Management Accounting Assignment
Question 1: a. How do fixed costs in a business create a problem for job costing?
b. Provide examples of wages that might be deemed to be (1) a direct cost and (2) an indirect costs.
Question 2: Estimated or budgeted cost and operating data for three companies for 2013 are given below:
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Company X
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Company Y
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Company Z
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Units to be produced
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10,000
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8,000
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12,000
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Machine- hours
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50,000
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10,000
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6,000
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Direct labour- hours
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12,000
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16,000
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36,000
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Direct labour cost
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$48,000
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$64,000
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$150,000
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Factory overhead cost
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150,000
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40,000
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60,000
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Predetermined overhead rates are calculated on the following bases in the three companies:
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Overhead rate based on
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Company X
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Machine-hours
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Company Y
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Direct labour-hours
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Company Z
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Direct labour cost
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Required:
a. Calculate the predetermined overhead rate to be used in each company during 2013.
b. Assume that three jobs are worked on during 2013 in company X. Machine-hours recorded by jobs are: job 23, 21,000 hours; job 29, 16,000 hours; and job 31, 11,000 hours. How much overhead will the company apply to work in process? If actual overhead costs total $149,000 for 2012, will overhead be over- or under-applied? By how much?
c. Of what value is the schedule of cost of goods manufactured and how does it tie into the profit and loss statement. Discuss.
Question 3: Tony's Textile Company sells shirts for men and boys. The average selling price and variable cost for each product are as follows:
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Men's
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Boy's
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Selling Price
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$28.80
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Selling Price
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$24.00
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Variable Cost
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$20.40
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Variable Cost
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$16.80
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Fixed costs are $38,400.
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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?
c. What is meant by a product's contribution margin ratio and how is this ratio useful in the planning of business operations?
Question 4: Byron Sports is a manufacturer of sportswear. It produces all of its products in one department using a process costing system.
The information for the current month is as follows:
Beginning work in process (30% complete as to conversion cost) - 12,000 units
Units started - 90,000 units
Units completed and transferred out - ?
Ending work in process (70% complete as to conversion) - 8,000 units
Costs:
Beginning work-in-process direct materials - $28,800
Beginning work-in-process conversion - $5,040
Direct materials added during month - $216,000
Conversion costs incurred during the month - $139,200
Direct materials are added at the beginning of the process. Conversion costs are incurred uniformly throughout the production process. Costing is handled on a FIFO basis.
Required:
a. Prepare a production cost worksheet using 5 steps approach.
b. Under what conditions would a process costing system be more appropriate than a job order costing system? Explain.