Semester 2, 2020
CEB Corporation is an Australian owned printed circuit board manufacturer with customers
worldwide including Australia, Asia, USA and Europe. It has grown substantially over the
years since its establishment in 1992 and in 2001 went public to acquire additional capital for
future growth. Being a public company, CEB is under relatively high performance pressure
from its investors who closely monitor the profit margins and cash flows. The profits have been
falling over the last three years and its profitability is below the industry average. This has had
a negative impact on the company’s share price. In addition, the COVID 19 crisis set CEB’s
targeted profit under a serious threat.
Although CEB manufactures several different types of printed-circuit boards, two of the boards
account for the majority of the company’s sales – a TV circuit board and a PC circuit board.
The first of these boards, a TV board, has been a standard in the industry for several years. The
market for this type of board is competitive and, therefore, price sensitive. The second highvolume product is a PC board of which the manufacturing process is substantially different and
more complex relative to that of the TV board. Because the PC board incorporates the latest
technology, it can be sold at a premium price. In the recent years, PC boards have become
number one product for CEB.
The original plan for 2020 was to sell 80,000 of the TV boards at a price of $200 per unit and
130,000 PC boards at $350 per unit. However, CEB’s management group is meeting to discuss
how to react to the COVID 19 crisis on the top of the already falling profits, and how to spend
the sales and promotion budget to protect if not increase the company’s profit during the crisis.
They are considering several options and discussing which product mix would result in the
highest profits. The sales manager Jason Jackman believes that the market share for the TV
board could be expanded by concentrating CEB’s promotional efforts in this area. Moreover,
due to lockdown the sales of TVs are increasing worldwide, generating more demand for TV
boards. In response to this suggestion, the production manager Stacey Hu said,
“Why don’t we go after a bigger market for the PC board? The cost sheets that I
reviewed show that the contribution from the PC board is one and a half times the
contribution from the TV board. I know we get a premium price for the PC board.
Focusing on the PC boards and changing the product mix should help overall
CEB currently uses a standard cost system, and the following data apply to the TV and PC
TV boards PC boards
Direct materials $100 $160
Direct labour (hours) 1.7 4.2
Machine time (hours) 0.6 1.9
Direct labour cost is $16 per hour. Variable manufacturing support costs are applied on the
basis of direct labour hours. This year’s variable manufacturing support costs are budgeted at
$2,240,000, and direct labour hours are estimated at 448,000. Other manufacturing support is
applied at $12 per machine hour. CEB applies a materials handling charge (in other words,
materials support costs) of 12% of direct materials cost; this materials handling charge is not
included in variable manufacturing support costs.
Ed Welch, CEB’s management accountant, believes that before the management group
proceeds with the discussion about allocating sales and promotional dollars to individual
products, it may be worthwhile to look at these products on the basis of the activities involved
in their production. He noticed that the company has been recently selling more of the highend PC boards than their competitors, yet the profits were still falling.
“Using this information,” Welch explained, “we can calculate an activity-based cost
for each TV board and each PC board and then compare it to the standard cost we
have been using. The costs that remain the same for both cost methods are the costs
of direct materials and direct labour. The cost drivers will replace all indirect costs.”
Welch has prepared the following schedules for the management group:
Materials support costs
Procurement $600,000 Number of parts 3,000,000
Production scheduling $330,000 Number of boards 165,000
Packaging/shipping $660,000 Number of boards 165,000
Total costs $1,590,000
Variable support costs
Machine setup $669,000 Number of setups 418,125
Hazardous waste disposal $48,000 Kilogram of waste 8,000
Quality control $560,000 Number of inspections 240,000
General supplies $66,000 Number of boards 165,000
Total costs $1,343,000
Other manufacturing support costs
Machine insertion $1,800,000 Number of machine insertions 4,500,000
Manual insertion $5,000,000 Number of manual insertions 2,000,000
Wave soldering $198,000 Number of boards 165,000
TV boards PC boards
Parts 15 47
Machine insertions 10 37
Manual insertions 1 19
Machine setups 2 5
Kilogram of waste 0.04 0.70
Inspections 1 3
� THE END OF CASE STUDY �
Requirements: Your case study write-up should include the first five sections listed
In this section you are to provide a brief overview of the important background information
relating to the company. This information presented in the Background section should be
relevant to your discussion of the company’s problem and issues that you are to identify in
Section 2. Ideally, you should briefly describe the company’s core business, products, costing
systems, and/or other significant aspects that you see as relevant in this case.
2. Problem & Issues
In this section you are to identify and briefly discuss:
a. The problem the company is facing at the time of the case,
b. The issues that may have led to the problem the company is facing,
c. The rationale that links the problem and issues you have identified - explain how the issues
you have identified lead to the company’s problem?
Note: A problem is something that the organization must overcome to be sustainable/profitable
and is reasonably well understood – even if its solution is not.
An issue is more specific to the company’s situation and has led to the problem. It also requires
attention but needs to be investigated and better understood (which you will attempt to do in
Sections 3 & 4) before specific solutions are considered.
3. Theoretical Analysis
This section requires your analysis of the qualitative aspect of the underlying cause(s) of the
problems and issues that you have identified in Section 2. Your analysis should be supported
by the relevant theory and concepts covered in ACCT2102. Identify at least three advantages
that are associated with activity-based costing over the standard costing system.
4. Calculations & Interpretations – Quantitative Analysis
This section requires you to undertake quantitative analysis on the case. You are to perform
calculations (may be presented in the Appendix) that are relevant to the problem and issues
that you identified in Section 2. In particular:
a) On the basis of standard costs, calculate the total contribution margin and a contribution
margin per product expected in 2020 for CEB Corporation’s products: the TV board
and the PC board.
b) On the basis of activity-based costs, calculate the total contribution margin and the
contribution margin per unit expected for 2020 for CEB Corporation’s two products.
c) How would the change of the product mix (if supported by marketing and promotion
efforts and assuming that they would be successful) change total profitability of the
In addition, interpret the results of your analysis. Your interpretation of your calculations
should further the discussion on the problem and issue/s and should be supported by the
relevant theory and concepts covered in ACCT2102.
In this final section, you are to present your recommendations to the company’s management
to address the underlying causes of the problem and issues the company is facing. Your
recommendations should be informed by your analysis in Sections 3 & 4. Explain how the
comparison of the results of the two costing methods may impact the decisions made by CEB
Corporation’s management group.
6. Appendix (optional)
You may present your calculations in the Appendix and refer to them in the body of your case.
You are allowed two additional pages for the Appendix. Any material over this limit will not
be read or marked. The interpretation of your calculations is to be presented in Section 4.
Interpretation presented in the Appendix will not be read or marked.
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Study Marking Rubric”.
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outlined above using section headings.
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margins). This word limit does not include any tables, graphs etc., that support your
analysis and recommendations, all tables, graphs etc are to be presented in the Appendix
which is limited to 2 pages only. Any material in addition to these requirements will not
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a single Word document of their case study with their name and student number in the top
right hand header of each page.
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