Managerial Accounting – ACC00714 (S2, 2017)
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Assignment 1 (25 Marks)
QUSTION 1 (3 MARKS)
What factors should be considered in selecting a base to be used in calculating the predetermined factory overhead rate? What would happen to factory overhead rates based on direct labour hours when automated equipment is used intensively? Discuss and support your discussion by examples. You must disclose the source of your information by appropriate referencing.
QUSTION 2 (4 MARKS)
Why is cost accumulation easier under a process costing system than under a job order costing system? Discuss and support your discussion by real world examples. You must disclose the source of your information by appropriate referencing.
QUESTION 3 (6 MARKS)
Selected account balances for the year ended May 31, 20×1 are provided below for Super Dmart:
Raw materials inventory, June 1, 20×0 $40,000
Raw materials inventory, May 31, 20×1 30,000
Purchases of raw materials 150,000
Insurance, factory 12,000
Work in process, June 1, 20×0 ?
Utilities, factory 25,000
Indirect labour 60,000
Finished goods inventory, June 1, 20×0 85,000
Direct labour ?
Indirect materials 30,000
Work in process, May 31, 20×1 48,000
Rent, factory building 120,000
Finished goods inventory, May 31, 20×1 ?
Maintenance, factory 16,000
The goods available for sale for the year totaled $635,000, the total manufacturing costs were $563,000, and the cost of goods sold totaled $560,000 for the year.
- Prepare a schedule of cost of goods manufactured in the form illustrated in Exhibit 2-8 (page 43) in the textbook and a schedule of cost goods sold.
- Assume that the dollar amounts given above are for the equivalent of 40,000 units produced during the year. Calculate the unit cost for direct materials. Calculate the unit cost for rent on the factory building.
- Assume in 20×2 that the company produces 50,000 units. What would be the per unit and total cost that you would expect to be incurred for direct materials? For rent on the factory building?
- As the manager in charge of production costs, explain to the president the reason for any difference in unit costs between (2) and (3) above.
QUESTION 4 (6 MARKS)
The One Stop Print Shop does a wide variety of printing work on a custom basis. For this reason, the company uses a job order cost system. During the month of May, six jobs were worked on. A summary of the job cost sheet on these jobs is given below:
Job no Direct materials Direct labour Factory OH applied Total Cost of job
216 $410 $360 $288 $1,058
217 850 790 632 2,272
218 110 85 68 263
219 1,500 1,140 912 3,552
220 950 850 680 2,480
221 270 115 92 477 (ending work in process)
The One Stop Print Shop has used the same overhead rate on all jobs. Job 216 was the only job in process at the beginning of the month. At that time it had incurred direct labor costs of $150 and total cost of $570.
- What is the apparent predetermined overhead rate being applied by the One Stop Print Shop?
- Assume that during May factory overhead was overapplied by $600. What was the actual factory overhead cost incurred during the month?
- What was the total amount of direct materials placed into production during May?
- How much direct labour cost was incurred during May?
- What was the cost of goods manufactured for May?
- The beginning finished goods inventory was $2,550. What was the cost of goods sold for the month if the ending finished goods inventory was 3,550?
Question 5 (6 marks)
Hard Wood P/L manufactures furniture, including tables. Selected costs are given below:
- The tables are made of wood that costs $100 per table.
- The tables are assembled by workers, at a wage cost of $40 per table.
- Workers assembling the tables are supervised by a factory supervisor who is paid $38,000 per year.
- Electrical costs are $2 per machine-hour. Four machine-hours are required to produce a table.
- The depreciation on the machines used to make the tables totals $10,000 per year. The machines have no resale value and do no wear out through use.
- The salary of the president of the company is $100,000 per year.
- The company spends $250,000 per year to advertise its products.
- Salespersons are paid a commission of $30 for each table sold.
- Instead of producing the tables, the company could rent its factory space to $50,000 per year
- The salary of the factory accountant is $60,000 per year.
Classify these costs according to the various cost terms used such as: Variable cost, fixed cost, period cost, product cost, direct material cost, direct labour cost, factory overhead cost, and sunk cost.