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Kenny Katuma (KK) manufactures standard engine components. It operates a costing system based on absorption costing and standard costs, and the management control system is based on monthly variance analysis reports.
KK has recently appointed a new CEO, who has begun to introduce changes to the manufacturing systems. He believes in lean manufacturing principles and has begun to establish a just-in-time manufacturing system, with a focus on reducing inventories and production cycle times, and eliminating waste. Discussions are in progress with major suppliers to introduce just-in-time purchasing arrangements.
The CEO has informed the management accountant that changes will be needed to the company’s internal accounting systems. He has also indicated that KK will need a lean management accounting system to support its lean manufacturing system. The CEO is dissatisfied with many features of the current management accounting system. There are many errors in data capture for the cost accounting system, and monthly variance reports are not produced until two weeks after the end of each month. He also considers that wrong information is being reported.
Required:
a. Explain the main principles of a lean information system. (6 Marks)
b. Discuss the reasons why KK’s current cost and management accounting systems do not fulfill the requirements of lean information systems. (7 Marks)
c. Identify the changes that should be made to KK’s management accounting system in order to turn it into a lean information system. (7 Marks)
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Akoko plc. has recently developed a new product called “EKO” which has been in production for the past year. The plant producing “EKO” shuts down for routine inspection and maintenance every three months, and during the first year’s operation, the costs of shut-down have been as follows:
| Quarter | Shut-Down Cost (₦) |
|---|---|
| I | 36,000 |
| 2 | 28,800 |
| 3 | 27,000 |
| 4 | 25,200 |
The management accountant attempts to forecast maintenance costs for the coming year. On examining the data, it appears that these costs have steadily decreased, which may be due to maintenance engineers becoming more efficient or the plant settling down after initial operational issues. The learning curve might explain this trend.
Required:
a. Explain the concept of a learning curve. (4 Marks)
b. Estimate the rate of learning inherent in the data and explain its meaning. (4 Marks)
c. Using the learning rate determined, forecast the total cost of shut-down for routine maintenance during the coming year. (5 Marks)
d. Assume learning ceases at the end of the second year; forecast the total cost of shut-down for routine maintenance during the third year. (4 Marks)
e. State TWO specific reasons why this forecast may be inaccurate. (3 Marks)
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Lunda Limited manufactures a range of products, many of which have short product lifecycles. Research and development staff recently designed three new products which would be manufactured in a single production cell of the company’s factory. The combined monthly manufacturing overhead costs of the three products are summarized as follows:
| Activity | Costs (₦) |
|---|
| Production set-ups (10 per month) | 200,000 |
| Material movements (400 per month) | 1,800,000 |
| Repairs (4,000 per month) | 3,000,000 |
| Total manufacturing overheads per month | ₦5,000,000 |
The following information is available concerning the three new products:
The company’s target costing task group expressed the view that the new products
would not be profitable, given the likely market prices and the cost of
manufacturing the products using the proposed design. In response, the product
designers indicated that no design changes were possible in relation to Product A
or B, but that changes in the design of Product C would bring about the following
reductions in the amount of monthly activity involved in manufacturing that
product without compromising either the quality or quantity of output:
Calculate the reduction in the cost per unit of each of the three products
which would occur as a result of the design changes to Product C, in each of
the following circumstances:
• If manufacturing overheads are allocated to products using activitybased costing (ABC);
• If manufacturing overheads are allocated to products on a direct labour
hour basis. (10 Marks)
b. Discuss the view that an ABC system is essential for the implementation of
target costing. Use the case of Lunda Limited to illustrate your answer.
(5 Marks)
c. The following data relates to another product of Lunda
Comment on the trends in this data set. (5 Marks)
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Integrating the operations of an organization is a decision that many find difficult to make as it is possible to find architectures that adapt to different requirements. Despite this, business integration is a necessity because of the success and benefits it brings to corporations and businesses.
Required:
Explain FIVE (5) benefits an organization would gain from integrating all of its operations.
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You are the Accounts officer for Unimech Garages, a company that provides mobile vehicle repairs for faulty vehicles on the Accra – Kumasi and Accra – Takoradi highways. The company has adopted the Just-In-Time (JIT) inventory control system for its operations. The JIT inventory control system was adopted because all repairs performed vary from vehicle to vehicle, and there is no need to stock any spare parts since the repair team has no idea of the next repairs to be conducted as well as the type of spare parts they would require. Again, this inventory system was implemented to prevent employees from committing the offence of selling stocked spare parts for their individual gains.
Required:
Suggest FIVE (5) benefits the company would derive from this inventory system. (10 marks)
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Find Related Questions by Tags, levels, etc.
The Minister of Finance in his mid-year review of the national budget hinted that government payroll may be outsourced. The main reason being the guarantee of cost. In April 2017, a bio-metric exercise conducted by SSNIT ensured that 27,000 ghost names were identified and removed from government payroll. In the same year, 23,000 ghost names were removed as a result of a headcount of government employees. Resulting from these exercises, GH¢250 million was saved in 2017.
Required:
i) Discuss the effects of payroll outsourcing in this stance. (5 marks)
ii) Analyze what the service user auditor must do in the course of his duties when the outsourcing programme is implemented. (5 marks)
Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
Kenny Katuma (KK) manufactures standard engine components. It operates a costing system based on absorption costing and standard costs, and the management control system is based on monthly variance analysis reports.
