Identify the problem that the leadership team is trying to solve and the stakeholders who are affected by the approach to solve this problem.
Identify the problem that the leadership team is trying to solve and the stakeholders who are affected by the approach to solve this problem. Be sure to address the challenges of satisfying the expectations of all stakeholder groups. Remember that stakeholders are not the same as stockholders – stockholders are the owners of the company and represent one stakeholder group. If you are not clear about who might be a stakeholder, take a look at Caux Round Table Principles at https://www.cauxroundtable.org/principles/ for identification of Key Stakeholders.
identify and analyze the options that the company has to solve their problem. There are always multiple options, so think about different ways to make this decision. Computations are important and helpful, but they need to be relevant to the decision and should be explained. Address the pros and cons of the options that you have identified. Consider the material in the text about costing methods, cost behavior, cost-volume profit model, and the objectives of management accounting models. For example, what happens to costs if sales volumes stay the same, increase, or fall? Will there be increased or unreasonable demands on certain employees? What happens to the company if sales opportunities are missed? There are several important questions.
Write a conclusion to communicate your findings and recommendations. You will be recommending one solution in your conclusion. Explain your proposed solution and support your recommendation by explaining why it is the best approach. It is critical to provide numbers as part of your recommendation – remember the material from class about the cost volume profit model and break-even analysis.
Cost data:
Cost information developed by the accounting department.
Activity Cost Pool
Annual Cost (dollars)
Driver
Annual Driver volume
Cost/unit
Purchasing
175,000
number of orders
800
Materials handling
168,000
number of moves
7,800
Production (cutting, etc)
280,000
DL hours
105,000
Setting up machines
185,000
number of setups
850
Inspecting
190,000
no. of inspections
7,200
Inventory control
138,000
no. of parts
16,800
Utilities
250,000
square feet
90,000
Total for all activity pools
1,386,000
budgeted machine hours
100,000
Single OH rate using machine hours
Cost estimate for proposed job
costs traditional OH
costs ABC OH
units to produce
2,400
Direct materials (spec)
325,000
Direct labor
425,000
machine hours
10,500
DL hours
17,100
no. of Puchase orders
475
no. of material moves
1,480
no. of machine setups
525
no. of inspections
850
no. of parts
1,600
square feet used
6,200
total OH
total job costs
Cost per unit
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