【正文】 are slightly larger that they would be using a directlabor costallocation base, while the allocation of assembly costs is slightly smaller.4B4 (5060 min.)1. A summary of the analyses follows.Pen CellPhoneCasings Casings CompanyBase Gross Profit Percentage* % % %Plan Gross Profit Percentage** % % %Support of Product Manager? Strong NoneSupport of President? Moderate* See Exhibit 46 on p. 136 of the text.** See Panel B of Exhibit 4B4 that follows.Exhibit 4B4, Panels A and B on the following pages can be used to explain the impact of the controller’s idea using the process map of the traditional costing system and the related financial reports. Notice that the $80,000 annual decrease in the cost of engineers needs to be converted to a $20,000 quarterly savings. The controller’s idea will result in an increase of % . .. . ..學(xué)習(xí)參考in the gross profit of the pencasings line but a decrease of % in the cellphone line. The product manager of pen casings would probably give strong support to the idea but the cellphone casings manager would most likely not support the idea. Although the panylevel gross profit margin improves, the president’s support may not be strong. Why? There is not a strong consensus among productline managers. Top management is normally hesitant to support actions that do not have the unanimous support among productline managers unless there is solid evidence of material improvement in profitability. While the current loss would be reversed, the return on sales is still nominal at 3,500 247。 8,000) 165。 92,000 = 165。s uses only 16% of the direct labor hours used for A, B, and C, so it is is allocated only 16% of the costs allocated on the basis of direct labor hours. But it uses 40% of the machine hours, and there is allocated 40% of costs that are allocated on the basis on machine hours. Therefore, it receives relatively more costs with a base of machine hours than with a base of directlabor hours. . .. . ..學(xué)習(xí)參考TABLE 4B1 STATEMENT OF OPERATING INCOME OPERATING INCOME BY PRODUCT LINEThousands of Dollars Lawn HandScooter Mower Tool Cost Type,Parts Parts Parts Assignment Method Lawn Mower Parts Hand Tool Parts Cost Type, Assignment MethodSales $990 $350 $380 $260Cost of goods sold: Direct material 400 175 125100 Direct, Direct Trace Indirect manufacturing 94 68 1 14 12 Indirect – 494 243 139 112 Gross profit 496 107 241 148 Selling and administrative expenses: Commissions 55 25 2022 Direct, Direct TraceDistribution to warehouses 150 20 2 80 50 Indirect WeightTotal selling and administrative expenses 205 45 100 60 Contribution to corporate expenses and profit 291 $ 62$141 $ 88 Unallocated expenses: Corporate salaries 11 Other general expenses 17 Total unallocated expenses 28 Operating ine before tax $263 1 Total machine hours is 8,500 + 1,750 + 1,500 = 11,750. Indirect manufacturing cost per machine hour is then $94,000 247。 2,050 = $20. The allocation to custom detailed is $20 1,400 machine hours = $28,000.2 Total weight shipped is 25,000 kg + 75,000 kg + 160,000 kg = 260,000 kg. Indirect distribution costs per kilogram is then $10,400 247。1 is spent on direct labor, Watanabe adds 165。4,100,000 247。 $480,000 = .73%.Exhibit 4B4: Panel AProcess Map of Traditional Cost System. .. . ..學(xué)習(xí)參考Unallocated$80,000Direct Materials for Pen Casings $22,500Direct Labor for Pen Casings $135,000Direct Materials for Cell Phone Casings $24,000Direct Labor for Cell Phone Casings $15,000Pen CasingsSales $360,000Cell Phone Casings Sales $120,000All Indirect Resources $200,000All Unallocated Value Chain Costs $80,000Cost Driver[Direct Labor Hours = 4,500 + 1,000 = 5,500]. .. . ..學(xué)習(xí)參考Exhibit 4B4: Panel BPROFORMA FINANCIAL REPORTS:TRADITIONAL COST ALLOCATION SYSTEMSTATEMENT OF OPERTING INCOME CONTRIBUTION TO CORPORATE COSTS AND PROFIT[EXTERNAL REPORTING PURPOSE] [INTERNAL STRATEGIC DECISION MAKING AND OPERATIONALCONTROL PURPOSE]Pen Casings Cell Phone CasingsSales $480,000 $360,000 $120,000 1Cost of goods sold:Direct material 46,500 22,500 24,000 2Direct labor 150,000 135,000 15,000Indirect manufacturing 200,000163,636 3 36,364 4Cost of goods sold 396,500 321,136 75,364Gross profit 83,500 $ 38,864$ 44,636Corporate expenses (unallocated) 80,000Operating ine $ 3,500Gross profit margin % 5 % %1. $80,000 .75 22. $12,000 2 3. $200,000 [4,500/(4,500 + 1,000)]4. $200,000 [1,000/(4,500 + 1,000)]5. $83,500/$480,000. .. . ..學(xué)習(xí)參考Perhaps the most important factor bearing on the president’s support is lack of confidence in the accuracy of the cost and hence gross margin figures. She probably will inquire whether the shift in the consumption percentages by the two activities is captured by the traditional costing system. Does the change in allocation rates from 90:10 to 82:18 based on direct labor hour changes accurately capture the impact of the operational changes? An informal analysis of the controller’s idea might look like the following table.Likely Impact on the Consumption of Resources that Support:Operational Change Pen CasingsCellPhone CasingsLess purchasing work to supply parts for cellphone casings ?Less engineering design work on cell phone casings ?Less equipment used to support cellphone production ?