KK has recently appointed a new CEO, who has begun to introduce changes to the manufacturing systems. He believes in lean manufacturing principles and has begun to establish a just-in-time manufacturing system, with a focus on reducing inventories and production cycle times, and eliminating waste. Discussions are in progress with major suppliers to introduce just-in-time purchasing arrangements.
The CEO has informed the management accountant that changes will be needed to the company’s internal accounting systems. He has also indicated that KK will need a lean management accounting system to support its lean manufacturing system. The CEO is dissatisfied with many features of the current management accounting system. There are many errors in data capture for the cost accounting system, and monthly variance reports are not produced until two weeks after the end of each month. He also considers that wrong information is being reported.
Required:
a. Explain the main principles of a lean information system. (6 Marks)
b. Discuss the reasons why KK’s current cost and management accounting systems do not fulfill the requirements of lean information systems. (7 Marks)
c. Identify the changes that should be made to KK’s management accounting system in order to turn it into a lean information system. (7 Marks)
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Akoko plc. has recently developed a new product called “EKO” which has been in production for the past year. The plant producing “EKO” shuts down for routine inspection and maintenance every three months, and during the first year’s operation, the costs of shut-down have been as follows:
| Quarter | Shut-Down Cost (₦) |
|---|---|
| I | 36,000 |
| 2 | 28,800 |
| 3 | 27,000 |
| 4 | 25,200 |
The management accountant attempts to forecast maintenance costs for the coming year. On examining the data, it appears that these costs have steadily decreased, which may be due to maintenance engineers becoming more efficient or the plant settling down after initial operational issues. The learning curve might explain this trend.
Required:
a. Explain the concept of a learning curve. (4 Marks)
b. Estimate the rate of learning inherent in the data and explain its meaning. (4 Marks)
c. Using the learning rate determined, forecast the total cost of shut-down for routine maintenance during the coming year. (5 Marks)
d. Assume learning ceases at the end of the second year; forecast the total cost of shut-down for routine maintenance during the third year. (4 Marks)
e. State TWO specific reasons why this forecast may be inaccurate. (3 Marks)
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Lunda Limited manufactures a range of products, many of which have short product lifecycles. Research and development staff recently designed three new products which would be manufactured in a single production cell of the company’s factory. The combined monthly manufacturing overhead costs of the three products are summarized as follows:
| Activity | Costs (₦) |
|---|
| Production set-ups (10 per month) | 200,000 |
| Material movements (400 per month) | 1,800,000 |
| Repairs (4,000 per month) | 3,000,000 |
| Total manufacturing overheads per month | ₦5,000,000 |
The following information is available concerning the three new products:
The company’s target costing task group expressed the view that the new products
would not be profitable, given the likely market prices and the cost of
manufacturing the products using the proposed design. In response, the product
designers indicated that no design changes were possible in relation to Product A
or B, but that changes in the design of Product C would bring about the following
reductions in the amount of monthly activity involved in manufacturing that
product without compromising either the quality or quantity of output:
Calculate the reduction in the cost per unit of each of the three products
which would occur as a result of the design changes to Product C, in each of
the following circumstances:
• If manufacturing overheads are allocated to products using activitybased costing (ABC);
• If manufacturing overheads are allocated to products on a direct labour
hour basis. (10 Marks)
b. Discuss the view that an ABC system is essential for the implementation of
target costing. Use the case of Lunda Limited to illustrate your answer.
(5 Marks)
c. The following data relates to another product of Lunda
Comment on the trends in this data set. (5 Marks)
Find Related Questions by Tags, levels, etc.
Integrating the operations of an organization is a decision that many find difficult to make as it is possible to find architectures that adapt to different requirements. Despite this, business integration is a necessity because of the success and benefits it brings to corporations and businesses.
Required:
Explain FIVE (5) benefits an organization would gain from integrating all of its operations.
Find Related Questions by Tags, levels, etc.
You are the Accounts officer for Unimech Garages, a company that provides mobile vehicle repairs for faulty vehicles on the Accra – Kumasi and Accra – Takoradi highways. The company has adopted the Just-In-Time (JIT) inventory control system for its operations. The JIT inventory control system was adopted because all repairs performed vary from vehicle to vehicle, and there is no need to stock any spare parts since the repair team has no idea of the next repairs to be conducted as well as the type of spare parts they would require. Again, this inventory system was implemented to prevent employees from committing the offence of selling stocked spare parts for their individual gains.
Required:
Suggest FIVE (5) benefits the company would derive from this inventory system. (10 marks)
Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
The Minister of Finance in his mid-year review of the national budget hinted that government payroll may be outsourced. The main reason being the guarantee of cost. In April 2017, a bio-metric exercise conducted by SSNIT ensured that 27,000 ghost names were identified and removed from government payroll. In the same year, 23,000 ghost names were removed as a result of a headcount of government employees. Resulting from these exercises, GH¢250 million was saved in 2017.
Required:
i) Discuss the effects of payroll outsourcing in this stance. (5 marks)
ii) Analyze what the service user auditor must do in the course of his duties when the outsourcing programme is implemented. (5 marks)
Find Related Questions by Tags, levels, etc.
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