ACCTBA3 GROUP BUSINESS CASE (5% of class standing grade)

1st Term, Academic Year 2015-2016

Crimson Fate Manufacturing Corporation
The 21st century is characterized by the constant leaps in technology and most of technological advances
experienced in this era are focused on the communications industry. From smartphones to email to chat
apps, people are constantly connected to one another using all the available medium in world. Talking
with one another from one country to another has never been this efficient and effective. These
changes opened a very big market that can be tapped by any company willing to take the various risks in
taking on early movers such as Apple, Google and the like. One of these companies is Crimson Fate
Manufacturing Corporation or CF.
The Company started in 2020 with its first line of smartphones. In order to promote product retention
among customers, they named their three products, I, LOVE and THIS. CF would like to use the standard
costing system with the following standard cost card as basis for unit product costs:
I
LOVE
Standard quantity of materials 10 grams 15 grams
Standard price of materials
Php 10
Php 10
Standard hour of labor
1.5 hours 2 hours
Standard rate of labor
Php 150 Php 150

THIS
20 grams
Php 10
2.5 hours
Php 150

Variable overhead was applied to production based on actual materials used. Expected variable
overhead for the first year of operations amounted to Php 1,000,000 while expected direct materials to
be used totaled Php 10,000,000.
At the end of the first year of operations, the following actual data was gathered by the company
executives for analysis:

Units sold/produced
Sales
Cost of goods sold
Gross Profit
General and Administrative Expenses
Selling Expenses
Net Income/(loss)

I
5,000.00
10,000,000.00
(5,000,000.00)
5,000,000.00
(2,000,000.00)
(1,750,000.00)
1,250,000.00

LOVE
3,000.00
12,000,000.00
(3,000,000.00)
9,000,000.00
(1,500,000.00)
(1,250,000.00)
6,250,000.00

THIS
1,000.00
5,000,000.00
(2,000,000.00)
3,000,000.00
(3,000,000.00)
(750,000.00)
(750,000.00)

Out of the costs incurred by the company, 40% of the costs of goods sold was variable, 55% of the
general and administrative expenses was fixed and the selling expense was determined to be a mixed
cost. The selling expense was composed of commissions which was variable and advertising expense
which was fixed. Commission rate for all products were equal and so were advertising expenses.
Actual variable costs of manufacturing each product are as follows:
Page 1 of 5

Actual direct materials costs

Actual direct materials quantity purchased
Actual direct materials quantity used
Actual direct labor costs
Actual direct labor hours
Actual variable overhead costs
Total Actual Costs

I
400,000.00
50,000.00
50,000.00
1,100,000.00
8,000.00
500,000.00
2,000,000.00

LOVE
450,000.00
50,000.00
50,000.00
705,000.00
6,000.00
45,000.00
1,200,000.00

THIS
200,000.00
25,000.00
25,000.00
350,000.00
2,500.00
250,000.00
800,000.00

Due to the loss of product THIS, the company is evaluating whether to drop or retain this segment.
According the Companys engineers, all traceable fixed costs (50% of all fixed costs) related to the
segment can be eliminated should the company decide to drop it.
INSTRUCTIONS:
1. This is a group business case consisting of a maximum of 4 members in a group.
2. From the information gathered in the case, the group must then submit a written report forming
analysis, conclusions and recommendations on the case. Incorporate the answers to the following
guide questions:
1.
a.
b.
c.
d.
e.
f.

Compute for the following variances:

Direct materials price variance for product I
Direct materials quantity variance for product LOVE
Labor rate variance for product THIS
Labor efficiency variance I
Variable overhead rate variance LOVE
Variable overhead efficiency variance THIS

2. Identify the people responsible for the unfavorable variances.

3. Compute for the breakeven point of each product.
4. Should the company drop or retain product THIS? Provide solutions.

5. If CF has average operating assets of Php 2,500,000 and Php 15,625,000 for products I and LOVE
respectively, which manager is doing a better job based on ROI? Provide solutions.

