Assessments

Assessment Task 1

  1. a) Which cost driver probably would be most suitable for allocating overhead costs?

Machine hours

  1. Using machine hours as the cost driver, what overhead recovery rate will be used for the year

 

  1. Product A requires ½ hour of machine time and Product B requires 3 hours. What are their overhead costs per unit?
  1. Factory overhead application rate

 

 

  1. Overhead applied in the period

 

  1. Under and over-applied overhead for the period

 

  1. Flexible Budget formula
  2. Spending Variance

This is the difference between the Actual Factory Overhead (AFOH) and the Budgeted Allowance based on Standard Hour (BAAH)

 

  1. Capacity Variance

This is the difference between Budgeted Allowance based on Standard Hour (BAAH) and Actual Hour based on Standard rate (AH×SR)

 

Assignment Task 2

  • How many units must be produced and sold to break-even?

 

  • Calculate the margin of safety as a percentage.

 

  • Determine the expected profit or loss if selling price decreases by 10% and all other cost and revenue relationships remain the same.
  • Determine the expected profit or loss if sales volume decreases by 10% and all other cost and revenue relationships remain the same.
  • Fixed costs increase by 70% and all other cost and revenue relationships remain the same, determine the expected net profit or loss.

 

SENSITIVITY ANANLYSIS
Basic Case Price Decrease 10% Sales Volume Decrease 10% Fixed Cost Increase 10%
Variable Values
Sales Price Per Unit $ 10.00 $ 9.00 $ 10.00 $ 10.00
Variable Cost per Unit $ 6.00 $ 6.00 $ 6.00 $ 6.00
Fixed Cost $ 1,000,000.00 $ 1,000,000.00 $ 1,000,000.00 $ 1,100,000.00
Sales Volume $ 312,500.00 $ 312,500.00 $ 281,250.00 $ 312,500.00
CVP Model Results
Sales $ 3,125,000.00 $ 2,812,500.00 $ 2,812,500.00 $ 3,125,000.00
Variable Costs $ 1,875,000.00 $ 1,875,000.00 $ 1,687,500.00 $ 1,875,000.00
Contribution Margin $ 1,250,000.00 $ 937,500.00 $ 1,125,000.00 $ 1,250,000.00
Fixed Costs $ 1,000,000.00 $ 1,000,000.00 $ 1,000,000.00 $ 1,100,000.00
Operating Profit $ 250,000.00 ($ 62,500.00) $ 125,000.00 $ 150,000.00
Dollar Change in Profit ($ 312,500.00) ($ 125,000.00) ($ 100,000.00)
% Change in Profit   ($ 1.25) ($ 0.50) ($ 0.40)

 

 

Assessment Task 3

  1. Show calculations for the cost of direct materials requisitioned using the stipulated cost assignment methods. You are not required to prepare stock cards but may do so if you wish. A total stocktake adjustment will need to be recorded later in the general ledger account only-information is not supplied as to the stocktake balance for each of the two direct material items.

Table 1: First in First Out Inventory management for timber

Timber Inventory Management
Date Purchases Consumption Balance
Units Units Cost Total Units Unit Cost Total Units Unit Cost Total
May     31             300 $ 15.00 $ 4,500.00
June       3 250 $ 16.00 $ 4,000.00       300 $ 15.00 $ 4,500.00
              250 $ 16.00 $ 4,000.00
4       20 $ 15.00 $ 300.00 280 $ 15.00 $ 4,200.00
              250 $ 16.00 $ 4,000.00
10       85 $ 15.00 $ 1,275.00 195 $ 15.00 $ 2,925.00
              250 $ 16.00 $ 4,000.00
14       150 $ 15.00 $ 2,250.00 45 $ 15.00 $ 675.00
              250 $ 16.00 $ 4,000.00
17       45 $ 15.00 $ 675.00 185 $ 16.00 $ 2,960.00
        65 $ 16.00 $ 1,040.00      
23 300 $ 16.50 $ 4,950.00       185 $ 16.00 $ 2,960.00
              300 $ 16.50 $ 4,950.00
24       180 $ 16.00 $ 2,880.00 5 $ 16.00 $ 80.00
              300 $ 16.50 $ 4,950.00
26       5 $ 16.00 $ 80.00 210 $ 16.50 $ 3,465.00
        90 $ 16.50 $ 1,485.00      

 

Table 2: Weighted Average Price Inventory management for Steel

Steel Inventory Management
Date Purchases Consumption Balance
Units Units Cost Total Units Unit Cost Total Units Unit Cost Total
May   31             200 $ 36.00 $ 7,200.00
June     4       40 $ 36.00 $ 1,440.00 160 $ 36.00 $ 5,760.00
10       70 $ 36.00 $ 2,520.00 90 $ 36.00 $ 3,240.00
12 210 $ 38.00 $ 7,980.00       300 $ 37.40 $ 11,220.00
14       100 $ 37.40 $ 3,740.00 200 $ 37.40 $ 7,480.00
17       80 $ 37.40 $ 2,992.00 120 $ 37.40 $ 4,488.00
20 200 $ 39.00 $ 7,800.00       320 $ 38.40 $ 12,288.00
24       120 $ 38.40 $ 4,608.00 200 $ 38.40 $ 7,680.00
26       50 $ 38.40 $ 1,920.00 150 $ 38.40 $ 5,760.00

