Provide management accounting information
Question:1 - Preparing a Flexible Budget
You are required to use the following information, for the coming year, to prepare a flexible manufacturing overhead budget showing budgeted overheads at 80%, 100% and 120% of the normal production activity level. The normal production activity level is assumed to be 100,000 units.
Budgeted normal production activity level overheads are as follows:
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$
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Indirect materials
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15,000
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Factory rent
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20,000
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Factory manager's salary
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6,000
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Maintenance of machinery
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5,000
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Electricity
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2,500
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Depreciation - machinery
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3,500
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Workers compensation insurance
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1,500
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Insurance - machinery
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450
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Depreciation - building
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1,250
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Additional information
a) Indirect materials cost varies directly with production activity.
b) Maintenance of machinery is dependent upon hours worked by the machines (all units are uniform in terms of machine hours).
c) Electricity is a constant percentage of the total units produced.
d) Machinery is depreciated on a straight-line basis.
e) Workers compensation insurance is a percentage of direct labor and therefore varies directly with production activity.
Question: 2 - In accounting for and controlling labour costs, what is the function of:
a) The timekeeping department?
a) The payroll department?
Question: 3
The following facts relate to the firm:
* The base wage rate for the workers is $14 per hour
* Employees are entitled to four weeks annual leave
* Sick leave entitlement is five days on full pay
* There are ten public holidays
* Workers compensation insurance is 15% of gross wages
* Payroll tax is 5.25% of gross wages
* The company contributes an amount equal to 9% of gross wages to the staff superannuation fund.
* Employees work a forty-hour week.
a) Calculate the accrual hourly rates to bring to account the cost of all labour-related costs.
b) Calculate an hourly composite charge-out rate that will recover all labour costs for the company
a) Accrual hourly rates for all labour-related costs: Calculation of total annual gross pay:
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Salary $ x 40 x
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29,120
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Calculation of total working hours available:
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Maximum = × 40
Deduct: annual leave 40 × 4
sick leave 1
public holidays
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Actual working hours available
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Calculation of total leave costs per employee:
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280 hours X
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Hourly leave cost = 1,800 = $
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Calculation of payroll tax hourly per employee:
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5.25% × $
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$
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Hourly payroll tax cost = $ ÷ 1,800
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$
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Calculation of workers compensation hourly cost per employee:
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15% × $
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$
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Hourly cost = $ ÷ 1800
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$
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Calculation of company superannuation contributions per employee
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9% × $
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$
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Hourly cost = $ ÷ 1,800
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$
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b) The composite chargeout rate is the total hourly rate that must be charged by the company to recover an employee's pay plus all related costs. In this case, using the figures calculated above, it is as follows:
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Base hourly rate of pay
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$
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Base hourly rate of pay
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$
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Add labour-related costs:
leave costs
workers compensation
payroll tax
superannuation
= Company's contribution --------------------
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$
$
$
$
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$
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Question- 4
a) State the assumptions and limitations of cost-volume-profit analysis.
b) Prepare aof a cost-volume-profit graph by using the following details of costs and revenue:
* selling price $1.25 per unit
* variable costs $0.75 per unit
* total fixed costs $30,000 per annum.
The relevant range of activity is between 40,000 and 100,000 units per annum.
At the point where the sales revenue line intersects the total cost line, the firm neither makes a profit nor a loss - it breaks even. In the graph, the break-even point should be situated at:
$75,000 sales revenue (Y axis)
$60,000 units sales volume (X axis).
In the graph show, the break-even point, the loss potential and the profit potential. Please present your graph with appropriate HEADINGs and indicate what each axis represents.
Question-5:
As the accountant of Jones Ltd, you are required to prepare a performance report for Sales Department operating expenses for the month of March, current year from the following information
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March
$
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Nine months to date $
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Actual expenses
Sales staff salaries
Rates and taxes
Lighting and heating
Advertising and promotion
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120,000
5,000
3,000
55,000
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1,100,000
48,000
28,000
440,000
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Budgeted expenses
Sales staff salaries
Rates and taxes
Lighting and heating
Advertising and promotion
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125,000
4,500
5,000
60,000
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1,125,000
42,000
40,000
540,000
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