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?

3. 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

 

 

2. 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

 

3. 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

 

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

 

1. Sick Leave

 

5. 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

 

 

6. Prepare the following general ledger accounts and post the above journal entries where relevant:
7. 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

 

 

 

 

7. 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