Part A (maximum 750 words, 60% of the coursework marks)
Bristol Syrup Company Ltd (BSC) makes a unique syrup using cane sugar and local herbs. The syrup is sold in small bottles and is prized as a flavouring for drinks and for use in desserts. The bottles are sold for £8 each. The first stage in the production process is carried out in the Mixing department, which removes foreign matter from the raw materials and mixes them in the proper proportions in large vats. The company uses the weighted-average method in its process costing system.
Information on work in the Mixing Department for the month of April is shown below:
Units to be accounted for:
Work in progress inventory, 1 April (90% materials, 80% conversion cost added last month) 60,000
Started into production 400,000
Total units 460,000
Units accounted for as follows:
Transferred to the next department 380,000
Work in progress inventory, 30 April (70% materials, 55% conversion cost added this month) 80,000
Total units 460,000 Total Cost
Cost to be accounted for:
Work in progress inventory, 1 April £ 98,000
Cost added during the month 827,000
Total cost £ 925,000
Cost accounted for as follows:
Transferred to the next department £ 805,600
Work in progress inventory, 30 April 119,400
Total cost £ 925,000
While collecting information to prepare the mixing department process cost report for April, Ethan learns that 10,000 of the completed units were later considered spoilt and discarded. The previous month there was no spoilage. He is puzzled by the high quantity of spoilage during April. Ethan discusses the spoilage with the mixing department manager. She tells him 3000 units were spoiled because of a problem that occurs three or four times a year with the quality of the raw materials. The problem causes a slight crystallization in the number of units. In addition, a new employee accidentally programmed the mixing machine incorrectly, spoiling 7000 units during April. All spoilage is discovered when units are turned out at the end of the mixing process (when they are 100% complete).
After further discussion with the mixing department manager, Ethan learns that approximately 3% of units throughout the year are spoilt due to crystallization. Thus, he decides that for the raw material problem, up to 3% of units produced should be accounted for as normal spoilage. He decides that the spoilage caused by incorrect equipment setting should be account for as abnormal spoilage because the manager tells him that little employee turnover exists and this probably rarely occurs.
BSC has just been acquired by another company, and the management of the acquiring company would like some additional information about the operations of BSC, particularly with reference to the information on the work done in April. In addition, the management is shocked by the amount of spoilage that occurs in the production process of BSC. As such, the management of the acquiring company is seeking answers in relation to the following questions.
- What were the equivalent units for the month of April?
- What were the costs per equivalent unit for the month of April? The beginning inventory consisted of the following costs: materials, £67,800; and conversion cost, £30,200. The costs added during the month consisted of: materials, £579,000; and conversion cost, £248,000.
- What is the total cost of the 10,000 units that were spoilt and discarded?
(i, ii and iii = 20 marks)
(iv) With reference to additional concern of the management of the acquiring company, discuss five costs that may result from spoilage due to manufacturing? Where possible, illustrate your discussion with the data from the case.
Part B (maximum 750 words, 40% of the coursework marks)
Spoilage in product manufacturing causes the organisation to incur different costs to ensure quality, thereby increasing the usual budgetary provisions for total costs. Critically discuss five quality related costs that may exist to ensure the prevention and detection of spoilage in manufacturing settings or companies. Your discussion should highlight why these costs are associated with spoilage. You should seek to support your discussion with relevant academic literature, and where appropriate, real-life cases or examples.
Important notes and instructions
- The report and essay should not exceed 750 words for each part or 1,500 words in total (excluding title page, references, bibliography and appendices) and must be typed using 12pt font, double spaced. State your word count on the cover sheet.
- All essays must be submitted via FASER by 18 March 2021, 10:00AM. Details are available on Moodle and in your student handbook. More information concerning late submission of coursework or absence from in-class tests, can be found here: http://www2.essex.ac.uk/academic/services/students/crswk_pol.htm
- Note that this coursework invites you to reflect and provide your own opinion/argument on the topic, which means that there is no right or wrong answer. You are advised to refer to materials from the relevant lectures plus recommended readings to get a basic understanding on the topic. You should then carry out additional research by searching for relevant research articles, practitioner literature, published case studies, and news and media reports that can help you develop an opinion/argument on the topic. There is no minimum requirement regarding the number of references that you must use but essays that are well-researched will normally attract a higher mark than those that are not. All sources used must be properly cited in-text and referenced (Harvard referencing style is required).
- The overall quality of your writing may affect your mark. You should therefore aim to present your ideas in an organised manner and demonstrate coherence in your argument. A basic essay structure should normally consist of an introduction, body, and a conclusion.