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ACCY211: Management Accounting

Subject: ACCY211: Management Accounting II
Type of assessment task: Assignment 2
Due date: Week 8 in your enrolled tutorial class.
QUESTION 1 40 marks
Agrava Ltd. provides the costs for its single product using process costing. Direct material is added at the beginning of the production process, and conversion activity occurs uniformly throughout the process.
Percent Complete
Physical units Materials Conversion
50,000 100% 80%
80,000
100,000
30,000
100%
30%
Total Direct Materials Conversion
$490,000 $130,000 $360,000
$990,000 $260,000 $730,000
$1,480,000 $390,000 $1,090,000
Work in process, August 1
Units started during August
Units completed and transferred out during August
Work in process, August 31
Work in process, August 1
Costs incurred during August
Total costs to account for
Required:
Using weighted-average process costing to complete the following requirements:
(a) Determine the equivalent units for August. (10 marks) (b) Compute the costs per equivalent unit. (10 marks)
(c) Compute the cost of goods completed and transferred out during August ( 5 marks) (d) Compute the cost remaining in the work in process inventory on August 31. (10 marks)
(e) Prepare a journal entry to record the transfer of the cost of goods completed and ( 5 marks) transferred out.
QUESTION 2 40 marks ACCY211: Management Accounting
Quintric Ltd. produces two types of fine wool coats that are classified as Executive and Elite coat. Quintric’s currently using a simple job-costing system that has two direct-cost categories (direct materials and direct labour) and a single indirect-cost pool with indirect cost allocation based on machine-hours. For 2016, Quintric’s budget includes estimated manufacturing overhead costs of $200,000 and 8,000 machine hours. Quintric collected the following information for 2016.
Executive coat Elite coat
Number of coats 400 coats 200 coats
Machine hours per coat 10 10
Price per coat $700 $1,200
Cost of materials per coat $200 $ 300
Direct labour costs per coat $180 $ 410
Required:
(a) Using the simple costing system, calculate the product cost per unit for the Executive and Elite coat. (10 marks)
(b) Quintric Ltd. incurred actual total manufacturing costs of $202,000 and 8,000 total (5 marks)
machine hours during the year. Determine the amount of under applied or over applied manufacturing overhead for the period and prepare a journal entry to close any balance in the manufacturing overhead account assuming the under/over applied overhead amount is insignificant.
(c) Quintric is concerned about the accuracy of the costs assigned to the Executive and Elite coat and therefore is planning to implement an activity-based costing (ABC) system. Quintric’s ABC system would have the same direct-cost categories as its simple costing system. However, instead of a single indirect-cost pool there would now be three categories (design, setup and printing machine operations) for assigning indirect costs. To see how activity-based costing would affect the costs of the Executive coat or Elite coat, the following information is collected for an analysis.
Activity Costs Cost Allocation Quantity of Cost Allocation Base
Base
Executive coat Elite coat
Design $80,000 Design hours 800 design hours 3,200 design hours
Setups 45,000 Number of setups 10 setups 40 setups
Machine 75,000 Machine hours 3,000 machine hours 2,000 machine hours operations
$200,000
Using the activity based costing system, calculate the estimated product cost per unit for the Executive and Elite coat. (15 marks)
(d) Compare the costs of the Executive coat and Elite coat under the simple and activity based costing systems. Explain why the simple and activity based costing systems differ in the cost of the Executive and Elite coat. (10 marks)
QUESTION 3 20 marks
Axioma Ltd has the following budgeted sales for the next six-month period:
Month Unit Sales
January 90,000
February 120,000
March 210,000
April 150,000
May 180,000
June 120,000
Axioma Ltd. sells a single product at a price of $50 per unit. There were 24,000 units of finished goods in inventory at the beginning of February. Axioma Ltd.’s policy is to keep an inventory of finished goods that is equal to 20% of the unit sales for the next month.
Five kilograms of materials are required for each unit of finished goods produced. Each kilogram of material costs $8. Inventory levels for materials are equal to 20% of the production needs for the next month. Material inventory at the beginning of February was $1,104,000 (138,000 kilograms).
Required:
(a) Prepare sales budgets in units and dollars for February and March (4 marks)
(b) Prepare production budgets in units for February and March (8 marks)
(c) Prepare direct materials usage budget in kilograms and dollars for February (4 marks)
(d) Prepare direct materials purchases budgets (in kilograms and dollars) for February (4 marks)

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