You have been hired as a Cost Accountant by Sundial, Inc. Your duties include developing cost standards for materials and labor, designing and implementing cost accounting systems, defining various product and operational costs, analyzing production costs and recommending changes. Your trial period is now over, and it’s time to present the results of your work to the managers (your instructor and classmates).
Create a slideshow presentation with 10 slides (PowerPoint). In the slideshow, you must reflect the following information from your Capstone Project Parts 1-3:
The ways Sundial, Inc. can boost its profits by cost cutting or increase in sales.
The examples of each of the types of Quality Costs that Sundial, Inc. might have encountered.
The set of measures that Sundial, Inc. has to undertake in order to reduce the cost of quality.
BF180: Costs and Budgeting (BCF)
Capstone Project Part 1
Project Description:
Congratulations! You have been hired as a Cost Accountant by Sundial, Inc., which produces sunglasses. Your duties
include developing cost standards for materials and labor, designing and implementing cost accounting systems,
defining various product and operational costs, analyzing production costs and recommending changes. When the
trial period is over, you will have a performance review to demonstrate the completed tasks and gained knowledge.
There are two models of sunglasses in Sundial’s assortment — Essenz and CoolBe. The sunglasses have the following
characteristics:
Essenz
CoolBe
Selling price per unit
$160
$160
Variable cost per unit
$60
$80
Expected units sold per year
60,000
40,000
The total fixed costs per year for the company are $2,208,000.
Refer to your textbook (Chapter 3 pp. 98-101, 108-109), and read the following articles to answer the questions
below:
• “These 50 Fantastic Ways Will Cut Your Business Expenses!” https://www.outsourcinginsight.com/reducebusiness-expenses/
• “How to Increase Sales for Your Business (Without Breaking the Bank)” https://localiq.com/blog/how-toincrease-sales-for-your-business-on-a-budget/
1) What is the anticipated level of profits for the expected sales volumes?
2) Assuming that the product mix is the same at the break-even point, compute the break-even point.
3) If the product sales mix were to change to four pairs of Essenz sunglasses for each pair of CoolBe sunglasses,
what would be the new break-even volume for Sundial, Inc.?
4) How can Sundial, Inc. boost its profits by costs cutting or increase in sales? Provide at least three
recommendations that you consider the most important.
Submit your work with calculations to Capstone Project Part 1 in Moodle.
FOR INSTRUCTOR USE ONLY
Grading Rubric
Grading accepts a start value of 100. Points will be deducted for failure to fully complete or meet the stated requirements.
Grading: 90-100 = Represents work of superior quality (A); 80-89 = Represents work of good to very good quality (B); 70-79 =
Represents adequate command of class content (C); 69 and below = Represents work that shows a need for development or
improvement (F); 0 = Represents plagiarized work (F).
BF180: Costs and Budgeting (BCF)
Student:
Instructor:
Date:
STUDENT LEARNING OUTCOMES
SLO-1. Define the main concepts of a product’s cost and costing.
SLO-3. Identify the components of a product’s cost.
SLO-5. Understand the relation between cost, volume and profit, and how to use CVP-analysis to evaluate data and
decisions.
SLO-7. Know how cost analysis helps to make decisions that would improve a company’s performance.
Capstone Project Part 1
Possible
Points
Description of requirements
SLO-1, SLO-3, SLO-5. Calculated the anticipated level of profits for the expected sales
volumes.
20
SLO-1, SLO-3, SLO-5. Assuming that the product mix is the same at the break-even
point, computed the break-even point.
25
SLO-1, SLO-3, SLO-5. Computed the new break-even volume for Sundial, Inc. if the
product sales mix were to change to four pairs of Essenz sunglasses for each pair of
CoolBe sunglasses.
25
SLO-5, SLO-7. Answered: How can Sundial, Inc. boost its profits by costs cutting or
increase in sales? Provided at least three recommendations that you consider the most
important.
30
TOTAL
100
YOUR SCORE: ________
Instructor Comments:
Your
Points
1. Sale volume =9,200,000
Profit=160*60,000-60*60,000+160*40,000-80*40,000-2,208,000=6,992,000
2. Break-even point = Fixed costs / Weighted average contribution margin ratio
Weighted average contribution margin ratio = (0.625 * 60,000 + 0.5 * 40,000) /
(60,000 + 40,000) = 0.575
BEP= Break-even point = $2,208,000 / 0.575 = $3,840,000
3. New contribution margin ratio = (0.625 * 4 + 0.5 * 1) / (4 + 1) = 0.575
New break-even volume = $2,208,000 / 0.575 = $3,840,000
4. Better variable cost from supplier
Reduce the administration and marking cost
More channel to sell more products.
