HI5017 Managerial Accounting And Selling and distribution Costs

Question 1

Job cost sheets show the following information:

1. Which job(s) are still in process at the end of January, and what is the cost of this job(s)?
2. Which job(s) were completed at the end of February, and what is the cost of this completed job(s)?
3. What are the balances in the work in process inventory, finished goods inventory, and cost of goods sold for March?
4. How does job costing in a service organisation differ from job costing in a manufacturing organisation?

Question 2

1. Discuss the circumstances that would require a business to change from traditional costing to ABC costing?
2. Takulah Co. Ltd has traditionally allocated its overhead based on machine hours but had collected this information to change to activity-based costing:

iii) Would you recommend a change to ABC costing for this company? Justify your answer?

Question 3

New machinery will be added in September. This machine will reduce the labour required per unit and increase the labour rate for those employees qualified to operate the machinery.

Finished goods inventory is required to be 20% of the next month’s requirements. Direct material requires 2.5 kg per unit at a cost of $5 per kg. The ending inventory required for direct materials is 20% of the next month’s needs. In July, the beginning inventory is 3,750 units of finished goods and 13,125 kg of materials.

Question 4

Required: What type of responsibility centre best describes her department, and why? 

Division YX makes product YAS using one unit of component TEX and other materials. It then sells the completed product YAS to external customers. To date, Division YX has always bought component TEX from Division EX.

The following information is available:

Division EX charges the same price for component TEX to both Division YX and external customers. However, it does not incur the selling and distribution costs when transferring internally.

Division YX has just been approached by a new supplier who has offered to supply it with component TEX for $36 per unit. Prior to this offer, the cheapest price which Division YX could have bought component TEX for from outside the group was $41 per unit.

It is head office policy to let the divisions operate autonomously without interference at all.

iii) Discuss the problems which will arise if the transfer price remains unchanged. 

Question 5

Smarty Inc. Ltd produces two different products with the following monthly data:

Assume the sales mix remains the same at all levels of sales.

Required:

1. Calculate the weighted average contribution margin per unit.
2. How many units in total must be sold to break even? 
3. How many units of each product must be sold to break even? 
4. How many units of each product must be sold to earn a monthly profit of $100,000?
5. Prepare a contribution margin income statement for the month. 
6. If the sales mix shifts more toward the P1 product than the P2 product, would the break-even point in units increase or decrease? Explain. (Detail calculations are not necessary but may be helpful in confirming your answer.

Question 6

Ezy Fixit Ltd has been asked to quote a price for a special job that must be completed within one week. The job requires a total of 90 skilled labour hours and 80 unskilled labour hours. The current employees are paid a guaranteed minimum wage of $525 for skilled workers and $280 for unskilled workers for a 35-hour week. Currently, skilled labour has spare capacity amounting to 70 labour hours each week and unskilled labour has spare capacity amounting to 100 labour hours each week. Additional skilled workers and unskilled workers can be employed and paid by the hour at rates based on the wages paid to the current workers.

The materials required for the job are currently held in inventory at a book value of $5,000. The materials are regularly used by Ezy Fixit Ltd and the current replacement cost for the materials is $4,500. The total scrap value of the materials is $1,000.