 

Table 3: Timber Requisition Form

Date Job No Quantity Cost per unit Total Cost
04 June 2013 420 20 $ 15.00 $ 300.00
10 June 2013 421 85 $ 15.00 $ 1,275.00
14 June 2013 422 150 $ 15.00 $ 2,250.00
17 June 2013 423 110 45 @ $ 15.00, $ 65 @ $16.00 $ 1,715.00
24 June 2013 424 180 $ 16.00 $ 2,880.00
26 June 2013 425 95 5 @ $ 16.00, 90 @ $ 16.50 $ 1,565.00
Total   640   $ 9,985.00

 

 

Table 4: Steel Requisition Form

Steel Requisition Form
Date Job No Quantity Cost per unit Total Cost
04 June 2013 420 40 $ 36.00 $ 1,440.00
10 June 2013 421 70 $ 36.00 $ 2,520.00
14 June 2013 422 100 $ 37.40 $ 3,740.00
17 June 2013 423 80 $ 37.40 $ 2,992.00
24 June 2013 424 120 $ 38.40 $ 4,608.00
26 June 2013 425 50 $ 38.40 $ 1,920.00
Total   460   $ 17,220.00

 

 

  1. Prepare an analysis of factory wages and salaries showing direct and indirect allocations for time worked in June.
Category Regular Rate Number of hours Overtime Rate Number of hours Number of Employees Total Labour Cost
Direct Labour $ 22.00 390 $ 33.00 20 3 $ 27,720.00
General Labour $ 22.00 152 _ _ 1 $ 3,344.00
Non-productive time $ 22.00 500     4 $ 44,000.00
Supervisor (Salary) _ _ _ _ _ $ 4,616.00
Total           $ 79,680.00

 

  1. Calculate the factory overhead application rate.

 

 

Prepare a job card cost summary for June, detailing costs assigned to each job and in total.

BLUE GUM TIMBER WORKSHOP
Job no. 420
Cost Summary
Materials $1,740.00
Labour $660.00
Overhead $6,450.00
Total $8,850.00
Direct Materials Direct Labour Overheads
Materials Quantity Cost Normal Rate Wage Rate Cost Direct hours Application Rate Cost
Timber 20 $300.00 30.00 22.00 $660.00 30 215.00 $6,450.00
Steel 40 $1,440.00
$1,740.00 $660.00 $6,450.00
                 
Job no. 421
Cost Summary
Materials $3,795.00
Labour $1,320.00
Overhead $12,900.00
Total $18,015.00
Direct Materials Direct Labour Overheads
Materials Quantity Cost Normal Rate Wage Rate Cost Direct hours Application Rate Cost
Timber 85 $1,275.00 60.00 22.00 $1,320.00 60 215.00 $12,900.00
Steel 70 $2,520.00
$3,795.00 $1,320.00 $12,900.00
                 
Job no. 422
Cost Summary
Materials $5,870.00
Labour $1,980.00
Overhead $19,350.00
Total $27,200.00
Direct Materials Direct Labour Overheads
Materials Quantity Cost Normal Rate Wage Rate Cost Direct hours Application Rate Cost
Timber 150 $2,250.00 90.00 22.00 $1,980.00 90 215.00 $19,350.00
Steel 100 $3,620.00
$5,870.00 $1,980.00 $19,350.00
                 

 

Job no. 423
Cost Summary
Materials $4,755.00
Labour $1,870.00
Overhead $18,275.00
Total $24,900.00
Direct Materials Direct Labour Overheads
Materials Quantity Cost Normal Rate Wage Rate Cost Direct hours Application Rate Cost
Timber 110 $1,715.00 85.00 22.00 $1,870.00 85 215.00 $18,275.00
Steel 80 $3,040.00
$4,755.00 $1,870.00 $18,275.00
                 
Job no. 424
Cost Summary
Materials $7,440.00
Labour $2,310.00
Overhead $22,575.00
Total $32,325.00
Direct Materials Direct Labour Overheads
Materials Quantity Cost Normal Rate Wage Rate Cost Direct hours Application Rate Cost
Timber 180 $2,880.00 105.00 22.00 $2,310.00 105 215.00 $22,575.00
Steel 120 $4,560.00
$7,440.00 $2,310.00 $22,575.00
                 
Job no. 425
Cost Summary
Materials $3,515.00
Labour $880.00
Overhead $8,600.00
Total $12,995.00
Direct Materials Direct Labour Overheads
Materials Quantity Cost Normal Rate Wage Rate Cost Direct hours Application Rate Cost
Timber 95 $1,565.00 40.00 22.00 $880.00 40 215.00 $8,600.00
Steel 50 $1,950.00
$3,515.00 $880.00 $8,600.00
                 

