hour 0.60 $338,400$ Budgeted Feetper Unit Actual Units Actual Units 12.00 Budgeted Hours Budgeted Cost perper UnitHour 47,000$ (56,400)Efficiency Variance 0.5 $282,000 12.00 Flexible Budget(Budgeted InputQty. Allowed forActual Output× Budgeted Price) Actual Input Qty. × Budgeted PriceActual Feet per Budgeted CostUnitper Foot $ 0.25 $2,350$ Actual Units 0.20 Budgeted Feetper Unit 47000$ 470Efficiency Variance Budgeted Cost perFoot 0.3 $2,820 0.20 I believe that all of the yellow highlighted cells should read “per Unit” and not “per Ounce”