Unformatted text preview: Hi Everyone, Hopefully by now you are all getting a better "feel" for what this course involves. The one thing that people seem to continue to struggle with, however, is how to answer qualitative or discursive type questions well. I'm going to use the Week 4 tutorial question as an example (LS 7.52 part 4): "Should Travel Smart use a plantwide rate or departmental rates to assign overhead to products? Explain your answer." The first thing you should always do is answer the question! Plantwide, or departmental. State your choice! The next step is to explain why you have made that choice, and it is the explaining part that people don't tend to do so well. Imagine this is a 5 mark question in an exam. I'm going to give some hypothetical answers, and then tell you what the answer is likely to receive, just so you get a better understanding of what we are looking for. 1. "Departmental rates, because it is more accurate." Maximum of 2 out of 5: the student has answered the question, and is correct (departmental rates have added detail and are always going to be more accurate than a single plantwide rate, unless you are a single product firm!). However, I have no idea if the student understands why it is more accurate. Further, the answer has not been tailored to this particular company. 2. "Departmental rates, because it acknowledges that there may be different relationships between overhead usage in different departments, and hence has different bases. This makes departmental rates more accurate compared to a single plant wide rate, which uses one rate to allocate overhead, and ignores differences between departments." 3/5: it is clear the student knows the difference between departmental rates and plantwide rates, and understands why using departmental rates can be better. The student still has not tailored their answer to Travel Smart's situation. 3. "Travel smart should use departmental rates to assign OH to products rather than plant wide rates because TS can improve the accuracy of its product costs by using departmental OH rates. Improved accuracy of its product costs is achieved because the estimated OH cost is divided by the level of the cost driver for each dept e.g., the moulding dept is significantly more machine intensive in comparison to the component and assembly dept, which are more labour intenstive. A plantwide rate limits the cost driver for the entire plant to one, being DLH. In addition, the calculations show that the estimated OH costs differ dramatically when using departmental rates as opposed to a plant wide rate, and the fact that the plantwide OH rate understates the OH cost of producing this product will affect the manager's ability to make reliable decisions." 5/5: This is a fantastic answer that I pretty much copied from one of my students' homework hand in. It answers the question, it demonstrates knowledge of the difference between departmental and plant wide rates, it draws on calculations performed, and it is tailored to Travel Smart's situation. Nicole ...
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- Three '11
- Better, Plantwide, Travel Smart