 

 

Job Card Cost Summary

Job numbers 420 421 422 423 424 425 Total
Balance b/f
Direct Material $ 1,740.00 $ 3,795.00 $ 5,870.00 $ 4,755.00 $ 7,440.00 $ 3,515.00 $ 27,115.00
Direct Labour $ 660.00 $ 1,320.00 $ 1,980.00 $ 1,870.00 $ 2,310.00 $ 880.00 $ 9,020.00
Overhead $ 6,450.00 $ 14,150.00 $ 19,350.00 $ 18,275.00 $ 22,575.00 $ 8,600.00 $ 89,400.00
Total $ 8,850.00 $ 19,265.00 $ 27,200.00 $ 24,900.00 $ 32,325.00 $ 12,995.00 $ 125,535.00
               

 

  1. Calculate the monthly amounts to be provided for annual and sick leave for the factory employees. (Round amounts to the nearest whole dollar)
  2. Annual Leave

 

  1. Sick Leave

 

  1. Record all transactions (including cash) for June in a general journal. Remember to record factory employee entitlements and other noted adjustments.
Date Particulars Dr Cr
June   30 Materials control $ 30,135.00
Accounts payable $ 30,135.00
Purchase of materials
June   30 Work in process $ 24,730.00
Manufacturing overhead $ 5,405.00
Materials control $ 30,135.00
Direct and indirect material requisition
June   30 Work in process $ 9,020.00
Manufacturing overhead $ 25,962.00
Cash $ 34,982.00
direct and indirect labour incurred
June   30 Manufacturing overhead
Accounts payable $ 1,230.00
Accumulated depreciation $ 1,500.00
Paid expenses $ 5,405.00
Electricity Expense $ 500.00
Actual indirect costs incurred
June   30 Work in process $ 88,150.00
Manufacturing overhead applied $ 88,150.00
Applied manufacturing overheads

 

Date Particulars Dr Cr
June   30 Work in process $ 1,250.00
Subcontracting $ 1,250.00
Invoice paid for subcontracting
June   30 Finished Goods $ 123,150.00
Work in process $ 123,150.00
Good transferred out of production for sale
June   30 Accounts Recievable
Sales (160% of cost for job 420, 421 and 422) $ 88,696.00
Products sold to customers
June   30 Cost of Goods Sold $ 123,150.00
Finished Goods $ 123,150.00
Transfer of cost of goods sold to expense account

 

 

  1. Prepare the following general ledger accounts and post the above journal entries where relevant:
  2. Materials control (including stocktake adjustment)
Materials Control
May Bal b/d $ 15,310.00   Direct Materils $ 24,730.00
Purchases $ 30,135.00 Indirect Materials $ 5,405.00
  bal cld $ 15,310.00
$ 45,445.00 $ 45,445.00

 

 

  1. Labour control (c) Factory overhead control (including transfer of under/over-applied overhead)
Labour Control
May Wages Paid $ 34,982.00   Direct labour $ 9,020.00
  Indirect labour $ 25,962.00
$ 34,982.00 $ 34,982.00
 

 

  1. Work in process
Work in Process Control
May Bal b/d $ 2,770.00   Cost of goods manufactured $ 123,150.00
Direct Materials $ 24,730.00
Direct Labour $ 9,020.00
Applied Manufacturing overheads $ 88,150.00 Bal c/d $ 1,520.00
$ 124,670.00 $ 124,670.00
  1. Finished goods
Finished Goods Control
May Bal b/d $ 6,890.00   Cost of Goods Sold $ 123,150.00
Cost of goods manufactured $ 123,150.00 Bal c/d $ 6,890.00
$ 130,040.00 $ 130,040.00

 

 

 

 

  1. Prepare an analysis of under- or over-applied factory overhead showing two variances (spending and capacity)
TOTAL OVERHEADS
Annual rate of depreciation 15%
Monthly rate of depreciation 1.25%
Bal as at 31 May 2013 $ 120,000.00
Monthly Provision for Depreciation $ 1,500.00
Overhead Purchases  
Sundry Factory Stores $ 2,510.00  
Various items of factory stores $ 2,895.00  
$ 5,405.00
Gross payroll for month of June:  
Factory wages and salaries $ 18,300.00  
Administration wages and salaries $ 24,580.00  
Annual leave paid $ 1,552.00  
$ 44,432.00  
Less:   PAYG withholding ($ 7,400.00)  
Superannuation contributions ($ 2,050.00) $ 9,450.00  
Net pays $ 34,982.00  
Less: Direct Labour  
3 Direct Employees @ $22 per hr (38 × 4) hrs ($ 10,032.00)  
Overtime (20 hours) ($ 440.00) $ 24,510.00
Provision for Annual and Sick Leave      
Add: Monthly provision for annual leave   $ 458.00  
Monthly provision for sick   $ 195.00 $ 653.00
June invoices received and payable for factory overheads $ 1,230.00
Factory electricity used for June but not yet paid $ 500.00
Total Overheads $ 33,798.00

 

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