Handy Headphones Handy Headphones is an Irish company that is manufacturing lightweight, flexible, Bluetoothenabled and waterproof headphones. It is proving to be very popular among people wanting to listen to music in the shower or while swimming on holiday or at community leisure centres’lane swimming sessions (mainly because of their Gh¢159 price tag). Before the headphones can be delivered to the warehouse for distribution, they pass through a fivestage production process. The headphones start in the moulding department and work their way through the wiring department, IT department, polishing department and, finally, the packaging department. As well as these five production departments, there are two other non-production departments within this factory. These two service departments are the canteen and the maintenance department. All employees who work in this factory have the benefit of eating at the subsidized canteen. The maintenance department is responsible for the general maintenance and repairing of the machinery within the whole factory. Handy currently make 2,500 headphones. The forecast figures for the Handy Headphones for 2020 are as follows: Factory rent Gh¢140,000 Re-decorating of moulding department Gh¢20,000 Electricity cost Gh¢30,000 Depreciation of machinery Gh¢5,000 Direct materials Gh¢24,000 Direct labour – skilled workers Gh¢20,000 Direct labour – unskilled workers Gh¢26,000 Direct expenses Gh¢10,000 Training for IT department staff Gh¢6,500 Packaging department floor resurfacing Gh¢3,000 New machinery for maintenance department Gh¢23,500 Canteen redesign Gh¢55,000 MouldingWiringITPolishingPackagingMaintenanceCanteenTotal Area (m²) 1,000 800 550 650 700 60 70 3,830 Machine value (Gh¢)20,000 4,000 55,000 38,000 23,000 — 20,000 160,000 Number of staff 10 40 12 6 12 20 — 100 Practical task Use a spreadsheet to complete the following task: 1 You are a newly appointed cost accountant for Handy Headphones and you are curious to know what the total cost per headphone is working out at. You need to analyse the overhead costs, how they are allocated, apportioned and reapportioned as there may be some changes made by the management accountant based on your findings. The management accountant would also like to know how all these costs would be shown on the standard cost card. Research and presentation Using PowerPoint, present the outcome and show how the costs change from task 1, if the management accountant goes ahead with his plans to do the following: Plan A – Take two members of staff from the maintenance department and transfer them to the IT department. There are two members of staff on long-term sick leave and this is affecting the production and causing a bottleneck in the IT department. Plan B – Employ six new members of staff, who will receive accelerated training and start working in the IT department as soon as training is completed. This will increase training costs by Gh¢3,000 and skilled direct labour by Gh¢10,000. The number of headphones produced would then increase by an extra 80 units
