QUESTION 1- SMART ELECTRONICS

1.) Model M-11

Overhead cost allocated per unit: [80 000/ (650 + 15)] x 650= 65 000 / 13000 units
sold= 50 per unit
Thus, the GROSS MARGIN PER UNIT= 90-10-50= 30 per unit

Model R-24
Overhead cost allocated per unit: [80 000/ (650 + 15)] x 150= 15 000 / 1500 units
sold= 10 per unit
Thus, the GROSS MARGIN PER UNIT= 90-10-50= 30 per unit

2.)using ABC costing

Number of setups= 20 000 /10=2000
Number of components= 50 000 /50= 1000
Number of material movements= 10 000/50= 200

MODEL M-11
[(2000X3) +(1000X17) +(200X15)]= 26000
Overhead cost allocated= 26000 / 1300= 20
THUS, THE GROSS MARGIN PER UNIT= 90-10-20= 60 PER UNIT

MODEL R-24
[(2000X7) +(1000X33) +(200X35)]= 54 000
Overhead cost allocated= 54 000/ 1500=36
THUS, THE GROSS MARGIN PER UNIT= 60-30-36= -6 PER UNIT

3.) As there is enough variation in the production process, Smart Electronics can
use the activity based costing to identify the dufferences in overhead resources by
using the different cost drivers and thus provides different results.
Based on the situation of Smart Electronics, the M-24 has the most number of
setups, components, and number of material movements and these drivers used in ABC
can't be reflected when using the traditional approach using only the direct labor
hours.

4.) ADVANTAGES OF ABC:

-it provides understanding of the costs in manufacturing overhead by identifying
the different cost drivers
-it allocates manufacturing overhead more accurately

LIMITATIONS OF USING ABC

-It is time consuming to identify activities and drivers and more costly to use
than the traditional approach
-the estimation of costs of activities may lead or cause to errors

QUESTION 2- SMALL PARTS

1.)-Effectiveness and efficiency
-reliability
-compliance

2.)
-1 person should not have both the custody and accounting functions
-the salesperson are in charge of many functions
-the inventory of returned product is not entered in the accounting records.

3.)Smallparts will improve its internal control by means of separating these duties
separately among different individuals.
-AUTHORITY- the person who executes the job
-RECORDING the transactions
-CUSTODY of the assets involved in the transactions
-PERIODIC RECONCILIATIONS

4.)-Have a segregation of duties among different individuals

-treat the inventory of returned products just like an ordinary product