BF180: Costs and Budgeting (BCF)
Capstone Project Part 2
Project Description:
You have been hired as a Cost Accountant by Sundial, Inc., which produces sunglasses. Your duties include
developing cost standards for materials and labor, designing and implementing cost accounting systems, defining
various product and operational costs, analyzing production costs and recommending changes. When the trial
period is over, you will have a performance review to demonstrate the completed tasks and gained knowledge.
You have read the Cost of Quality Report of Sundial, Inc. and discovered that quality costs constitute 4.2% of sales.
The amount is enormous, and your boss asks you to develop a set of measures to reduce it.
Sundial, Inc.
Cost of Quality Report
For the Year
Cost of Quality
Percent of Sales ($32,000,000)
Prevention costs
$160,000
0.5%
Appraisal costs
$192,000
0.6%
Internal failure costs
$576,000
2.8%
External failure costs
$416,000
1.3%
Total cost of quality
$1,344,000
4.2%
Read the following articles and answer the three questions below:
• “Costs of quality or quality costs” https://www.accountingformanagement.org/costs-of-quality-or-qualitycosts/
• “11 Ways to Reduce Cost of Quality with Integrated MES and EQMS” https://www.ibaset.com/11-ways-toreduce-cost-of-quality-with-integrated-mes-and-eqms/
1) How would you define the Cost of Quality? Identify the types of quality costs.
2) Provide at least three examples of each of the types of Quality Costs that Sundial, Inc. might have
encountered.
3) Develop a set of measures that Sundial, Inc. has to undertake in order to reduce the cost of quality. Provide
at least five measures and explain in your own words how their implementation would impact the costs of
quality and Sundial’s performance.
Submit your original responses to Capstone Project Part 2 in Moodle.
FOR INSTRUCTOR USE ONLY
Grading Rubric
Grading accepts a start value of 100. Points will be deducted for failure to fully complete or meet the stated requirements.
Grading: 90-100 = Represents work of superior quality (A); 80-89 = Represents work of good to very good quality (B); 70-79 =
Represents adequate command of class content (C); 69 and below = Represents work that shows a need for development or
improvement (F); 0 = Represents plagiarized work (F).
BF180: Costs and Budgeting (BCF)
Student:
Instructor:
Date:
STUDENT LEARNING OUTCOMES
SLO-1. Define the main concepts of a product’s cost and costing.
SLO-7. Know how cost analysis helps to make decisions that would improve a company’s performance.
SLO-8. Explain how activities that influence quality affect costs and profitability.
Capstone Project Part 2
Possible
Points
Description of requirements
SLO-1, SLO-8. Defined the Cost of Quality. Identified the types of quality costs.
20
SLO-1, SLO-8. Provided at least three examples of each of the types of Quality Costs
that Sundial, Inc. might have encountered.
30
SLO-7, SLO-8. Developed a set of measures that Sundial, Inc. has to undertake in
order to reduce the cost of quality. Provided at least five measures and explained
in your own words how their implementation would impact the costs of quality and
Sundial’s performance.
50
TOTAL
100
YOUR SCORE: ________
Instructor Comments:
Your
Points
1.
Cost of Quality: The concept of cost of quality has been around for many years. Dr. Joseph M.
Juran in 1951 in his
Quality Control Handbook included a section on COQ. Mr. Philip B. Crosby in his book Quality Is
Free has popularized the COQ concept.
Quality is concerned with conformance to specification; ability to satisfy customer expectations
and
value for money. Recognising the importance of cost of quality is important in terms of
continuous
improvement process. The cost of control/conformance and the cost of failure of control/nonconformance is the quantitative measure of COQ. It is the sum of the costs related to prevention
and detection of defects and the costs incurred due to occurrences of defects.
2.
Types of Cost of Quality:
Prevention costs: Ensuring the failures do not happen
Example: • Quality training • Quality circles • Statistical process control activities
Appraisal costs: Checking for failures
Example: • Testing and inspecting materials • Final product testing and inspecting • WIP testing
and inspecting
Internal failure costs: Keeping defective products from falling into the hands of customers
Example: • Cost of Scrap (net of realization) • Cost of Spoilage • Cost of Rework
External failure cost: Costs of defects discovered by the customers
Example: • Cost of field servicing • Cost of handling complaints • Warranty repairs
3.
Set of measures that Sundial, Inc. has to undertake in order to reduce the cost of quality
#1 Work Instructions and Process Change Management
On a shop floor with a paper system, changes to work instructions are written into the margins with red
ink and stamped by a Liaison Planner. A copy of the redlined document is routed back to a process
planner to get the changes incorporated into future releases of the work instructions.