Page 2 of 5

3. Outline:
I. INTRODUCTION
II. DISCUSSION: (This is the bulk of the paper. Be sure to include answers to guide questions and
support your answers with computations and logical ANALYSIS.)
III.CONCLUSION/RECOMMENDATION
IV. REFERENCES: (if any)
4. Format of Written Report:
a) Paper size: 8.5 x 11
b) Margin: 1 on all sides
c) Font and Font size: Tahoma 11
d) Paragraph alignment: Justified
e) Paragraph spacing: 1.5
f) Length of written report: 5 to 10 pages, EXCLUDING cover page and attachments
g) Attachments: Include the copy of the business case and other attachments at the end of your
report.
h) Insert the entire report in a short sliding folder.
i) The cover page should be as follows:
CRIMSON FATE MANUFACTURING CORPORATION

A Group Business Case

Presented to the
Accountancy Department
De La Salle University

In partial fulfillment
Of the course requirements
In ACCTBA3

SUBMITTED TO:
Gonzales, Nino Jose B.

SUBMITTED BY:
Surname, Given Name, M.I.*
Surname, Given Name, M.I.
Surname, Given Name, M.I.
Surname, Given Name, M.I.

Date
Page 3 of 5

*NOTE: The names should be arranged alphabetically.

5. Deadline of Written Report:

DECEMBER 2, 2015, 12 NOON

6. Rubric/Criteria for Grading:

a) To compute for the 5% team grade, please refer to next page for the rubric.
b) To compute for the individual written group business case analysis grade, the average peer
evaluation grade (refer to Item#7) will be multiplied to the team grade. A sample computation
follows:
Application of ACCTBA3-related tools 100% * weight of 50% = 50.00%
Depth of insights
90% * weight of 30% = 27.00%
Quality in writing paper
90% * weight of 20% = 18.00%
Team grade
= 95.00%
Multiplied by: Average peer evaluation grade
(Assume 2 exemplary, 1 satisfactory or 290%/3)
96.67%
INDIVIDUAL GRADE
91.83%
Multiplied by: Business case grade
5%
INDIVIDUAL BUSINESS CASE GRADE
4.59%
CRITERIA

Application
of
ACCTBA3related
tools and
skills
[50%]
Depth of
insights
and
discussions
[30%]

Quality in
writing the
paper
(format,
grammar)
[20%]

EXEMPLARY
100%
The group applies
at least two
ACCTBA3-related
tools and skills
appropriately and
includes only
realistic
assumptions in
the paper.
The group relates
properly the case
to the learnings
in ACCTBA3
course and shows
comprehensive
knowledge on
ACCTBA3 topics.

SATISFACTORY
90%
The group applies
two ACCTBA3 related tools and
skills
appropriately and
includes a few
unrealistic
assumptions in
the paper.
The group relates
properly the case
to the learnings
in ACCTBA3
course and shows
some knowledge
on ACCTBA3
topics.

The group follows

the format and
has not one
spelling/
grammatical error
in the paper.

The group follows

the format and
uses only the
English language
in the paper
which is at an
acceptable level.

DEVELOPING
80%
The group applies
only one
ACCTBA3 -related
tool and skill
appropriately and
includes some
unrealistic
assumptions in
the paper.
The group relates
somewhat
improperly the
case to the
learnings in
ACCTBA3 course
and shows little
knowledge on
ACCTBA3 topics.
The group follows
the format but
uses a mixture of
Filipino and
English language
in the paper
and/or uses the
English language
somewhat
inappropriately.

Page 4 of 5

BEGINNING
70%
The group fails to
apply at least one
ACCTBA3 -related
tool and skill
appropriately and
includes many
unrealistic
assumptions in
the paper.
The group fails to
relate properly
the case to the
learnings in
ACCTBA3 course
and shows little
to no knowledge
on ACCTBA3
topics.
The group does
not follow format
and uses a
mixture of Filipino
and English
language in the
paper and/or
uses the English
language
inappropriately.

7. Peer Evaluation
a) On a one-half sheet of bond paper, cross-wise, write the names of all your group mates (in
alphabetical order).
b) Give the corresponding percentage (70, 80, 90, 100) for each of your group mate. Refer to table
below. Be fair when evaluating.
c) Print your name then sign as evaluator.
d) Include this as an attachment at the end of the paper.
CRITERIA

Contribution
to teams
final output
[100%]

EXEMPLARY
100%
The student
contributes to
the teams final
output more
than what is
expected.

SATISFACTORY
90%
The student
contributes to the
teams final
output as
expected.

DEVELOPING
80%
The student
contributes
somewhat to the
teams final
output.

Page 5 of 5

BEGINNING
70%
The student does
not contribute to
the teams final
output.