Destin Brass Products Co. Case Assessment Questions PART 2 Section 3: Qualitative Analysis (21 marks) 1. [State whether each of the following statements is true or false (Questions 1-3).] Traditional costing always results in cost distortion when there is product diversity. 2. Traditional costing always results in cost distortion when there is process complexity. 3. ABC results in more costs being traced rather than being allocated. (Questions 1-3: true or false, 1 mark each, 3 marks) 4. Refer to Exhibit 2, what is the cost / activity level of ‘depreciation’ in the cost hierarchy? (multiple choice, 1 mark) (a) Unit-level (b) Batch-level (c) Product-sustaining (d) Faculty-sustaining 5. Refer to Exhibit 2, what is the cost / activity level of ‘set-up labor’ in the cost hierarchy? (multiple choice, 1 mark) (a) Unit-level (b) Batch-level (c) Product-sustaining (d) Faculty-sustaining 6. [Why is DBP’s original choice of a costing system that allocated overhead costs based on DL cost an issue that led to the identified problem? Consider this and answer Questions 6-8:] Why is DBP’s original choice of the costing system inappropriate/inaccurate? Note: do not discuss beyond costing, any discussions on pricing and management are to be presented in Q8 (short answer, < 180 words, 8 marks) 7. Why is having the inappropriate/inaccurate costing system a significant issue for DBP? (short answer, < 100 words; 3 marks) 8. How did the issue of costing lead to the observed problem? You should mention all three issues in this discussion, i.e. you should link the issue in costing to the problem through the discussion on the other two issues. (short answer, < 150 words; 5 marks) Section 4: Quantitative Analysis (15 marks) 9. Compute the unit OH costs under ABC. Structure your calculation using a table. Construct your table in a word document first before copying and pasting it into the answer field in the Blackboard test. Round to the second decimal place. To facilitate your response to Question 10 below, it is recommended that you convert all costs to unit costs. (calculation: 10 marks) 10. With reference to your calculations in Question 9., explain the reasons why there is a significant discrepancy between flow controllers’ unit cost under the original costing system and that under ABC. (short answer, <100 words, 5 marks) Section 5: Recommendations (17 marks) 11. Provide two actionable recommendations to improve DBP’s customer profitability. Use one sentence for each recommendation. (short answer: 4 marks) 12. Provide two actionable recommendations to improve the profitability of flow controllers. Use one sentence for each recommendation. (short answer: 4 marks) 13. DBP did not consider cost behaviour when designing their costing system, provide instructions on what DBP can do to further refine its costing system by addressing different cost behaviours. You should consider capacity concepts in formulating your responses response. (short answer: 4 marks) 14. Are all manufacturing costs identified by DBP related to the function of production in the value chain? If not, identify the related value chain function (s) and provide the recommendation(s) to update the ABC system for external reporting purposes. (short answer: 5 marks)