#2 Reducing Reliance on 100% Inspection
One way to reduce inspection levels from 100% inspection, 100% of the time, is to only trigger a
comprehensive inspection based on production process validation (PPV) or first article inspection (FAI)
rules when there is (a) a change in design, affecting fit, form or function of the product, or (b) a change of
manufacturing sources, processes, inspection methods, location, tooling or materials, which affects fit,
form or function.
#3 Automated Inspection
Where inspection is needed, and a lot of data needs to be collected, there might be possibility of
reducing manual clerical effort using automated inspection methods such as CMM (Coordinate
Measurement Machines) or visual inspection machines that are integrated directly into the MES
inspection data collection records.
#4 Discrepancy Documentation
The cost of filling out a non-conformance report on manufactured or purchased parts includes
the cost of good problem Identification. The use standard codes and descriptions for symptom,
defect and cause types, can simplify (and speed up) the documentation process, and provide
more consistent data for analysis.
#5 Eliminating multiple sources of suppliers
Reducing costs can be achieved by choosing single sources for items that are absolutely
necessary. This can create economies of scale, because you are ordering from one supplier
and generally at a reduced cost. This also creates rooms for lower overheads by reducing
administrative costs, particularly due to eliminating multiple transactions from accounting
activities. Ensure that there are back up suppliers, however, to create an ‘insurance policy’ when
or if a supplier cannot fulfIll their duties.
BF180: Costs and Budgeting (BCF)
Capstone Project Part 3
Project Description:
You have been hired as a Cost Accountant by Sundial, Inc., which produces sunglasses. Your duties include
developing cost standards for materials and labor, designing and implementing cost accounting systems, defining
various product and operational costs, analyzing production costs and recommending changes. When the trial
period is over, you will have a performance review to demonstrate the completed tasks and gained knowledge.
In order to achieve the purpose of delegation, controlling tasks, and improving decision-making, Sundial, Inc.
decides to decentralize and introduce a Management Control System. As a new assignment, your boss asks you to
prepare a proposal for Responsibility Accounting, which implies creation of four decentralized units (responsibility
centers).
The organizational structure of Sundial, Inc. looks as follows:
Sundial, Inc.
President and CEO
Divisions
Vice President
Finance
CFO
Sunglasses
Product Manager
Sunglasses
Plant Manager
Sunglasses
Distribution Manager
Legal General Counsel
Personnel
Vice President
Read the following articles and answer the questions below:
•
•
“Responsibility Center” https://www.wallstreetmojo.com/responsibility-center/
“4 Types of Responsibility Centers” https://www.yourarticlelibrary.com/accounting/responsibilityaccounting/4-types-of-responsibility-centres/52904
1) Explain in your own words what Responsibility Centers are. What are the four types of responsibility
centers? Provide at least two advantages and two disadvantages of responsibility centers.
2) Design the project to implement the decentralized structure in Sundial, Inc. that includes creating
responsibility centers. Identify the divisions that are going to represent each of the four types of the
responsibility centers. Explain the functions of each of the responsibility centers and how they are going
to be exercised by the divisions.
Submit your original responses to Capstone Project Part 3 in Moodle.
FOR INSTRUCTOR USE ONLY
Grading Rubric
Grading accepts a start value of 100. Points will be deducted for failure to fully complete or meet the stated requirements.
Grading: 90-100 = Represents work of superior quality (A); 80-89 = Represents work of good to very good quality (B); 70-79 =
Represents adequate command of class content (C); 69 and below = Represents work that shows a need for development or
improvement (F); 0 = Represents plagiarized work (F).
BF180: Costs and Budgeting (BCF)
Student:
Instructor:
Date:
STUDENT LEARNING OUTCOMES
SLO-1. Define the main concepts of a product’s cost and costing.
SLO-7. Know how cost analysis helps to make decisions that would improve a company’s performance.
SLO-9. Understand how responsibility centers are used for planning and control by companies.
Capstone Project Part 3
Possible
Points
Description of requirements
SLO-1, SLO-9. Explained in your own words what Responsibility Centers are.
Answered: What are the four types of responsibility centers?
25
SLO-1, SLO-7, SLO-9. Provided at least two advantages and two disadvantages of
responsibility centers.
SLO-7, SLO-9. Designed the project to implement the decentralized structure in
Sundial, Inc. that includes creating responsibility centers. Identified the divisions that
are going to represent each of the four types of the responsibility centers.
20
30
SLO-7, SLO-9. Explained the functions of each of the responsibility centers and how
they are going to be exercised by the divisions.
25
TOTAL
100
YOUR SCORE: ________
Instructor Comments:
Your
Points
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