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





Moulding
Wiring
IT
Polishing
Packaging
Maintenance
Canteen
Total
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.