Assignment

Question 1

How can the need for a more refined costing system be identified? Your discussion should be supported by readings and real world examples.

Question 2

Bob's Textile Company sells shirts for men and boys. The average selling price and variable cost for each product are as follows:

                        Men's                                         Boys'
Selling Price        $28.80              Selling Price        $24.00
Variable Cost      $20.40              Variable Cost      $16.80

Fixed costs are $38,400.

Required:

a. What is the breakeven point in units for each type of shirt, assuming the sales mix is 2:1 in favor of men's shirts?

b. What is the operating income, assuming the sales mix is 2:1 in favor of men's shirts, and sales total 9,000 shirts?

Question 3

Hammond and Jarrett provide tax consulting for estates and trusts. Their job-costing system has a single direct-cost category (professional labor) and a single indirect-cost pool (research support). The indirect-cost pool contains all the costs except direct personnel costs. All budgeted indirect costs are allocated to individual jobs using actual professional labor-hours.

Required:

a) Discuss the reasons a consulting firm might use a normal costing system rather than an actual costing system. You should support your discussion by readings and real world examples.

b) What might be some reasons for the firm to change from a one-pool to a multiple-pool allocation concept? You should support your discussion by readings and real world examples.

Question 4

A local engineering firm is bidding on a design project for a new client. The total budgeted direct-labor costs for the firm are $800,000. The total budgeted indirect costs are $1,200,000. It is estimated that there are 16,000 billable hours in total.

Required:

a. What is the budgeted direct-labor cost rate?
b. What is the budgeted indirect-cost rate assuming direct-labor cost is the allocation base?
c. What should be the engineering firm bid on the project if the direct labor hours are estimated at 500 hours?

Question 5

Ballina Fishy Fillet P/L obtains fish and then processes them into frozen fillets and then prepares the frozen fish fillets for distribution to its retail sales department. Direct materials are added at the initiation of the cycle. Conversion costs are incurred evenly throughout the production cycle. Before inspection, some fillets are spoiled due to nondetectible defects. Inspection occurs when units are 50% converted. Spoiled fillets generally constitute 3.5% of the good fillets. Data for April 2008 are as follows:

Required:

Prepare a production cost worksheet if spoilage is recognized and the weighted-average method is used.